Question

Use Accounting Equation to show the effect of the following transactions of M/s Royal Traders:

		(₹)
(a)	Started Business with Cash	1,20,000
(b)	Purchased goods for cash	10,000
(c)	Rent received	5,000
(d)	Salary outstanding	2,000
(e)	Received interest	700
(f)	Sold goods for cash (costing ₹ 5,000)	7,000
(g)	Goods destroyed by fire	500

Answer 1

ACCOUNTING EQUATION
S. No.	Transaction	Assets					=	Liabilities	+	Capital
		Cash	+	Stock			=	Outstanding Salary
(a)	Started business with cash	+1,20,000							+	1,20,000
		1,20,000					=			1,20,000
(b)	Purchased goods for cash	–10,000		+10,000
		1,10,000	+	10,000			=			1,20,000
(c)	Rent received	+5,000								+5,000 (Income)
		1,15,000	+	10,000			=			1,25,000
(d)	Outstanding salary							+2,000		–2,000 (Expense)
		1,15,000	+	10,000			=	2,000	+	1,23,000
(e)	Interest received	+700								+700 (Income)
		1,15,700	+	10,000			=	2,000	+	1,23,700
(f)	Sold goods costing Rs 5,000 for Rs 7,000	+7,000		–5,000						+2,000 (Profit)
		1,22,700	+	5,000			=	2,000	+	1,25,700
(g)	Goods destroyed by fire			–500						–500
		1,22,700	+	4,500			=	2,000	+	1,25,200