1
Question
What will be the effect of the following on the Accounting Equation?
(i) Harish started business with cash ₹ 1,80,000.
(ii) Purchased goods for cash ₹ 60,000 and on credit ₹ 30,000.
(iii) Sold goods for cash ₹ 40,000; costing ₹ 24,000.
(iv) Rent paid ₹ 5,000; and rent outstanding ₹ 2,000.
(v) Sold goods on credit ₹ 50,000 (costing ₹ 38,000).
(vi) Salary paid in advance ₹ 3,000.
(i) Harish started business with cash ₹ 1,80,000.
(ii) Purchased goods for cash ₹ 60,000 and on credit ₹ 30,000.
(iii) Sold goods for cash ₹ 40,000; costing ₹ 24,000.
(iv) Rent paid ₹ 5,000; and rent outstanding ₹ 2,000.
(v) Sold goods on credit ₹ 50,000 (costing ₹ 38,000).
(vi) Salary paid in advance ₹ 3,000.
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Solution
ACCOUNTING EQUATION
S. No.
Transaction
Assets
=
Liabilities
+
Capital
Cash
+
Stock
+
Debtors
Prepaid Salary
=
Creditors
+
Outstanding Rent
(i)
Harish started business with cash
+1,80,000
+
1,80,000
1,80,000
=
1,80,000
(ii)
Purchased goods for cash Rs 60,000 and on credit Rs 30,000
–60,000
+90,000
+30,000
1,20,000
+
90,000
=
30,000
+
1,80,000
(iii)
Sold goods costing Rs 24,000 for Rs 40,000
+40,000
–24,000
+16,000 (Profit)
1,60,000
+
66,000
=
30,000
+
1,96,000
(iv)
Rent paid Rs 5,000 and outstanding Rs 2,000
–5,000
+2,000
–7,000 (Expense)
1,55,000
+
66,000
=
30,000
+
2,000
+
1,89,000
(v)
Goods costing Rs 38,000 sold on credit for Rs 50,000
–38,000
+50,000
+12,000 (Profit)
1,55,000
+
28,000
+
50,000
=
30,000
+
2,000
+
2,01,000
(vi)
Salary paid in advance
–3,000
+3,000
1,52,000
+
28,000
+
50,000
+
3,000
=
30,000
+
2,000
+
2,01,000
| ACCOUNTING EQUATION | ||||||||||||||
| S. No. | Transaction | Assets | = | Liabilities | + | Capital | ||||||||
| Cash | + | Stock | + | Debtors | Prepaid Salary | = | Creditors | + | Outstanding Rent | |||||
| (i) | Harish started business with cash | +1,80,000 | + | 1,80,000 | ||||||||||
| 1,80,000 | = | 1,80,000 | ||||||||||||
| (ii) | Purchased goods for cash Rs 60,000 and on credit Rs 30,000 | –60,000 | +90,000 | +30,000 | ||||||||||
| 1,20,000 | + | 90,000 | = | 30,000 | + | 1,80,000 | ||||||||
| (iii) | Sold goods costing Rs 24,000 for Rs 40,000 | +40,000 | –24,000 | +16,000 (Profit) | ||||||||||
| 1,60,000 | + | 66,000 | = | 30,000 | + | 1,96,000 | ||||||||
| (iv) | Rent paid Rs 5,000 and outstanding Rs 2,000 | –5,000 | +2,000 | –7,000 (Expense) | ||||||||||
| 1,55,000 | + | 66,000 | = | 30,000 | + | 2,000 | + | 1,89,000 | ||||||
| (v) | Goods costing Rs 38,000 sold on credit for Rs 50,000 | –38,000 | +50,000 | +12,000 (Profit) | ||||||||||
| 1,55,000 | + | 28,000 | + | 50,000 | = | 30,000 | + | 2,000 | + | 2,01,000 | ||||
| (vi) | Salary paid in advance | –3,000 | +3,000 | |||||||||||
| 1,52,000 | + | 28,000 | + | 50,000 | + | 3,000 | = | 30,000 | + | 2,000 | + | 2,01,000 | ||
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