Question

What will be the effect of the following on the Accounting Equation?
(i) Harish started business with cash ₹ 18,000
(ii) Purchased goods for Cash ₹ 5,000 and on credit ₹ 2,000
(iii) Sold goods for cash ₹ 4,000 (costing ₹ 2,400)
(iv) Rent paid ₹ 1,000 and rent outstanding ₹ 200

Answer 1

S. No.	Transactions	Assets			=	Liabilities			+	Capital
		Cash (Rs)	+	Stock (Rs)	=	Creditors (Rs)	+	Outstanding Rent (Rs)		(Rs)
(i)	Harish started business with cash	18,000			=					18,000
		18,000			=					18,000
(ii)	Purchased goods for Cash Rs 5,000 and on credit Rs 2,000	– 5,000	+	7,000	=	2,000
		13,000	+	7,000	=	2,000			+	18,000
(iii)	Sold goods for cash Rs 4,000 costing Rs 2,400	4,000		– 2,400	=					1,600 (Profit)
		17,000	+	4,600	=	2,000			+	19,600
(iv)	Rent paid Rs 1,000 and Rent Outstanding Rs 200	– 1,000			=			200		– 1,200
		16,000	+	4,600	=	2,000	+	200	+	18,400

Assets	=		16,000 + 4,600
	=	Rs	20,600
Liabilities	=		2,000 + 200
	=	Rs	2,200
Capital	=	Rs	18,400