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Question
Mohit has the following transactions, prepare accounting equation:
| (a) | Business started with cash | ₹ 1,75,000 |
| (b) | Purchased goods from Rohit | ₹ 50,000 |
| (c) | Sales goods on credit to Manish (Costing ₹ 17,500) | ₹ 20,000 |
| (d) | Purchased furniture for office use | ₹ 10,000 |
| (e) | Cash paid to Rohit in full settlement | ₹ 48,500 |
| (f) | Cash received from Manish | ₹ 20,000 |
| (g) | Rent paid | ₹ 1,000 |
| (h) | Cash withdrew for personal use | ₹ 3,000 |
Solution
| S.No. | Transactions | Assets | Liabilities | + | Capital | |||||||
| Cash | + | Stock | + | Debtors | + | Furniture | = | Creditors | + | Capital | ||
| (a) | Increase in cash | 1,75,000 | ||||||||||
| Increase in capital | 1,75,000 | |||||||||||
| 1,75,000 | = | NIL | + | 1,75,000 | ||||||||
| (b) | Increase in stock | 50,000 | ||||||||||
| Increase in creditors (Rohit) | = | 50,000 | + | 1,75,000 | ||||||||
| 1,75,000 | + | 50,000 | = | 50,000 | + | 1,75,000 | ||||||
| (c) | Increase in debtors (Manish) | 20,000 | ||||||||||
| Decrease in stock | (17,500) | |||||||||||
| Increase in capital (Profit) | 2,500 | |||||||||||
| 1,75,000 | + | 32,500 | + | 20,000 | = | 50,000 | + | 1,77,500 | ||||
| (d) | Increase in furniture | 10,000 | ||||||||||
| Decrease in cash | (10,000) | |||||||||||
| 1,65,000 | + | 32,500 | + | 20,000 | + | 10,000 | = | 50,000 | + | 1,77,500 | ||
| (e) | Decrease in creditors (Rohit) | (50,000) | ||||||||||
| Decrease in dash | (48,500) | |||||||||||
| Increase in capital | 1,500 | |||||||||||
| (Discount received) | ||||||||||||
| 1,65,000 | + | 32,500 | + | 20,000 | + | 10,000 | = | Nil | + | 1,79,000 | ||
| (f) | Increase in cash | 20,000 | ||||||||||
| Decrease in debtors(Manish) | (20,000) | |||||||||||
| 1,36,500 | + | 32,500 | + | Nil | + | 10,000 | = | Nil | + | 1,79,000 | ||
| (g) | Decrease in capital (Expenses) | (1,000) | ||||||||||
| Decrease in cash | 1,000 | |||||||||||
| 1,35,500 | + | 32,500 | + | Nil | + | 10,000 | = | Nil | + | 1,78,000 | ||
| (h) | Decrease in capital (Drawings) | (3,000) | ||||||||||
| Decrease in cash | (3,000) | |||||||||||
| 1,32,000 | + | 32,500 | + | Nil | + | 10,000 | = | Nil | + | 1,75,000 | ||
| Total | 1,75,000 | = | 1,75,000 | |||||||||
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Rohit has the following transactions:
| (a) | Commenced business with cash | ₹ 1,50,000 |
| (b) | Purchased machinery on credit | ₹ 40,000 |
| (c) | Purchased goods for cash | ₹ 20,000 |
| (d) | Purchased car for personal use | ₹ 80,000 |
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Prepare the accounting equation to show the effect of the above transactions on the assets, liabilities and capital.
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) | Prepaid Insurance | ₹ 1,000 |
| (f) | Received interest | ₹ 700 |
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| (h) | Goods destroyed by fire | ₹ 500 |
Show the accounting equation on the basis of the following transaction:
| (a) | Udit started business with: | |
| (i) Cash | ₹ 5,00,000 | |
| (ii) Goods | ₹ 1,00,000 | |
| (b) | Purchased building for cash | ₹ 2,00,000 |
| (c) | Purchased goods from Himani | ₹ 50,000 |
| (d) | Sold goods to Ashu (Cost ₹ 25,000) | ₹ 36,000 |
| (e) | Paid insurance premium | ₹ 3,000 |
| (f) | Rent outstanding | ₹ 5,000 |
| (g) | Depreciation on building | ₹ 8,000 |
| (h) | Cash withdrawn for personal use | ₹ 20,000 |
| (i) | Rent received in advance | ₹ 5,000 |
| (j) | Cash paid to himani on account | ₹ 20,000 |
| (k) | Cash received from Ashu | ₹ 30,000 |
Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation:
| (a) | Started business with cash | ₹ 1,20,000 |
| (b) | Rent received | ₹ 10,000 |
| (c) | Invested in shares | ₹ 50,000 |
| (d) | Received dividend | ₹ 5,000 |
| (e) | Purchase goods on credit from Ragani | ₹ 35,000 |
| (f) | Paid cash for household Expenses | ₹ 7,000 |
| (g) | Sold goods for cash (costing ₹ 10,000) | ₹ 14,000 |
| (h) | Cash paid to Ragani | ₹ 35,000 |
| (i) | Deposited into bank | ₹ 20,000 |
Show the effect of following transaction on the accounting equation:
| (a) | Manoj started business with | |
| (i) Cash | ₹ 2,30,000 | |
| (ii) Goods | ₹ 1,00,000 | |
| (iii) Building | ₹ 2,00,000 | |
| (b) | He purchased goods for cash | ₹ 50,000 |
| (c) | He sold goods (costing ₹ 20,000) | ₹ 35,000 |
| (d) | He purchased goods from Rahul | ₹ 55,000 |
| (e) | He sold goods to Varun (Costing ₹ 52,000) | ₹ 60,000 |
| (f) | He paid cash to Rahul in full settlement | ₹ 53,000 |
| (g) | Salary paid by him | ₹ 20,000 |
| (h) | Received cash from Varun in full settlement | ₹ 59,000 |
| (i) | Rent outstanding | ₹ 3,000 |
| (j) | Prepaid Insurance | ₹ 2,000 |
| (k) | Commission received by him | ₹ 13,000 |
| (l) | Amount withdrawn by him for personal use | ₹ 20,000 |
| (m) | Depreciation charge on building | ₹ 10,000 |
| (n) | Fresh capital invested | ₹ 50,000 |
| (o) | Purchased goods from Rakhi | ₹ 6,000 |
Transactions of M/s Vipin Traders are given below.
Show the effects on Assets, Liabilities and Capital with the help of accounting Equation:
| (a) | Business started with cash | ₹ 1,25,000 |
| (b) | Purchased goods for cash | ₹ 50,000 |
| (c) | Purchase furniture from R.K. Furniture | ₹ 10,000 |
| (d) | Sold goods to Parul Traders (Costing ₹ 7,000 vide bill no. 567) | ₹ 9,000 |
| (e) | Paid cartage | ₹ 100 |
| (f) | Cash Paid to R.K. furniture in full settlement | ₹ 9,700 |
| (g) | Cash sales (costing ₹ 10,000) | ₹ 12,000 |
| (h) | Rent received | ₹ 4,000 |
| (i) | Cash withdrew for personal use | ₹ 3,000 |
Bobby opened a consulting firm and completed these transactions during November, 2017:
(a) Invested ₹ 4,00,000 cash and office equipment with ₹ 1,50,000 in a business called Bobbie Consulting.
(b) Purchased land and a small office building. The land was worth ₹ 1,50,000 and the building worth ₹ 3,50,000. The purchase price was paid with ₹ 2,00,000 cash and a long-term note payable for ₹ 3,00,000.
(c) Purchased office supplies on credit for ₹ 12,000
(d) Bobbie transferred title of motor car to the business. The motor car was worth ₹ 90,000.
(e) Purchased for ₹ 30,000 additional office equipment on credit.
(f) Paid ₹ 75,00 salary to the office manager
(g) Provided services to a client and collected ₹ 30,000
(h) Paid ₹ 4,000 for the month’s utilities.
(i) Paid supplier created in transaction c.
(j) Purchase new office equipment by paying ₹ 93,000 cash and trading in old equipment with a recorded cost of ₹ 7,000.
(k) Completed services of a client for ₹ 26,000. This amount is to be paid within 30 days
(l) Received ₹ 19,000 payment from the client created in transaction k
(m) Bobby withdrew ₹ 20,000 from the business.
Analyse the above stated transactions and open the following T-accounts:
Cash, client, office supplies, motor car, building, land, long-term payables, capital, withdrawals, salary, expense and utilities expense.
