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Question
Prepare accounting equation for the following transactions.
- Murugan commenced business with cash ₹ 80,000
- Purchased goods for cash ₹ 30,000
- Paid salaries by cash ₹ 5,000
- Bought goods from Kumar for ₹ 5,000 and deposited the money in CDM.
- Introduced additional capital of ₹ 10,000
Ledger
Solution
| Transaction | Assets | Capital ₹ | Creditors ₹ | |||||
| Cash ₹ | + Stock ₹ | + Furniture ₹ | + Debtors ₹ | + Bank ₹ | ||||
| a. Murugan commenced business with cash | + 80,000 | + 80,000 | ||||||
| Equation | + 80,000 | = | + 80,000 | |||||
| b. Cash purchases | − 30,000 | + 30,000 | = | + 80,000 | ||||
| Equation | + 50,000 | + 30,000 | = | + 80,000 | ||||
| c. Paid salary in cash | − 5,000 | − 5,000 | ||||||
| Equation | + 45,000 | + 30,000 | = | + 75,000 | ||||
| d. Credit paid from Kumar and deposited in bank CDM | + 5,000 | − 5,000 | ||||||
| Equation | + 45,000 | + 35,000 | − 5,000 | = | + 75,000 | |||
| e. Introduced additional capital | + 10,000 | + 10,000 | ||||||
| Equation | + 55,000 | + 35,000 | − 5,000 | = | + 85,000 | |||
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Approaches of Recording Transactions
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Assets = Capital + Creditors
? = ₹ 1, 60,000 + ₹ 80,000
For the following transactions, show the effect on the accounting equation.
- Raj started business with cash - ₹ 40,000
- Opened bank account with a deposit of - ₹ 30,000
- Bought goods from Hari on credit for - ₹ 12,000
- Raj withdrew cash for personal use - ₹ 1,000
- Bought furniture by using debit card for - ₹ 10,000
- Sold goods to Murugan and cash received - ₹ 6,000
- Money withdrawn from bank for office use - ₹ 1,000
What will be the effect of the following on the accounting equation?
- Sunil started business with ₹ 1,40,000 cash and goods worth ₹ 60,000
- Purchased furniture worth ₹ 20,000 by cash
- Depreciation on furniture ₹ 800
- Deposited into bank ₹ 40,000
- Paid electricity charges through net banking ₹ 500
- Sold goods to Ravi costing ₹ 10,000 for ₹ 15,000
- Goods returned by Ravi ₹ 7,500 (costing ₹ 5,000)
Create an accounting equation on the basis of the following transactions:
- Started business with cash ₹ 80,000 and goods ₹ 75,000
- Sold goods to Shanmugam on credit for ₹ 50,000
- Received cash from Shanmugam in full settlement ₹ 49,000
- Salary outstanding ₹ 3,000
- Goods costing ₹ 1,000 given as charity
- Insurance premium paid ₹ 3000
- Out of insurance premium paid, prepaid is ₹ 500
