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Question
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| (l) | Amount withdrawn by him for personal use | ₹ 20,000 |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 |
Solution
| S.No. | Explanation | Assets | = | Liabilities | + | Capital | ||||||||||
| Cash | + | Stock | + | Building | + | Debtors | + | Prepaid Expenses | Creditors | + | Outstanding Expenses | |||||
| (a) | Increase n cash, stock and building | 2,30,000 | + | 1,00,000 | + | 2,00,000 | ||||||||||
| Increase in capital | 5,30,000 | |||||||||||||||
| 2,30,000 | + | 1,00,000 | + | 2,00,000 | = | + | 5,30,000 | |||||||||
| (b) | Increase in stock | 50,000 | ||||||||||||||
| Decrease in cash | (50,000) | |||||||||||||||
| 1,80,000 | + | 1,50,000 | + | 2,00,000 | = | + | 5,30,000 | |||||||||
| (c) | Increase n cash | 35,000 | ||||||||||||||
| Decease in stock | (20,000) | |||||||||||||||
| Increase in capital (Profit) | 15,000 | |||||||||||||||
| 2,15,000 | + | 1,30,000 | + | 2,00,000 | + | 5,45,000 | ||||||||||
| (d) | Increase in stock | |||||||||||||||
| Increase in creditors | ||||||||||||||||
| 2,15,000 | + | 1,30,000 | + | 2,00,000 | = | 55,000 | + | 5,45,000 | ||||||||
| (e) | Increase in debtors | 60,000 | ||||||||||||||
| Decease in debtors | (52,000) | |||||||||||||||
| Increase in capital (profit) | 8,000 | |||||||||||||||
| 2,15000 | + | 1,33,000 | + | 2,00,000 | + | 60,000 | = | 55,000 | + | 5,53,000 | ||||||
| (f) | Decrease in creditors | = | (55,000) | |||||||||||||
| Decrease in cash | (53,000) | |||||||||||||||
| Increase in capital (Discount received) | 2,000 | |||||||||||||||
| 1,62,000 | + | 1,33,000 | + | 2,00,000 | + | 60,000 | = | NIL | + | 5,55,000 | ||||||
| (g) | Decrease in cash | (20,000) | ||||||||||||||
| Decrease in capital | (20,000) | |||||||||||||||
| 1,42,000 | + | 1,33,000 | + | 2,00,000 | + | 60,000 | = | NIL | 5,35,000 | |||||||
| (h) | Increase in cash | 59,000 | ||||||||||||||
| Decrease in capital (Discount allowed) | (1,000) | |||||||||||||||
| Decrease in debtors | 60,000 | |||||||||||||||
| 2,01,000 | + | 1,33,000 | + | 2,00,000 | + | NIL | = | NIL | 5,34,000 | |||||||
| (i) | Increase in outstanding Expenses | 3,000 | ||||||||||||||
| Decrease in capital (Expenses) | (3,000) | |||||||||||||||
| 2,01,000 | + | 1,33,000 | + | 2,00,000 | + | NIL | = | NIL | + | 3,000 | + | 5,31,000 | ||||
| (j) | Decrease in prepaid expenses | 2,000 | ||||||||||||||
| Decrease in cash | (2,000) | |||||||||||||||
| 1,99,000 | + | 1,33,000 | + | 2,00,000 | + | NIL | + | 2,000 | = | NIL | + | 3,000 | + | 5,31,000 | ||
| (k) | Increase in cash | 13,000 | ||||||||||||||
| Increase in capital (Income) | 13,000 | |||||||||||||||
| 2,12,000 | + | 1,33,000 | + | 2,00,000 | + | NIL | + | 2,000 | = | NIL | + | 3,000 | + | 5,44,000 | ||
| (l) | Decrease in capital | (20,000) | ||||||||||||||
| Decrease in cash | (20,000) | |||||||||||||||
| 2,12,000 | + | 1,33,000 | + | 2,00,000 | + | NIL | + | 2,000 | = | NIL | + | 3,000 | + | 5,24,000 | ||
| (m) | Decrease in capital | (10,000) | ||||||||||||||
| Decrease in building | (10,000) | |||||||||||||||
| 2,12,000 | + | 1,33,000 | + | 1,90,000 | + | NIL | + | 2,000 | = | NIL | + | 3,000 | + | 5,14,000 | ||
| (n) | Increase in cash | 50,000 | ||||||||||||||
| Increase in capital | 50,000 | |||||||||||||||
| 2,42,000 | + | 1,33,000 | + | 1,90,000 | + | NIL | + | 2,000 | = | NIL | + | 3,000 | + | 5,64,000 | ||
| (o) | Increase in stock | 10,000 | ||||||||||||||
| Increase in creditors | 10,000 | |||||||||||||||
| 2,42,000 | + | 1,43,000 | + | 1,90,000 | + | NIL | + | 2,000 | = | 10,000 | + | 3,000 | + | 5,64,000 | ||
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