Practical Questions
Accounting Equation
Rule: Assets= Capital + Liabilities
Practical Questions
Started business with cash and bank balance Rs. 1,00,000 and Rs. 50,000 respectively.
Goods costing Rs. 10,000 sold for Rs. 12,000 on credit.
Goods purchased on credit Rs. 5,000.
Received from debtor Rs. 11,800 in full settlement.
Paid to creditor Rs. 4,700 in full settlement.
Loan taken from Everest bank limited Rs. 20,000.
Rent paid rs. 12,000 including pre-paid Rs. 2,000.
Commission received Rs. 6000 including advance Rs. 1,000.
Furniture costing rs. 1,500 sold for rs. 1,200 on credit.
Machinery costing rs. 5,000 destroyed by fire and Insurance Company admitted claim rs. 3,000.
Interest on loan paid rs. 1,800 and still payable rs. 200.
Donation paid rs. 1,000.
Rent received rs. 2,000 and still receivable rs. 200.
Accounting Equation 5 marks
| SN | Transaction | Asset | Capital | Liabilities | ||
| 1 | Started business with cash and bank balance | 1,00,000 cash 50,000 bank balance | 1,50,000 | 0 | ||
| Starting Equation | 1,50,000 | = | 1,50,000 | + | 0 | |
| 2 | Goods sold on credit with profit | 12,000 debtor (10,000) goods | 2000 (profit) | 0 | ||
| New Equation | 1,52,000 | = | 1,52,000 | + | 0 | |
| 3 | Goods purchased on credit | 5000 Goods | 5000 (creditor) | |||
| New Equation | 1,57,000 | = | 1,52,000 | + | 1,57,000 | |
| 4. | Received from debtor in full settlement | 11,800 cash (12,000) debtor | -200 (discount allowed) | 5,000 | ||
| New equation | 1,56,800 | = | 1,51 ,800 | + | 5,000 | |
| 5. | Paid to creditor in full settlement | (4,700) cash | 300 (discount received) | 0 | ||
| New Equation | 1,52,100 | = | 1,52,100 | + | 0 | |
| 6 | Loan taken from Everest bank limited | 20,000 cash | 0 | 20,000 | ||
| New Equation | 1,72,100 | = | 1,52,100 | + | 20,000 | |
| 7 | Rent paid including prepaid | (10,000) cash (2,000) prepaid rent | (12,000) expenses | 0 | ||
| New Equation | 1,60,100 | = | 1,40,100 | + | 20,000 | |
| 8 | Commission received including advance | 6,000 cash | 5,000 (income) | 1,000 | ||
| New Equation | 1,66,100 | = | 1,45,100 | + | 21,000 | |
| 9 | Furniture sold on loss | 1200 cash (1500) furniture | (300) loss | 0 | ||
| New Equation | 1,65,800 | = | 1,44,800 | + | 21,000 | |
| 10 | Machinery destroyed by fire and insurance co. admitted claim partially | 3,000 (insurance co.) (5,000) machinery | (2,000) loss | 0 | ||
| New Equation | 1,63,800 | = | 1,42,800 | + | 21,000 | |
| 11 | Interest on load paid and still payable | (1800) cash | (2000) interest | 200 | ||
| New Equation | 1,62,000 | = | 1,40,800 | 21,200 | ||
| 12 | Donation Paid | (1000) cash | (1000) expenses | 0 | ||
| New Equation | 1,61,000 | = | 1,39,800 | + | 21,200 | |
| 13 | Rent received and still receivable | 2,000 cash 200 receivable | 2,200 (income) | 0 | ||
| Final Equation | 1,63,200 | = | 1,42,000 | + | 21,200 |
Therefore, Assets= 1,63,200, Capital=1,42,000 and Liabilities= 21,200.
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