Practical Questions

    Accounting Equation

    Rule: Assets= Capital + Liabilities

    Practical Questions

               1.    Started business with cash and bank balance Rs. 1,00,000 and Rs. 50,000  respectively.

               2.    Goods costing Rs. 10,000 sold for Rs. 12,000 on credit.

               3.    Goods purchased on credit Rs. 5,000.



               4.    Received from debtor Rs. 11,800 in full settlement.

               5.    Paid to creditor Rs. 4,700 in full settlement.

               6.    Loan taken from Everest bank limited Rs. 20,000.

               7.    Rent paid rs. 12,000 including pre-paid Rs. 2,000.

               8.    Commission received Rs. 6000 including advance Rs. 1,000.

               9.     Furniture costing rs. 1,500 sold for rs. 1,200 on credit.

              10.    Machinery costing rs. 5,000 destroyed by fire and Insurance Company admitted claim rs. 3,000.

    11.    Interest on loan paid rs. 1,800 and still payable rs. 200.

              12.   Donation paid rs. 1,000.

              13. 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.