Double Entry Book Keeping

Ts Grewal 2022

for Class 11 Commerce Accountancy

Chapter 5 - Accounting Equation

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Question 5:

Develop an Accounting Equation from the following transactions:

		`
(i)	Mohan commenced business with cash	50,000
(ii)	Purchased goods for cash	30,000
(iii)	Purchased goods on credit	20,000
(iv)	Sold goods (costing ` 10,000) for	12,000
(v)	Bought furniture on credit	2,000
(vi) (vii)	Paid cash to a creditor Salary paid	15,000 1,000

Answer:

S. No.	Transaction	Assets					=	Liabilities	+	Capital
S. No.	Transaction	Cash ( `)	+	Stock ( `)	+	Furniture ( `)	=	Creditors ( `)		( `)
(i)	Mohan commenced business with cash	50,000					=			50,000
		50,000					=			50,000
(ii)	Purchased goods for cash	– 30,000	+	30,000			=
		20,000	+	30,000			=			50,000
(iii)	Purchased goods on credit			20,000			=	20,000
		20,000	+	50,000			=	20,000	+	50,000
(iv)	Sold goods costing ` 10,000 for ` 12,000	12,000	+	– 10,000			=			2,000 (profit)
		32,000	+	40,000			=	20,000	+	52,000
(v)	Bought furniture on credit					2,000	=	2,000
		32,000	+	40,000	+	2,000	=	22,000	+	52,000
(vi)	Paid cash to a creditor	– 15,000					=	– 15,000
		17,000	+	40,000	+	2,000	=	7,000	+	52,000
(vii)	Salary Paid	– 1,000					=			– 1,000 (expenses)
		16,000	+	40,000	+	2,000	=	7,000	+	51,000

Assets	=		16,000 + 40,000 + 2,000
	=	`	58,000
Liabilities	=	`	7,000
Capital	=	`	51,000

Question 6:

Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash ` 70,000.
(ii) Credit purchase of goods ` 18,000.
(iii) Payment made to creditors in full settlement `17,500.
(iv) Purchase of machinery for cash ` 20,000.
(v) Depreciation on machinery ` 2,000.

Answer:

S. No.	Transaction	Assets					=	Liabilities	+	Capital
S. No.	Transaction	Cash ( `)	+	Stock ( `)	+	Machinery ( `)		( `)		( `)
(i)	Started business with Cash ` 70,000	70,000								70,000
		70,000								70,000
(ii)	Credit purchase of goods ` 18,000			18,000			=	18,000
		70,000	+	18,000			=	18,000	+	70,000
(iii)	Payment made to creditor ` 17,500 in full settlement	– 17,500					=	– 18,000	+	500 (Discount Received)
		52,500	+	18,000			=			70,500
(iv)	Purchase of Machinery for Cash ` 20,000	– 20,000				20,000
		32,500	+	18,000	+	20,000	=			70,500
(v)	Depreciation on Machinery ` 2,000					– 2,000				– 2,000 (Depreciation)
		32,500	+	18,000	+	18,000	=			68,500

Assets	=		32,500 + 18,000 + 18,000
	=	`	68,500
Liabilities	=		NIL
Capital	=	`	68,500

Question 7:

Show the effect of the following transactions on the Accounting Equation:
(i) Started business with cash ` 50,000.
(ii) Salaries paid ` 2,000.
(iii) Wages Outstanding ` 200.
(iv) Interest due but not paid ` 100.
(v) Rent paid in advance ` 150.

Answer:

S. No.	Transactions	Assets			=	Liabilities	+	Capital
S. No.	Transactions	Cash ( `)	+	Advances Expenses ( `)	=	Outstanding Expenses ( `)		( `)
(i)	Started business with Cash	50,000			=			50,000
		50,000			=			50,000
(ii)	Salaries paid	– 2,000			=			– 2,000 (expenses)
		48,000			=			48,000
(iii)	Wages Outstanding				=	200	+	– 200 (expenses)
		4,800			=	200		47,800
(iv)	Interest due but not paid				=	100	+	– 100 (expenses)
		48,000			=	300	+	47,700
(v)	Rent paid in advance	– 150	+	150	=
		47,850	+	150	=	300	+	47,700

Assets	=		47,850 + 150
	=	`	48,000
Liabilities	=	`	300
Capital	=	`	47,700

Question 8:

What will be the effect of the following on the Accounting Equation?
(i) Harish started business with cash ` 18,000
(ii) Purchased goods for Cash ` 5,000 and on credit ` 2,000
(iii) Sold goods for cash ` 4,000 (costing ` 2,400)
(iv) Rent paid ` 1,000 and rent outstanding ` 200

Answer:

S. No.	Transactions	Assets			=	Liabilities			+	Capital
S. No.	Transactions	Cash ( `)	+	Stock ( `)	=	Creditors ( `)	+	Outstanding Rent ( `)		( `)
(i)	Harish started business with cash	18,000			=					18,000
		18,000			=					18,000
(ii)	Purchased goods for Cash ` 5,000 and on credit ` 2,000	– 5,000	+	7,000	=	2,000
		13,000	+	7,000	=	2,000			+	18,000
(iii)	Sold goods for cash ` 4,000 costing ` 2,400	4,000		– 2,400	=					1,600 (Profit)
		17,000	+	4,600	=	2,000			+	19,600
(iv)	Rent paid ` 1,000 and Rent Outstanding ` 200	– 1,000			=			200		– 1,200
		16,000	+	4,600	=	2,000	+	200	+	18,400