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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
Question No 2 Chapter No 5
2. Show the Accounting Equation for the following transactions:
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| S. No. | Particulars | Assets | Liabilities | Capital | ||
|---|---|---|---|---|---|---|
| Cash | +Stock | +Debtors | +Creditors | |||
| 1 | Gopinath Started Business with cash | +25000 | - | - | - | +25000 |
| 25000 | - | - | - | 25000 | ||
| 2 | Purchased goods from Shyam | - | +10000 | - | +10000 | - |
| 25000 | +10000 | - | 10000 | 25000 | ||
| 3 | Sold goods to Sohan costing Rs. 1800 | - | -1800 | +1500 | - | -300 |
| 25000 | +8200 | +1500 | 10000 | +24700 | ||
| 4 | Gopinath withdrew from business | -5000 | - | - | - | -5000 |
| Total | 20000 | +8200 | +1500 | +10000 | +19700 | |
Answer: -
Assets: Cash 20,000 + Stock 8,200 + Debtors 1,500 = 27,900/-
Liabilities : Creditors 10,000 , Capital 19,700.
Liabilities +Capital
10,000 + 19,700 = 27,900/-
This is not a part of the solution, So you don't have to write it in the exam. So why we explained if it is not needed. Because This explanation will help you to understand all transactions with logic so don't need to remember all the transactions but just understand and remember the logic use behind it.
As we discuss in the previous topic, A owner and a business both have a separate identity in the eye of law. So, the business will be treated as an Artificial Person and anything invested by the owner into the business will be treated as capital.
So, In this transaction, as shown in the above image owner investing her cash into the business, this will be treated as capital of the business. The business receiving an asset i.e. cash.
In this transaction, as shown in the above image business brought goods from M/s Shyam, the business received goods, a new asset is created i.e. Stock, but it is not clear about payment so, it will be treated as a credit transaction and M/s Shyam will be treated as our creditor(Liabilities) because the business will pay the due amount of it in near future.
In this transaction, as shown in the above image business sold goods to Sohan, the business giving its goods and the asset is going i.e. Stock, So, that's why the business has to subtract the value of sold goods from it.
but it is not clear about payment so, it will be treated as a credit transaction and Sohan will be treated as our Debtor (asset) because the business will receive the due amount from him in near future.
The third business has to subtract the amount of loss on sale from the Capital, Because the owner has to bear all loss of the business, so the amount of the loss will be subtracted from the capital a/c. (Loss = sale price – cost price) 1500-1800 = -300(loss)
In this transaction, as shown in the above image owner withdrawing the amount of cash from the business for his personal use.
In accounting, anything withdrawal by the owner from the business in cash or in-kind(any item) is treated as a Drawing. The amount of Drawing will be subtracted from the Total Capital.
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Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "Question No 2 Chapter No 5 - T.S. Grewal 11 Class", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to T.S. Grewal 11 Class Financial Accounting.
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