T.S. Grewal Class 11 Chapter 5 Q.8 - Accounting Equation (Harish)

Question 8

What will be the effect of the following on the Accounting Equation?

1. Harish started business with cash ₹18,000.
2. Purchased goods for Cash ₹5,000 and on credit ₹2,000.
3. Sold goods for cash ₹4,000 (costing ₹2,400). (Profit ₹1,600)
4. Rent paid ₹1,000 and rent outstanding ₹200. (Total rent expense ₹1,200)

Solution

Accounting Equation: Assets = Liabilities + Capital

S. No.	Transactions	Assets (₹)		Liabilities (₹)		Capital (₹)
		Cash	Stock	Creditors	Outstanding Rent	Capital
(i)	Harish started business with cash ₹18,000	+18,000	–	–	–	+18,000
	Balance	18,000	–	–	–	18,000
(ii)	Purchased goods for Cash ₹5,000 and on credit ₹2,000	−5,000	+7,000	+2,000	–	–
	Balance	13,000	7,000	2,000	–	18,000
(iii)	Sold goods (cost ₹2,400) for cash ₹4,000 (Profit ₹1,600)	+4,000	−2,400	–	–	+1,600
	Balance	17,000	4,600	2,000	–	19,600
(iv)	Rent paid ₹1,000 + Rent outstanding ₹200 (Total expense ₹1,200)	−1,000	–	–	+200	−1,200
	Balance	16,000	4,600	2,000	200	18,400
Total Assets = ₹16,000 + ₹4,600 = ₹20,600			Total Liabilities = ₹2,000 + ₹200 = ₹2,200		Capital = ₹18,400

Assets (₹20,600) = Liabilities (₹2,200) + Capital (₹18,400) ✓