Question No 11 Chapter No 5 - T.S. Grewal 11 Class

Question No 11 Chapter No 5

Table of Contents

Solution of Question No 11 Chapter No 5: –

Explanation of All Transactions with images: –

T.S. Grewal’s Double Entry Book Keeping (Class +1) – Solution

11. Show the effect of the following transactions on assets, liabilities, and capital using the Accounting Equation. Also prepare a Balance sheet:
(i) Started business with cash Rs 60,000
(ii) Rent received Rs 2,000
(iii) Accrued interest Rs 500
(iv) Commission received in advance Rs 1,000
(v) Amount is withdrawn Rs 5,000

Solution of Question No 11 Chapter No 5: –

Question No 11 Chapter No 5 – T.S. Grewal 11 Class - Explained with Animation

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S. No.	Particulars	Assets		Liabilities	Capital
S. No.	Particulars	Cash	+Accrued Interest	+Creditors	Capital
(i)	Started business with cash Rs 60,000	60,000			+60,000
		60,000	–	–	+60,000
(ii)	Rent received Rs 2,000.	+2,000			+2,000
		62,000	–	–	+62,000
(iii)	Accrued interest Rs 500	–	+500	–	+500
		62,000	+500	–	+62,500
(iv)	Commission received in advance Rs 1,000	+1,000	–	+1,000	–
		63,000	+500	1,000	+62,500
(v)	Amount withdrawn Rs 5,000	+5,000	–		-5,000
	Total	58,000	+500	1,000	+57,500

Answer: –

Assets = Cash 58,000 + Accrued Interest 500 = 58,500/-
Liabilities = 1,000/-
Capital = 57,500/-
Liabilities +Capital
1,000 + 57,500 = 58,500/-

Explanation of All Transactions with images: –

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.

Transaction No. 1

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.

Transaction No. 2

In this transaction, as shown in the above image two accounts are involved Cash and Capital
Cash a/c:- Business paying cash so it will be deducted.
Capital a/c:- Business received rent from the tenant, So this is the income of the business. “ All income and gains are added to the capital“.

Transaction No. 3

In this transaction, as shown in the above image three accounts are involved Accrued Interest and capital
Accrued Interest A/c: – The business did not receive any cash yet, but it will receive this amount in the future, So that’s why it will become our assets.
Capital a/c:- Business earned interest on investment, So this is an income of the business. “ All income and gains are added to the capital“.

Transaction No. 4

In this transaction, as shown in the above image two accounts are involved i.e. Cash and Advance Commission
Cash a/c:- Business Receiving cash from their selling partner.
Advance Commission A/c: – Business receiving cash against commission which is not yet earned, So this amount is not belonging to us yet, So if the business could not earn it in future then it has to pay back. That’s why it becomes our liability.

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