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

Question No 11 Chapter No 5

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(v) Amount is withdrawn Rs 5,000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: –

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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.

Transaction No. 5

In this transaction, as shown in the above image two accounts are involved i.e. one is cash and another is capital.

Cash a/c: – payment is made in cash.
Capital a/c:-  cash withdrawal by the owner

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

• Chapter No. 1 – Introduction to Accounting
• Chapter No. 2 – Basic Accounting Terms 
• Chapter No. 3 – Theory Base of Accounting, Accounting Standards and International Financial Reporting Standards(IFRS)
• Chapter No. 4 – Bases of Accounting
• Chapter No. 5 – Accounting Equation
• Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
• Goods and Services Tax(GST)
• Chapter No. 7 – Origin of Transactions –  Source Documents and Preparation of Vouchers
• Chapter No. 8 – Journal
• Chapter No. 9 – Ledger
• Chapter No. 10 – Special Purpose Books I – Cash Book
• Chapter No. 11 – Special Purpose Books II – Other Books
• Chapter No. 12 – Bank Reconciliation Statement
• Chapter No. 13 – Trial Balance 
• Chapter No. 14 – Depreciation
• Chapter No. 15 – Provisions and Reserves
• Chapter No. 16 – Accounting for Bills of Exchange
• Chapter No. 17 – Rectification of Errors 
• Chapter No. 18 – Financial Statements of Sole Proprietorship
• Chapter No. 19 – Adjustments in preparation of Financial Statements 
• Chapter No. 20 – Accounts from incomplete Records – Single Entry System
• Chapter No. 21 – Computers in Accounting
• Chapter No. 22 – Accounting Software – Tally

Check out T.S. Grewal’s +1 Book 2019 @ Official Website of Sultan Chand Publication