Question No 14 Chapter No 5
14 Raghunath had the following transactions in an accounting year:
(i) Commenced business with cash Rs 50,000.
(ii) Paid into Bank Rs 10,000
(iii) Purchased goods for cash Rs 20,000 and credit Rs 30000.
(iv) Sold goods for cash Rs 40,000 costing Rs 30,000
(v) Paid rent Rs 500.
(vi) Rent outstanding Rs 100
(vii) Bought furniture Rs 5,000 on credit.
(viii) Bought refrigerator for personal use Rs 5,000
(ix) Purchased Motorcycle for cash Rs 20,000
Create an Accounting Equation to show the effect of the above transactions on his assets, liabilities and capital and also show his final balance sheet.
The solution of Question No 14 Chapter No 5: –
Subscribe our Youtube Channel
| S. No. | Particulars | Assets |
Liabilities |
Capital | |||||
| +Cash | +Bank | +St. | +Fur. | +Veh. |
+Cr. | +o/s Rent | |||
| (i) | Commenced business with cash Rs 50,000. | +50,000 | +50,000 | ||||||
| 50,000 | – | – | – | – | – | – | +50,000 | ||
| (ii) | Paid into Bank Rs 10,000 | -10,000 | +10,000 | ||||||
| 40,000 | +10,000 | – | – | – | – | – | +50,000 | ||
| (iii) | Purchased goods for cash Rs 20,000 and credit Rs 30000. | -20,000 | – | +50,000 | +30,000 | ||||
| 20,000 | +10,000 | +50,000 | – | – | 30,000 | – | +50,000 | ||
| (iv) | Sold goods for cash Rs 40,000 costing Rs 30,000 | +40,000 | – | -30,000 | – | +10,000 | |||
| +60,000 | +10,000 | +20,000 | – | – | 30,000 | – | +60,000 | ||
| (v) | Paid rent Rs 500. | -500 | – | – | – | -500 | |||
| 59,500 | +10,000 | +20,000 | – | – | 30,000 | – | +59,500 | ||
| (vi) | Rent outstanding Rs 100 | – | – | – | +100 | -100 | |||
| 59,500 | +10,000 | +20,000 | – | – | 30,000 | +100 | +59,400 | ||
| (vii) | Bought furniture Rs 5,000 on credit. | – | – | – | +5,000 | +5,000 | – | – | |
| 59,500 | +10,000 | +20,000 | +5,000 | – | 35,000 | +100 | +59,400 | ||
| (viii) | Bought refrigerator for personal use Rs 5,000 | -5000 | – | – | – | – | – | – | -5000 |
| 54,500 | +10,000 | +20,000 | +5,000 | — | 35,000 | +100 | +54,400 | ||
| (ix) | Purchased Motorcycle for cash Rs 20,000 |
-20,000 |
– | – | – | +20,000 | – | – |
– |
| Total | 34,500 | +10,000 | +20,000 | +5,000 | +20,000 | 35,000 | +100 | +54,400 | |
Answer: –
Assets: – Cash 34,500 + bank 10,000 + Stock 2,000 + Furniture 5,000 + Vehicle 20,000 = 89,500/-
Liabilities: – Creditors 35,000 + Outstanding Rent 100 = 35,100/-
Capital = 54,400/-
Liabilities +Capital
35,100 + 54,400 = 89,500/-
| Liabilities | Amount | Assets | Amount |
| Capital | 54,500 | Cash | 34,500 |
| Creditors | 35,000 | Bank | 10,000 |
| Outstanding Rent | 100 | Stock | 20,000 |
| Furniture | 5,000 | ||
| Vehicle | 20,000 | ||
| 89,500 | 89,500 |
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 i.e. Cash and Bank
Advertisement-X
- Cash a/c: Because business paying cash.
- Bank a/c. Because the business deposited the amount of cash in the bank account.
There will no change in capital or liabilities.
Transaction No. 3
In this transaction, as shown in the above image three accounts are involved i.e. Stock(Purchase), Cash and Creditors.
- Stock a/c (Purchase):- Because business receiving goods.
- Cash a/c: – Because business paying some part of the due amount in cash.
- Creditor: – Because the Business did not pay some part of the due amount yet, But it has to pay in the future, so that’s why the account of creditors is created.
Transaction No. 4
In this transaction, as shown in the above image two accounts are involved i.e. Stock(Sale), Cash, and Capital(Profit):
- Stock a/c (Sale):- Because of business giving(selling) its goods.
- Cash: – Because Business received cash from the customer.
- Capital(Profit): Because the owner has the right to all profit of the business so the amount of the profit will be added in the capital a/c. (Profit = sale price – cost price) 40,000 – 30,000 = 10,000(Profit)
Transaction No. 5
In this transaction, as shown in the above image two accounts are involved i.e. rent and capital
- Cash a/s: – Part of the payment is made in cash.
- Capital a/c:- Business get services from its worker. So these are expenses for the business. “ All expenses and losses are deducted from the amount of capital”
Transaction No. 6
In this transaction, as shown in the above image two accounts are involved i.e. O/S Rent and capital
- O/s Rent A/c: – The business did not pay the amount of rent yet, but has to pay in the future, So that’s why it becomes a liability for the business.
- Capital a/c:- The rent is due but not paid yet. So these is expenses for the business. “ All expenses and losses are deducted from the amount of capital”
Transaction No. 7
In this transaction, as shown in the above image two accounts are involved i.e. Furniture a/c (Purchase) and Cash
- Furniture a/c (Purchase):- Because business receiving goods.
- Creditor: – Because the Business did not pay the due amount yet, But it has to pay in the future, so that’s why the account of creditors is created.
Transaction No. 8
In this transaction, as shown in the above image two accounts are involved i.e. cash and capital:
- Cash a/c: – payment is made in cash.
- Capital a/c:- cash withdrawal by the owner
Transaction No. 9
In this transaction, as shown in the above image two accounts are involved i.e.
In this transaction, as shown in the above image two accounts are involved i.e. Vehicle and Cash:
- Vehicle a/c (Purchase):- Because business receiving Motorcycle.
- Cash a/c: – Because the business transaction is not clear about the payment so it assumed that it is paid in cash.
Thanks Please share with your friends
Advertisement-X
Comment if you have any questions.
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
T.S. Grewal’s Double Entry Book Keeping