Question No 15 Chapter No 5
15. Prepare Accounting Equation from the following:
(i) Started business with cash Rs. 50,000 and Goods 30,000
(ii) Purchase goods for cash Rs 30,000 and on credit from Karan Rs 20,000
(iii) Goods costing Rs 40,000 were sold for Rs 55,000
(iv) Withdrew cash for personal use Rs 10,000
(v) Rent outstanding Rs 2,000
Solution of Question No 15 Chapter No 5: –
|(i)||Started business with cash Rs. 50,000 and Goods 30,000||+50,000||
|(ii)||Purchase goods for cash Rs 30,000 and on credit from Karan Rs 20,000||-30,000||+50,000||+20,000||–|
|(iii)||Goods costing Rs 40,000 were sold for Rs 55,000||+55,000||-40,000||+15,000|
|(iv)||Withdrew cash for personal use Rs 10,000||-10,000||-10,000|
|(v)||Rent outstanding Rs 2,000||–||–||–||+2,000||-2,000|
Assets: – Cash 65,000 + Stock 40,000= 1,05,000/-
Liabilities: – Creditors 20,000 + O/s Rent 2,000 = 22,000/-
Capital = 83,000/-
22,000 + 83,000 = 1,05,000/-
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 the 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 Stock(Purchase), Cash and Creditors.
- Stock a/c (Purchase):- Because business receiving goods.
- Cash a/c : – Because business paying some part of due amount in cash.
- Creditor : – Because Business did not pay some part of due amount yet, But it has to pay in future, so that’s why account of creditors is created.
Transaction No. 3
In this transaction, as shown in the above image three accounts are involved i.e. Stock(Sale), Cash and Capital(Profit):
- Stock a/c (Sale):- Because business giving(selling) its goods.
- Cash : – Because Business received cash from customer.
- Capital(Profit): Because owner has right on all profit of the business so the amount of the profit will be added in the capital a/c. (Profit = sale price – cost price) 55,000-40,000 = 15,000(Profit)
Transaction No. 4
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
Transaction No. 5
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: – Business did not paid the amount of rent yet, but has to pay in future, So that’s why it becomes a liability for the business.
- Capital a/c:- The rent is due but not paid yet. So this is expenses for the business. “ All expenses and losses are deducted from the amount of capital”
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