Question No 17 Chapter No 5
17. Prepare Accounting Equation from the following:
(a) Started business with cash Rs 1,00,000.
(b) Purchased goods for cash Rs 20,000 and on credit Rs 30,000
(c) Sold goods for cash costing Rs 10,000 and on credit costing Rs 15,000 both at a profit of 20%
(d) Paid salaries Rs 8,000
Solution of Question No 17 Chapter No 5: –
|(a)||Started business with cash Rs 1,00,000.||+1,00,000||+1,00,000|
|(b)||Purchased goods for cash Rs 20,000 and on credit Rs 30,000||-20,000||+50,000||–||+30,000||–|
|(c)||Sold goods for cash costing Rs 10,000 and on credit costing Rs 15,000 both at a profit of 20%||+12,000||-25,000||+18,000||–||+5,000|
|(d)||Paid salaries Rs 8,000||– 8,000||–||–||–||-8,000|
Assets: – Cash 84,000 + Stock 25,000 + Debtors 18,000 = 1,27,000/-
Liabilities: – Creditors 30,000 = 30,000/-
Capital = 97,000/-
30,000 + 97,000 = 1,27,000/-
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 assets i.e. cash, bank, stock, machine and Furniture.
Transaction No. 2
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 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 four accounts are involved i.e. Stock(Sale), Cash, Debtors and Capital(Profit):
- Stock a/c (Sale):- Because business giving(selling) its goods.
- Cash : – Because Business received cash from customer.
- Debtors: – Because half of the payment is yet not received. It will be our new asset.
- 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) 22,000-20,000 = 2,000(Profit)
Transaction No. 4
In this transaction, as shown in the above image two accounts are involved i.e. cash and capital
- Cash A/c: – Because business cash goes out from the business.
- Capital a/c:- because business get services from its employees and paid them for it. So this is expenses for the business. “ All expenses and losses are deducted from the amount of capital
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