Question No 2 Chapter No 5
2. Show the Accounting Equation for the following transactions:
(i) Gopinath Started Business with cash 25,000
(ii) Purchased goods from Shyam 10,000
(iii) Sold goods to Sohan costing Rs. 1800 1,500
(iv) Gopinath withdrew from business 5,000
Solution of Question No 2 Chapter No 5: –
|1||Gopinath Started Business with cash||+25000||–||–||–||+25000|
|2||Purchased goods from Shyam||–||+10000||–||+10000||–|
|3||Sold goods to Sohan costing Rs. 1800||–||-1800||+1500||–||-300|
|4||Gopinath withdrew from business||-5000||–||–||–||-5000|
Assets: Cash 20,000 + Stock 8,200 + Debtors 1,500 = 27,900/-
Liabilities : Creditors 10,000 , Capital 19,700.
10,000 + 19,700 = 27,900/-
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 business brought goods from M/s Shyam, the business received goods, a new asset is created i.e. Stock, but it is not clear about payment so, it will be treated as a credit transaction and M/s Shyam will be treated as our creditor(Liabilities) because the business will pay the due amount of it in near future.
Transaction No. 3
In this transaction, as shown in the above image business sold goods to Sohan, the business giving its goods and the asset is going i.e. Stock, So, that’s why the business has to subtract the value of sold goods form it.
but it is not clear about payment so, it will be treated as a credit transaction and Sohan will be treated as our Debtors (asset) because the business will receive the due amount from him in near future.
The third business has to subtract the amount of loss on sale from the Capital, Because the owner has bear all loss of the business, so the amount of the loss will be subtracted from the capital a/c. (Loss = sale price – cost price) 1500-1800 = -300(loss)
Transaction No. 4
In this transaction, as shown in the above image owner withdrawing the amount of cash from the business for his personal use.
In accounting, anything withdrawal by the owner from the business in cash or in kind(any item) is treated as Drawing. The amount of Drawing will be substracted from the Total Capital.
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