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Question No 3 Chapter No 5
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3. Show the Accounting Equation for the following transactions:
(i) Started business with cash Rs 50,000.
(ii) Salaries paid Rs 2,000.
(iii) Wages outstanding Rs 200.
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(iv) Interest due but not paid Rs 100.
(v) Rent paid in advance Rs 150.
Solution of Question No 3 Chapter No 5: –
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S. No. | Particulars | Assets | Liabilities | Capital | ||
Cash | +Adv. Rent | +Wages O/s | +Interest O/s | |||
(i) | Started business with cash Rs 50,000. | +50,000 | – | – | +50,000 | |
50,000 | – | – | +50,000 | |||
(ii) | Salaries paid Rs 2,000. | -2,000 | – | – | -2,000 | |
48,000 | – | – | +48,000 | |||
(iii) | Wages outstanding Rs 200. | – | – | +200 | -200 | |
48,000 | – | 200 | +47,800 | |||
(iv) | Interest due but not paid Rs 100. | – | – | – | +100 | -100 |
48,000 | – | 200 | +47,700 | |||
(v) | Rent paid in advance Rs 150. | -150 | +150 | – | – | – |
Total | 47,850 | +150 | +200 | +100 | +47,700 |
Answer: –
Assets: Cash 47,850 + Advance Rent 150 = 48,000/–
Liabilities : Wages Outstanding 200 + Interest outstnding 100 = 300/-
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Capital 47,700.
Liabilities +Capital
10,000 + 19,700 = 48,000/-
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
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it will effected the two accounts 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.
Transaction No. 3
In this transaction, as shown in the above image:
it will effected the two accounts i.e. O/S wages and capital
O/S Expenses A/c: – Business did not paid any cash yet but has to pay in, that’s why it become liability for business.
Capital a/c:- Business get services from its worker. So this is expenses for the business. “ All expenses and losses are deducted from the amount of capital.
Transaction No. 4
In this transaction, as shown in the above image:
It will effected the two accounts i.e. O/S Interest and capital
O/S Interest A/c: – Business did not paid any cash yet but has to pay in future, that’s why it become liability for business
Capital a/c:- Business get services from its worker. So this is expenses for the business. “ All expenses and losses are deducted from the amount of capital.
Transaction No. 5
In this transaction, as shown in the above image:
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It will effect the two accounts i.e. Advance Rent and Cash
Advance Rent a/c: – Business paid rent in advance so to date this expense is not due, so till it becomes due business will treat it as an asset of the business.
Cash a/c:- Business paying cash so it will be deducted.
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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
T.S. Grewal’s Double Entry Book Keeping