Question No 4 Chapter No 5 - T.S. Grewal 11 Class

Question No 4 Chapter No 5

Table of Contents

The solution of Question No 4 Chapter No 5: –

Explanation of All Transactions with images: –

T.S. Grewal’s Double Entry Book Keeping (Class +1) – Solution

4. What will be the effect of the following on the Accounting Equation?

(i) Harish Started Business with cash Rs 18,000

(ii) Purchased goods for cash Rs 5,000 and Credit 2,000

(iii) Sold goods for cash Rs 4,000(costing Rs 2,400)

(iv) Rent paid Rs 1,000 and rent outstanding Rs 200.

The solution of Question No 4 Chapter No 5: –

Question no. 4 chapter 5 T.S Grewal - Explained with Animated Examples

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S. No.	Particulars	Assets		Liabilities		Capital
S. No.	Particulars	Cash	+Stock	+Creditors	+O/S Wages	Capital
(i)	Harish Started Business with cash Rs 18,000	+18,000	–	–		+18,000
		18,000	–	–		+18,000
(ii)	Purchased goods for cash Rs 5,000 and Credit 2,000	-5,000	+7,000	+2,000		–
		13,000	+7,000	+2,000		+18,000
(iii)	Sold goods for cash Rs 4,000(costing Rs 2,400).	+4,000	-2,400	–		+1,600
		17,000	+4,600	2,000		+19,600
(iv)	Rent paid Rs 1,000 and rent outstanding Rs 200.	-1,000	–	–	+200	-1200
	Total	16,000	+4,600	2,000	+200	+18,400

Answer: –

Assets: Cash 16,000 + Stock 4,600 = 20,600/-

Liabilities : Creditors 2,000 + Wages Outstanding 200 = 2,200/-

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Capital 18,400.

Liabilities +Capital

2,200 + 18,400 = 20,600/-

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, three 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 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. 3

In this transaction, as shown in the above image three accounts are affected i.e. Stock(Sale), Cash, and Capital(Profit):
Stock a/c (Sale):- Because 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) 4000-2400 = 1600(Profit)

Transaction No. 4

In this transaction, as shown in the above image two accounts affected i.e. O/S wages and capital
Cash a/s: – Part of the payment is made in cash.
O/s Rent A/c: – The business did not pay any cash yet but has to pay in, that’s why it becomes a liability for the business.
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”

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