Question No 5 Chapter No 5
5. Prepare Accounting Equation from the following:
(i) Started business with cash Rs. 1,00,000 and Goods 20,000
(ii) Sold goods worth Rs 10,000 and 12,000
(iii) Purchased Furniture on credit for Rs 30,000
Solution of Question No 5 Chapter No 5: –
|(i)||Started business with cash Rs. 1,00,000 and Goods 20,000||+1,00,000||+20,000||–||–||+1,20,000|
|(ii)||Sold goods worth Rs 10,000 and 12,000||+12,000||– 10,000||–||–||+ 2,000|
|(iii)||Purchased Furniture on credit for Rs 30,000||–||–||+30,000||+30,000||–|
Assets = Cash 112000 + Stock 10000 + Furniture 30000 = 1,52,000/-
Liabilities = 30,000/-
Capital = 1,22,000/-
30,000 + 1,22,000 = 152,000/-
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, three accounts are effected 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) 12,000-10,000 = 2,000(Profit)
Transaction No. 3
In this transaction, as shown in the above image two accounts are involved Furniture and Creditors.
Furniture a/c (Purchase):- Because business receiving goods.
Creditor : – Because Business did not pay due amount yet, But it has to pay in future, so that’s why account of creditors is created.
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