Question No 7 Chapter No 5
7. Prepare an Accounting Equation from the following:
(i) Started business with cash Rs 1,00,000.
(ii) Purchased goods for cash Rs 20,000 and on credit Rs 30,000.
(iii) Sold goods for cash costing Rs 10,000 and on credit costing
Rs 15,000 both at a profit of 20 % .
The Content covered in this article:
Solution of Question No 7 Chapter No 5: –
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|(i)||Gopinath Started Business with cash||+1,00,000||+1,00,000|
|(ii)||Purchased goods for cash Rs 20,000 and on credit Rs 30,000.||-20,000||+50,000||–||+30,000||–|
|(iii)||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|
Assets = Cash 92,000 + Stock 25,000 + Debtors 18,000 = 1,35,000/-
Liabilities = 30,000/-
Capital = 1,05,000/-
30,000 + 1,05,000 = 135,000/-
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 involved 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 three accounts are involved Stock(Sale), Cash and Debtors .
Stock a/c (Sale):- Because business giving goods.
Cash a/c : – Because business receiving some part of due amount in cash.
Debtors : – Because Buyer did not pay some part of due amount yet, But he has to pay in future, so that’s why account of Debtors is created.
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