Question No 8 Chapter No 5 – T.S. Grewal 11 Class

Question No.8 - Chapter No.5- T.S. Grewal +1 Book 2019

Question No 8 Chapter No 5

8. Develop an Accounting Equation from the following transactions:

(i) Mohan commenced business with cash 50,000

(ii) Purchased goods for cash 30,000

(iii) Purchase goods on credit 20,000

(iv) Sold goods (costing Rs 10,000) for 12,000

(v) Bought furniture on credit 2,000

(vi) Paid cash to a creditors 15,000

(vii) Salary paid 1,000.

Solution of Question No 8 Chapter No 5: –

S. No.  Particulars Assets
Liabilities
Capital
Cash  +Stock +Furniture +Creditors
(i) Mohan commenced business with cash 50,000 +50,000       +50,000
    50,000 +50,000
(ii) Purchased goods for cash 30,000 -30,000 +30,000    
    20,000 +30,000 +50,000
(iii) Purchase goods on credit 20,000 20,000   20,000
    20,000 +50,000 20,000 +50,000
(iv) Sold goods (costing Rs 10,000) for 12,000

+12,000

-10,000   +2,000
    32,000 40,000 20,000 +52,000
(v) Bought furniture on credit 2,000 +2,000 +2,000
    32,000 40,000 +2,000 22,000 +52,000
(vi) Paid cash to a creditors 15,000 -15,000 -15,000
    17,000 40,000 +2,000 7,000 +52,000
(vii) Salary paid 1,000. -1,000 -1,000
  Total  16,000 +40,000 +2,000  7,000  +51,000

Answer: –

Assets = Cash 16,000 + Stock 40,000 + Furniture 2,000 = 58,000/-

Liabilities =  7,000/-

Capital = 51,000/-

Liabilities  +Capital

7,000 + 51,000 = 58,000/-

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 

Transaction No. 1 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 1 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

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

Transaction No. 2 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 1 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 2 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

In this transaction, as shown in the above image two accounts are involved Stock(Purchase) and Cash.
Stock a/c (Purchase):- Because business receiving goods.
Cash a/c : – Because business paying due amount in cash.

Transaction No. 3

Transaction No. 3 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 1 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 3 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

In this transaction, as shown in the above image two accounts are involved Stock(Purchase) and Creditors.
Stock a/c (Purchase):- Because business receiving goods.
Creditors a/c : – Because business did not paid due amount yet.

Transaction No. 4

Transaction No. 4 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 4 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

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. 5

Transaction No. 5 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 5 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

In this transaction, as shown in the above image two accounts are involved Furniture a/c (Purchase) and Cash
Furniture a/c (Purchase):- Because business receiving furniture.
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.

Transaction No. 6

Transaction No. 6 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 6 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

In this transaction, as shown in the above image two accounts are involved Cash and Creditors.
Cash a/c :- Because, payment made to creditors.
Creditors a/c : – Because, Due amount paid to creditors and creditors received payment.

Transaction No. 7

Transaction No. 7 Question No.8 Chapter No.5 T.S. Grewal 1 Book 2019 1 - Question No 8 Chapter No 5 - T.S. Grewal 11 Class
Transaction No. 7 Question No.8 – Chapter No.5- T.S. Grewal +1 Book 2019

In this transaction, as shown in the above image two accounts are involved 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.

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