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

Question No 8 Chapter No 5

8. Develop an Accounting Equation from the following transactions:
(i) Mohan commenced business with cash of 50,000
(ii) Purchased goods for cash 30,000
(iii) Purchase goods on the credit of 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

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

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 i.e. cash.

#### Transaction No. 2

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

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 pay the due amount yet.

#### Transaction No. 4

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.
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) 12,000-10,000 = 2,000(Profit)

#### Transaction No. 5

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 the furniture.
Creditor: – Because the Business did not pay the due amount yet, But it has to pay in the future, so that’s why the account of creditors is created.

#### Transaction No. 6

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

In this transaction, as shown in the above image two accounts are involved i.e. cash and capital