Question No 9 Chapter No 5 - T.S. Grewal 11 Class

Question No 9 Chapter No 5

Table of Contents

Solution of Question No 9 Chapter No 5: –

Explanation of All Transactions with images: –

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

9. Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash Rs 70,000.
(ii) Credit Purchase of goods Rs 18,000
(iii) Payment made to creditors in full settlement Rs 17,500
(iv) Purchase of machinery for cash Rs 20,000
(v) Depreciation on machinery Rs 2,000.

Solution of Question No 9 Chapter No 5: –

Question no. 9 chapter no. 5 T.S Grewal - Explained with Animated Examples

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S. No.	Particulars	Assets			Liabilities	Capital
S. No.	Particulars	Cash	+Stock	+Machine	+Creditors	Capital
(i)	Started business with cash Rs 70,000.	+70,000				+70,000
		70,000	–	–	–	+70,000
(ii)	Credit Purchase of goods Rs 18,000	–	+18,000		+18,000	–
		70,000	+18,000	–	+18,000	+70,000
(iii)	Payment made to creditors in full settlement Rs 17,500	-17,500	–		-18,000	+500
		52,500	+18,000	–	–	+70,500
(iv)	Purchase of machinery for cash Rs 20,000	-20,000	–	+20,000	–	–
		32,500	+18,000	20,000	–	+70,500
(v)	Depreciation on machinery Rs 2,000.	–	–	-2,000	–	-2,000
	Total	16,000	+18,000	+18,000	–	+68,500

Answer: –

Assets = Cash 16,000 + Stock 18,000 + Machine 18,000 = 68,500/-
Liabilities = Nil
Capital = 68,500/-
Liabilities +Capital
0 + 68,500 = 68,500/-

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 two accounts are involved Stock(Purchase) and Creditors.
Stock a/c (Purchase):- Because business receiving goods.
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. 3

In this transaction, as shown in the above image three accounts are involved Cash, Capital, and Creditors.
Cash a/c :- Because, payment made to creditors.
Capital a/c: – Business getting discount on cash payment. Discount is our gain so it will be added in the capital account. Because All income and gains are added in the capital accounts.
Creditors a/c : – Because, Due amount paid to creditors and creditors received payment.

Transaction No. 4

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

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Transaction No. 5

In this transaction, as shown in the above image two accounts are involved Machine and Capital:
Machine a/c:- Amount of Depreciation deducted from the Machine account, Because book value of machine of reduced.
Capital a/c: – Amount of Depreciation deducted from the capital account, Because all expenses and losses are worn by the owner.

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