Use accounting equation to show the effect of the
following transactions of M/s Royal Traders:
Rs
(a)
Started business with cash
1,20,000
(b)
Purchased goods for cash
10,000
(c)
Rent received
5,000
(d)
Salary outstanding
2,000
(e)
Prepaid Insurance
1,000
(f)
Received interest
700
(g)
Sold goods for cash (costing Rs 5,000)
7,000
(h)
Goods destroyed by fire
500
Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
Rs
(a)
Started business with cash
1,20,000
(b)
Purchased goods for cash
10,000
(c)
Rent received
5,000
(d)
Salary outstanding
2,000
(e)
Prepaid Insurance
1,000
(f)
Received interest
700
(g)
Sold goods for cash (costing Rs 5,000)
7,000
(h)
Goods destroyed by fire
500
|
S.No. |
Explanation |
Assets |
= |
Liabilities |
+ |
Capital |
||||
|
Cash |
+ |
Stock |
+ |
Prepaid Expenses |
|
Outstanding Expenses |
|
|
||
|
(a) |
Increase in cash |
1,20,000 |
|
|||||||
|
Increase in capital |
|
|
|
|
|
|
|
|
1,20,000 |
|
|
|
1,20,000 |
= |
NIL |
+ |
1,20,000 |
|||||
|
(b) |
Increase in stock |
10,000 |
|
|||||||
|
Increase in cash |
(10,000) |
|
|
|
|
= |
|
|
|
|
|
|
1,10,000 |
+ |
10,000 |
= |
NIL |
+ |
1,20,000 |
|||
|
(c) |
Increase in cash |
5,000 |
|
|||||||
|
Increase in capital (Profit) |
5,000 |
|||||||||
|
|
|
|
|
|
|
|
|
|
||
|
|
1,15,000 |
+ |
10,000 |
= |
NIL |
+ |
1,25,000 |
|||
|
(d) |
Increase in outstanding expenses |
= |
2,000 |
|
||||||
|
Decrease in capital (Expense) |
|
|
|
|
|
|
|
|
(2,000) |
|
|
1,15,000 |
+ |
10,000 |
= |
2,000 |
+ |
1,23,000 |
||||
|
(e) |
Increase in prepaid expenses |
|
1,000 |
|
||||||
|
Decrease in cash |
(1,000) |
|
||||||||
|
1,14,000 |
+ |
10,000 |
+ |
1,000 |
= |
2,000 |
+ |
1,23,000 |
||
|
(f) |
Increase in cash |
700 |
|
|||||||
|
Increase in capital (Profit) |
|
700 |
||||||||
|
1,14,700 |
+ |
10,000 |
+ |
1,000 |
= |
2,000 |
+ |
1,23,700 |
||
|
(g) |
Increase in cash |
7,000 |
|
|||||||
|
Decrease in stock |
|
(5,000) |
|
|||||||
|
Increase in capital (Profit) |
|
|
|
|
|
|
|
2,000 |
||
|
1,21,700 |
+ |
5,000 |
+ |
1,000 |
= |
2,000 |
+ |
1,25,700 |
||
|
(h) |
Decrease in stock |
|
(500) |
|
||||||
|
Decrease in capital (Loss) |
|
|
|
|
= |
|
|
(500) |
||
|
|
1,21,700 |
+ |
4,500 |
+ |
1,000 |
= |
2,000 |
+ |
1,25,200 |
|