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Page No 6.24:

Question 1:

Prepare Accounting Equation from the following:

 

 

(₹)

1.

Sandeep started business with Cash

1,00,000

2. Purchased furniture for cash 5,000
3. Purchased goods for cash 20,000
4. Purchased goods on credit 36,000
5. Paid for rent 700
6.

Goods costing ₹40,000 sold at a profit of 20% for cash

 

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Furniture + Stock = Creditors    
(i) Sandeep started business with cash 1,00,000             + 1,00,000
    1,00,000         =   + 1,00,000
(ii) Purchased furniture for cash –5,000   +5,000            
    95,000 + 5,000     =   + 1,00,000
(iii) Purchased goods for cash –20,000       +20,000        
    75,000 + 5,000 + 20,000 =   + 1,00,000
(iv) Purchased goods on credit         +36,000   +36,000    
    75,000 + 5,000 + 56,000 = 36,000 + 1,00,000
(v) Rent paid -700               –700
    74,300 + 5,000 + 56,000 = 36,000 + 99,300
(vi) Goods costing Rs 40,000 sold at a profit of 20% for cash +48,000       -40,000       +8,000
    1,22,300 + 5,000 + 16,000 = 36,000 + 1,07,300
                     

Working Note:

WN1 Calculation of Sale Price

Page No 6.24:

Question 2(A):

Show the Accounting Equation on the basis of the following and present a balance sheet on the last new equation balances:

 

 

(₹)

(i)

Manu started business with cash

50,000

(ii) Bought furniture for 500
(iii) Purchased goods on credit 4,000
(iv) Sold goods on cash (cost ₹500) for 700
(v) Received rent 200
(vi) Purchased goods for cash 1,000
(vii) Withdrew for personal use 700
(viii) Paid to creditors 400
(ix)

Paid for salaries

200

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Furniture + Stock = Creditors    
(i) Manu started business with cash +50,000               +50,000
    50,000         =   + 50,000
(ii) Purchased Furniture –500   +500            
    49,500 + 500         + 50,000
(iii) Purchased goods on credit         +4,000   +4,000    
    49,500 + 500 + 4,000 = 4,000 + 50,000
(iv) Sold goods costing Rs 500 for Rs 700 +700       –500       +200 (Profit)
    50,200 + 500 + 3,500 = 4,000 + 50,200
(v) Rent received +200               +200 (Income)
    50,400 + 500 + 3,500 = 4,000 + 50,400
(vi) Purchased goods for cash –1,000       +1,000        
    49,400 + 500 + 4,500 = 4,000 + 50,400
(vii) Withdrew for personal use –700               –700 (Drawings)
    48,700 + 500 + 4,500 = 4,000 + 49,700
(viii) Paid to creditors –400           –400    
    48,300 + 500 + 4,500 = 3,600 + 49,700
(ix) Salaries paid –200               -200
    48,100 + 500 + 4,500 = 3,600 + 49,500
   

 

               
 
Balance Sheet
as on ……
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 3,600 Cash 48,100
Capital 49,500 Furniture 500
    Stock 4,500
  53,100   53,100
       

Page No 6.24:

Question 2(B):

Prove that the Accounting Equation is satisfied in all the following transactions of Rajaram. Also prepare a Balance Sheet:−
1. Started business with Cash ₹1,20,000.
2. Purchased a typewriter for Cash for ₹8,000 for office use.
3. Purchased goods for ₹50,000 for cash.
4. Purchased goods for ₹40,000 on credit.
5. Goods costing ₹60,000 sold for ₹80,000 on credit.
6. Paid for Rent ₹1,500 and for salaries ₹2,000.
7. Received ₹800 for Commission.
8. Withdrew for private use ₹5,000 in cash.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Typewriter + Stock + Debtors = Creditors    
(i) Started business with cash +1,20,000                 + 1,20,000
    1,20,000             =     1,20,000
(ii) Purchased typewriter for office use –8,000 + 8,000                
    1,12,000 + 8,000         =     1,20,000
(iii) Purchased goods for cash –50,000       +50,000            
    62,000 + 8,000 + 50,000     =     1,20,000
(iv) Purchased goods on credit         +40,000       40,000    
    62,000 + 8,000 + 90,000     = 40,000 + 1,20,000
(v) Goods costing Rs 60,000 sold for Rs 80,000 on credit         –60,000   +80,000       +20,000 (Profit)
    62,000 + 8,000 + 30,000 + 80,000 = 40,000 + 1,40,000
(vi) Paid rent Rs 1,500 and salaries Rs 2,000 –3,500                   –3,500 (Expenses)
    58,500 + 8,000 + 30,000 + 80,000 = 40,000 + 1,36,500
(vii) Commission received +800                   +800 (Income)
    59,300 + 8,000 + 30,000 + 80,000 = 40,000 + 1,37,300
(viii) Withdrew cash for private use –5,000                   –5,000 (Drawings)
    54,300 + 8,000 + 30,000 + 80,000 = 40,000 + 1,32,300
   

 

                   
 
Balance Sheet of Rajaram
as on ……
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 40,000 Cash 54,300
Capital 1,32,300 Typewriter 8,000
    Stock 30,000
    Debtors 80,000
  1,72,300   1,72,300
       



Page No 6.25:

Question 3:

Prepare Accounting Equation from the following :
(a) Started business with Cash ₹2,00,000.
(b) Purchased goods for Cash ₹60,000 and  on Credit ₹1,50,000.
(c) Sold goods for Cash costing ₹40,000 at a profit of 20% and on Credit costing ₹72,000 at a profit of 25%.
(d) Paid for Rent ₹5,000.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Debtors = Creditors    
(i) Started business with cash +2,00,000               +2,00,000
    2,00,000         =     2,00,000
(ii) Purchased Goods for Cash Rs 60,000 and on credit Rs 1,50,000 –60,000   +2,10,000       +1,50,000    
    +1,40,000 + 2,10,000     = 1,50,000 + 2,00,000
(iii) Sold goods for cash costing Rs 40,000 at a profit of 20% and on credit Rs 72,000 at a profit of 25% +48,000   –1,12,000   +90,000       +26,000 (Profit)
    +1,88,000 + 98,000 + 90,000 = 1,50,000 + 2,26,000
(iv) Rent paid –5,000               –5,000 (Expenses)
    +1,83,000 + 98,000 + 90,000 = 1,50,000 + 2,21,000
                 

Working Note:

WN1 Calculation of Selling Price of Goods Sold




Total Cost of Goods Sold = 40,000 + 72,000 = Rs 1,12,000

Page No 6.25:

Question 4:

Prepare Accounting Equation from the following:

 

 

(₹)

(a)

Kunal started business with cash

2,50,000

(b) He purchased furniture for cash 35,000
(c) He paid commission 2,000
(d) He purchased goods on credit 40,000
(e)

He sold goods (Costing ₹20,000) for cash

26,000

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Furniture + Stock = Creditors    
(i) Kunal started business with cash +2,50,000             + 2,50,000
    2,50,000         =     2,50,000
(ii) Purchased furniture for cash –35,000   +35,000            
    2,15,000 + 35,000     =     2,50,000
(iii) Commission paid –2,000               -2,000 (Expense)
    2,13,000 + 35,000     =   + 2,48,000
(iv) Purchased goods on credit         +40,000   +40,000    
    2,13,000 + 35,000 + 40,000 = 40,000 + 2,48,000
(iv) Sold goods costing Rs 20,000 for Rs 26,000 +26,000       –20,000       +6,000 (Profit)
    2,39,000 + 35,000 + 20,000 = 40,000 + 2,54,000
                     

Page No 6.25:

Question 5:

Mohit has the following transactions, prepare Accounting Equation :

 

 

(₹)

(a) Business started with cash 1,75,000
(b) Purchased goods from Rohit 50,000
(c) Sold goods on credit to Manish (costing ₹17,500) 20,000
(d) Purchased furniture for office use 10,000
(e) Cash paid to Rohit in full settlement 48,500
(f) Cash received from Manish 20,000
(g) Rent paid 1,000
(h) Cash withdrew for personal use

3,000

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock
+

 

Debtors   Furniture = Creditors    
(i) Started business with cash +1,75,000                 + 1,75,000
    1,75,000             =   + 1,75,000
(ii) Purchased goods from Rohit     +50,000           +50,000    
    1,75,000 + 50,000         = 50,000 + 1,75,000
(iii) Sold goods costing Rs 17,500 for Rs 20,000 to Manish     –17,500   +20,000           +2,500 (Profit)
    1,75,000 + 32,500 + 20,000     = 50,000 + 1,77,500
(iv) Purchased furniture for office use –10,000           +10,000        
    1,65,000 + 32,500 + 20,000 + 10,000 = 50,000 + 1,77,500
(v) Cash paid in full settlement to Rohit –48,500               –50,000   +1,500 (Gain)
    1,16,500 + 32,500 + 20,000 + 10,000 = 0 + 1,79,000
(vi) Cash received from Manish +20,000       –20,000            
    1,36,500 + 32,500 + 0 + 10,000 =   + 1,79,000
(vii) Rent paid –1,000                   –1,000 (Expense)
    1,35,500 + 32,500 +   + 10,000 =   + 1,78,000
(viii) Withdrew cash for private use –3,000                   –3,000 (Drawings)
    1,32,500 + 32,500 +   + 10,000 =   + 1,75,000
                     

Page No 6.25:

Question 6:

What will be the effect of the following on the Accounting Equation?
(i) Harish started business with cash ₹1,80,000.
(ii) Purchased goods for cash ₹60,000 and on credit ₹30,000.
(iii) Sold goods for cash ₹40,000; costing ₹24,000.
(iv) Rent paid ₹5,000; and rent outstanding ₹2,000.
(v) Sold goods on credit ₹50,000 (costing ₹38,000).
(vi) Salary paid in advance ₹3,000.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Debtors   Prepaid Salary = Creditors + Outstanding Rent    
(i) Harish started business with cash +1,80,000                     + 1,80,000
    1,80,000             =         1,80,000
(ii) Purchased goods for cash Rs 60,000 and on credit Rs 30,000 –60,000   +90,000           +30,000        
    1,20,000 + 90,000         = 30,000     + 1,80,000
(iii) Sold goods costing Rs 24,000 for Rs 40,000 +40,000   –24,000                   +16,000 (Profit)
    1,60,000 + 66,000         = 30,000     + 1,96,000
(iv) Rent paid Rs 5,000 and outstanding Rs 2,000 –5,000                   +2,000   –7,000 (Expense)
    1,55,000 + 66,000         = 30,000 + 2,000 + 1,89,000
(v) Goods costing Rs 38,000 sold on credit for Rs 50,000     –38,000   +50,000               +12,000 (Profit)
    1,55,000 + 28,000 + 50,000     = 30,000 + 2,000 + 2,01,000
(vi) Salary paid in advance –3,000           +3,000            
    1,52,000 + 28,000 + 50,000 + 3,000 = 30,000 + 2,000 + 2,01,000
                   

Page No 6.25:

Question 7:

Use Accounting Equation to show the effect of the following transactions of M/s Royal Traders :Prepare

 

 

(₹)

(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 ₹5,000) 7,000
(h) Goods destroyed by fire

500

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock

+

Prepaid Insurance = Outstanding Salary    
(i) Started business with cash +1,20,000             + 1,20,000
    1,20,000         =     1,20,000
(ii) Purchased goods for cash –10,000   +10,000            
    1,10,000 + 10,000     =     1,20,000
(iii) Rent received +5,000               +5,000 (Income)
    1,15,000 + 10,000     =     1,25,000
(iv) Outstanding salary             +2,000   –2,000 (Expense)
    1,15,000 + 10,000     = 2,000 + 1,23,000
(iv) Prepaid insurance –1,000       +1,000        
    1,14,000 + 10,000 + 1,000 = 2,000 + 1,23,000
(iv) Interest received +700               +700 (Income)
    1,14,700 + 10,000 + 1,000 = 2,000 + 1,23,700
(iv) Sold goods costing Rs 5,000 for Rs 7,000 +7,000   –5,000           +2,000 (Profit)
    1,21,700 + 5,000 + 1,000 = 2,000 + 1,25,700
(iv) Goods destroyed by fire     –500           –500
    1,21,700 + 4,500 + 1,000 = 2,000 + 1,25,200
                     



Page No 6.26:

Question 8(A):

Prepare Accounting Equation from the following :−
1. Started business with cash ₹75,000 and goods ₹25,000.
2. Paid for Rent ₹2,000.
3. Bought goods for cash ₹30,000 and on credit for ₹44,000.
4. Goods costing ₹50,000 sold at a profit of 25%, out of which ₹27,500 received in Cash.
5. Purchased a Motor-cycle for personal use ₹20,000.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Debtors = Creditors    
(i) Started business with cash and goods +75,000 + 25,000     =   + 1,00,000
    75,000 + 25,000     =     1,00,000
(ii) Rent paid –2,000               –2,000 (Expense)
    73,000 + 25,000     =     98,000
(iii) Bought goods for cash and on credit –30,000   +74,000       +44,000    
    43,000 + 99,000     = 44,000 + 98,000
(iv) Goods costing Rs 50,000 sold at a profit of 25% out of which Rs 27,500 received in cash +27,500   –50,000   +35,000       +12,500 (Profit)
    70,500 + 49,000 + 35,000 = 44,000 + 1,10,500
(v) Purchased motor cycle for personal use –20,000               –20,000 (Drawings)
    50,500 + 49,000 + 35,000 = 44,000 + 90,500
                     

Working Note:

WN1 Calculation of Selling Price

Page No 6.26:

Question 8(B):

Prepare Accounting Equation from the following and also prepare a Balance Sheet :
1. Raghu started business with Cash ₹1,50,000.
2. Bought goods for cash ₹80,000 and on credit for ₹40,000.
3. Goods costing ₹75,000 sold at a profit of 3313%. Half the payment received in cash.
4. Goods costing ₹10,000 sold for ₹12,000 on credit.
5. Paid for Rent ₹2,000 and for salaries ₹4,000.
6. Goods costing ₹20,000 sold for ₹18,500 for Cash.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock

+

Debtors = Creditors    
(i) Raghu started business with cash +1,50,000             + 1,50,000
    1,50,000         =   + 1,50,000
(ii) Purchase goods for cash and on credit –80,000   +1,20,000       +40,000    
    70,000 + 1,20,000     = 40,000 + 1,50,000
(iii) Goods costing Rs 75,000 sold at a profit of 3313%. Half amount was received in cash. +50,000   –75,000   +50,000       +25,000 (Profit)
    1,20,000 + 45,000 + 50,000 = 40,000 + 1,75,000
(iv) Goods costing Rs 10,000 sold for Rs 12,000 on credit     –10,000   +12,000       +2,000 (Profit)
    1,20,000 + 35,000 + 62,000 = 40,000 + 1,77,000
(v) Rent and salaries paid –6,000               –6,000 (Expense)
    1,14,000 + 35,000 + 62,000 = 40,000 + 1,71,000
(vi) Goods costing Rs 20,000 sold for Rs 18,500 cash +18,500   –20,000           –1,500 (Loss)
    1,32,500 + 15,000 + 62,000 = 40,000 + 1,69,500
                     

Working Note:

WN1 Calculation of Selling Price

Balance Sheet of Raghu
as on ……
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 40,000 Cash 1,32,500
Capital 1,69,500 Stock 15,000
    Debtors 62,000
  2,09,500   2,09,500
       

 

Page No 6.26:

Question 9:

If the Capital of a business is ₹1,20,000 and Outside liabilities are ₹20,000, calculate total assets of the business.

Answer:

Assets  =  Liabilities + Capital
  =  20,000 + 1,20,000
  =  Rs 1,40,000

Page No 6.26:

Question 10:

If total assets of a business are ₹1,30,000 and capital is ₹80,000, calculate creditors.

Answer:

Assets  =  Liabilities + Capital
1,30,000  =  Liabilities + 80,000
Liabilities  =  1,30,000 – 80,000
   =  Rs 50,000

It is assumed that creditors are the only liability of the organisation, thus, Rs 50,000 are the creditors.



Page No 6.27:

Question 11:

'A' commenced his cloth business on 1st April, 2011 with a capital of ₹3,00,000. On 31st March, 2012 his assets were worth ₹5,00,000 and liabilities ₹1,00,000. Find out his closing capital and profits earned during the year.

Answer:

Opening Capital (Capital as on March 31, 2011) = Rs 3,00,000

Page No 6.27:

Question 12(A):

Yogesh commenced business on 1st April, 2011 with a Capital of ₹5,00,000 and a loan of ₹1,00,000 borrowed from Citi Bank. On 31st March, 2012, his assets were ₹8,00,000. Calculate his closing capital and profits earned during the year.

Answer:

Opening Capital (Capital as on 1st April, 2011) = Rs 5,00,000



*It is assumed that loan borrowed from Citi Bank has not been paid till the end of the accounting year.

Page No 6.27:

Question 12(B):

If in the above case, the proprietor had introduced fresh capital of ₹40,000 and had withdrawn ₹10,000 for personal purposes, calculate his profits.

Answer:

Opening Capital (Capital as on 1st April, 2011) = Rs 5,00,000

Page No 6.27:

Question 13:

Give one examples of each of the following transactions :
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.

Answer:

Effect of Transaction Example
(i) Increase in an asset and a liability Goods purchased on credit
(ii) Decrease in an asset and a liability Cash paid to creditors
(iii) Increase in assets and capital Additional capital brought in by the proprietor
(iv) Decrease in assets and capital Salary paid in Cash

Page No 6.27:

Question 14:

On which side the increase in the following accounts will be recorded? Also mention the nature of account :−

1, Furniture 5. Proprietor's Account
2. Rent Paid 6. Debtor
3. Commission Received 7. Creditor
4. Salary Paid  

Answer:

Accounts Increase Recorded at Side Nature
1. Furniture Debit Asset
2. Rent Paid Debit Expense
3. Commission Received Credit Income
4. Salary Paid Debit Expense
5. Proprietor’s Account Credit Capital
6. Debtor Debit Asset
7. Creditor Credit Liability

Page No 6.27:

Question 15:

On which side the decrease in the following g accounts will be recorded? Also Mention the nature of account:−

1. Cash 4. Outstanding Rent
2. Bank Overdraft 5. Prepaid Insurance
3. Rent Paid 6. Manoj, Proprietor of the business

Answer:

Accounts Decrease Recorded at Side Nature
1. Cash Credit Asset
2. Bank Overdraft Debit Liability
3. Rent Paid Credit Expense
4. Outstanding Rent Debit Liability
5. Prepaid Insurance Credit Asset
6. Manoj, Proprietor of the business Debit Capital

Page No 6.27:

Question 16:

Open 'T' shape account for Machinery and write the following on the proper side :

 

 

(₹)

1. Machinery purchased for

5,00,000

2. Machinery sold 1,20,000
3. Machinery discarded 50,000
4. New Machinery purchased 2,00,000
5. Machinery destroyed

40,000

Answer:

As we know, Machinery Account is an asset, so, increase in machinery will be recorded on the debit side while decrease in machinery will be recorded on the credit side of the Machinery Account.
 

Machinery Account
Dr.   Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Record increase in Machinery on this side-   Record decrease in Machinery on this side-  
1. Machinery purchased for 5,00,000 2. Machinery sold 1,20,000
4. New Machinery purchased 2,00,000 3. Machinery discarded 50,000
    5. Machinery destroyed 40,000
Total 7,00,000 Total 2,10,000
    Balance 4,90,000
  7,00,000   7,00,000
       

 



Page No 6.28:

Question 17(A):

Open 'T' shape account of our creditor 'Raghubir' and write the following transactions on the proper side :−
1. Purchased goods from Raghubir on credit for ₹50,000.
2. Returned goods to Raghubir for ₹5,000.
3. Paid to Raghubir ₹30,000.
4. Purchased goods from Raghubir on credit for ₹16,000.
5. Paid to Raghubir ₹20,000.

Answer:

Raghubir is a creditor, which means, it is a liability for the business. As we know, increase in liability is recorded on the credit side while decrease in liability will be shown on the debit side of the concerned liability account.
 

Raghubir Account (Creditors)
Dr.   Cr.
Particulars Amount
(Rs)
Particulars Amount
(Rs)
Record decrease in Creditors on this side-   Record increase in Creditors
on this side-
 
2. Returned goods to Raghubir 5,000 1. Purchased goods on credit from Raghubir 50,000
3. Paid to Raghubir 30,000 4. Purchased goods on credit from Raghubir 16,000
5. Paid to Raghubir 20,000    
Total 55,000 Total 66,000
Balance 11,000    
  66,000   66,000
       

Page No 6.28:

Question 17(B):

Question

Answer:

Commission can be an expense as well as an income. So, when commission is paid, it is shown on the debit side of the Commission Account while commission received (being an income) will be shown on the credit side of the Commission Account.
 

Commission Account 
Dr. Cr.
Particulars Amount (Rs) Particulars Amount
(Rs)
Record Expenses on this side-   Record Income on this side-  
2. Commission Paid 2,000 1. Commission Received 5,000
    3. Commission Received 1,500
Total 2,000 Total 6,500
Balance 4,500    
  6,500   6,500
       

Page No 6.28:

Question 18:

Put the following on the proper side of Cash account, Debtor's account and Creditor's account :
(a) Sold goods for cash ₹60,000.
(b) Sold goods to Hari on credit ₹20,000.
(c) Purchased goods from Krishan on credit ₹36,000.
(d) Purchased goods from Krishan for cash ₹10,000.
(e) Cash received from Hari ₹15,000.
(f) Cash paid to Krishan ₹28,000.

Answer:

Increase in Cash (being an asset) will be shown on the debit side and decrease in cash will be recorded on the credit side of the Cash Account.

Cash Account 

Dr.

 

Cr.

Particulars

Amount

(Rs)

Particulars

Amount

(Rs)

Record increase in Cash on this side-

 

Record decrease in Cash on this side-

 

(a) Sold goods for cash

60,000

(d) Purchased goods for cash

10,000

(e) Cash received from Hari

15,000

(f) Cash paid to Krishan

28,000

Total

75,000

Total

38,000

 

 

Balance

37,000

 

75,000

 

75,000

 

 

 

 

Increase in Debtors (being an asset) will be shown on the debit side and decrease in them will be recorded on the credit side of the Debtors Account.

Debtors Account 
Dr. Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Record increase in Debtors on this side-   Record decrease in Debtors on this side-  
(b) Sold goods on credit 20,000 (e) Cash received from debtor 15,000
Total 20,000 Total 15,000
    Balance 5,000
  20,000   20,000
       


Increase in Creditors (being a liability) will be shown on the credit side and decrease in the creditors will be recorded on the debit side of the Creditors Account.
 

Creditors Account 
Dr. Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Record decrease in Creditors on this side-   Record increase in Creditors on this side-  
(f) Cash paid to creditor 28,000 (c) Purchased goods on credit 36,000
Total 28,000 Total 36,000
Balance 8,000    
  36,000   36,000
       

 

Page No 6.28:

Question 19:

From the following transactions prepare the Proprietor's Account in 'T' shape :Prepare Accounting Equation from the following:

2013

 

(₹)

April 1 Commenced business with Cash

5,00,000

August 1 Introduced additional Capital 1,00,000
Dec. 31 Drawings 40,000
2014    
Feb. 28 Drawings 20,000
March 31 Net Profit shown by Profit & Loss A/c

1,25,000

Answer:

Capital Account 
Dr.   Cr.
Particulars Amount (Rs) Particulars Amount (Rs)
Record decrease in Capital on this side-   Record increase in Capital on this side-  
Dec. 31: Drawings 40,000 April 01: Commenced business 5,00,000
Feb. 28: Drawings 20,000 Aug. 01: Introduced additional capital 1,00,000
    March 31: Profit earned 1,25,000
Total 60,000 Total 7,25,000
Balance 6,65,000    
  7,25,000   7,25,000
       



Page No 6.29:

Question 20:

Prepare the Accounting Equation on the basis of the following:
(a) Started business with cash ₹ 1,40,000 and Stock ₹ 2,50,000.
(b) Sold goods (costing ₹ 50,000) at a profit of 25% on the cost.
(c) Deposited into bank account ₹ 1,80,000.
(d) Purchased goods from Mohan ₹ 80,000.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Bank = Creditors    
(i) Started business with cash and goods +1,40,000   +2,50,000           +3,90,000
    1,40,000 + 2,50,000     =     3,90,000
(ii) Goods (costing Rs 50,000) sold at a profit of 25% on cost +62,500   –50,000           +12,500 (Profit)
    2,02,500 + 2,00,000     =     4,02,500
(iii) Deposited into bank –1,80,000       +1,80,000        
    22,500 + 2,00,000 + 1,80,000 =     4,02,500
(iv) Purchased goods from Mohan     +80,000       +80,000    
    22,500 + 2,80,000 + 1,80,000 = 80,000 + 4,02,500
                     

Working Note:

WN1 Calculation of Selling Price

 

Page No 6.29:

Question 21:

Prepare Accounting Equation on the basis of the following transactions:
(a) Started business with cash ₹ 70,000.
(b) Credit purchase of goods ₹ 18,000.
(c) Payment made to creditors in full settlement ₹ 17,500.
(d) Purchase of machinery for cash ₹ 20,000.

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Machinery  = Creditors    
(i) Started business with cash +70,000               +70,000
    70,000         =     70,000
(ii) Purchased goods on credit     +18,000       +18,000    
    70,000 + 18,000     = 18,000 + 70,000
(iii) Payment to creditors in full settlement –17,500           –18,000   +500 (Gain)
    52,500 + 18,000     = 0 + 70,500
(iv) Purchased machinery for cash –20,000     + 20,000        
    32,500 + 18,000 + 20,000 = 0 + 70,500
                     

Page No 6.29:

Question 22:

Prepare accounting equation from the following:
(a) Started business with cash ₹ 50,000 and goods ₹ 30,000.
(b) Purchased goods for cash ₹ 30,000 and on credit from Karan ₹ 20,000.
(c) Goods costing ₹ 40,000 were sold for ₹ 55,000 fro cash.
(d) Withdrew cash for personal use ₹ 10,000.
(e) Rent outstanding ₹ 2,000

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock = Creditors + Outstanding Rent    
(i) Started business with cash and goods +50,000   +30,000           +80,000
    50,000 + 30,000 =       + 80,000
(ii) Purchased goods for cash and on credit from Karan –30,000   +50,000   +20,000        
    20,000 + 80,000 = 20,000     + 80,000
(iii) Goods costing Rs 40,000 sold for Rs 55,000 +55,000   –40,000           +15,000 (Profit)
    75,000 + 40,000 = 20,000     + 95,000
(iv) Withdrew cash for personal use –10,000               –10,000 (Drawings)
    65,000 + 40,000 = 20,000     + 85,000
(v) Outstanding Rent             +2,000   –2,000 (Expense)
    65,000 + 40,000 = 20,000 + 2,000 + 83,000
                     

Page No 6.29:

Question 23:

Show the accounting equation on the basis of the following transactions and present a Balance Sheet of the last new equation balance:

 

 

(₹)

(i)

Mohan commenced business with

70,000
(ii) Purchased goods on Credit 14,000
(iii) Withdrew for private use 1,700
(iv) Purchased goods for Cash 10,000
(v) Paid wages 300
(vi) Paid to Creditors 10,000
(vii) Sold goods on Credit at par 15,000
(viii) Sold goods for Cash (cost price was ₹ 3,000) 4,000
(ix) Purchased furniture for 500

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Debtors + Furniture = Creditors    
(i) Started business with cash +70,000                 + 70,000
    70,000             =     70,000
(ii) Purchased goods on credit     +14,000           +14,000    
    70,000 + 14,000         = 14,000 + 70,000
(iii) Withdrew for private use –1,700                   –1,700 (Drawings)
    68,300 + 14,000         = 14,000 + 68,300
(iv) Purchased goods for cash –10,000   +10,000                
    58,300 + 24,000         = 14,000 + 68,300
(v) Wages paid –300                   –300 (Expense)
                                         58,000 + 24,000         = 14,000 + 68,000
(vi) Paid to creditors –10,000               –10,000    
    48,000 + 24,000         = 4,000 + 68,000
(vii) Sold goods on credit at par     –15,000   +15,000            
    48,000 + 9,000 + 15,000     = 4,000 + 68,000
(viii) Sold goods (costing Rs 3,000) for Rs 4,000 +4,000   –3,000               +1,000 (Profit)
    52,000 + 6,000 + 15,000     = 4,000 + 69,000
(ix) Furniture purchased –500           +500        
    51,500 + 6,000 + 15,000 + 500 = 4,000 + 69,000
   

 

                   
 
Balance Sheet
as on ……
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 4,000 Cash 51,500
Capital 69,000 Stock 6,000
    Debtors 15,000
    Furniture 500
  73,000   73,000
       

 

Page No 6.29:

Question 24:

Prove that the accounting equation is satisfied in the following transactions:−

   

(₹)

(a) Brij Mohan commenced business with Cash 1,00,000
(b) Bought goods for Cash 60,000
(c) 13rd of the above goods sold at a profit of 20% on cost. Half the payment recieved in Cash  
(d) Purchased typewritter for office use 15,000
(e) Purchased goods on Credit from X 25,000
(f) Paid to X 15,000
(g) Paid Salary 3,000
(h) Received commission 500
(i) Sold goods for Cash (Cost ₹ 50,000)

60,000

Answer:

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Typewriter + Debtors = Creditors    
(i)