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Question -

Show the effect of following transaction on the accounting equation:

 

 

Rs

(a)

Manoj started business with

 

 

(i) Cash

₹2,30,000

 

(ii) Goods

₹1,00,000

 

(iii) Building

₹2,00,000

(b)

He purchased goods for cash

₹50,000

(c)

He sold goods(costing Rs 20,000)

₹35,000

(d)

He purchased goods from Rahul

₹55,000

(e)

He sold goods to Varun (Costing Rs 52,000)

₹60,000

(f)

He paid cash to Rahul in full settlement

₹53,000

(g)

Salary paid by him

₹20,000

(h)

Received cash from Varun in full settlement

₹59,000

(i)

Rent outstanding

₹3,000

(j)

Prepaid Insurance

₹2,000

(k)

Commission received by him

₹13,000

(l)

Amount withdrawn by him for personal use

₹20,000

(m)

Depreciation charge on building

₹10,000

(n)

Fresh capital invested

₹50,000

(o)

Purchased goods from Rakhi

₹10,000



Answer -

S.No.
Explanation
Assets
  
=
Liabilities
+
Capital
Cash
+
Stock
+
Building
+
Debtors
+
Prepaid Expenses
 
Creditors
+
Outstanding Expenses
 
 
(a)
Increase in cash, stock and building
2,30,000
+
1,00,000
+
2,00,000
         
 
 
Increase in capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,30,000
 
 
2,30,000
+
1,00,000
+
2,00,000
    
=
   
+
5,30,000
(b)
Increase in stock
    
50,000
         
 
 
Decrease in cash
(50,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,80,000
+
1,50,000
+
2,00,000
    
=
   
+
5,30,000
(c)
Increase in cash
35,000
             
 
 
Decrease in stock
  
(20,000)
           
 
 
increase in capital (Profit)
              
15,000
 
 
2,15,000
+
1,30,000
+
2,00,000
 
 
 
 
 
 
 
 
+
5,45,000
(d)
Increase in stock
  
55,000
           
 
 
Increase in creditors
         
=
55,000
   
 
  
2,15,000
+
1,85,000
+
2,00,000
 
 
 
 
=
55,000
 
 
+
5,45,000
(e)
Increase in debtors
 
     
60,000
       
 
 
Decrease in stock
 
 
(52,000)
           
 
 
Increase in capital (Profit)
 
             
8,000
  
2,15,000
+
1,33,000
+
2,00,000
+
60,000
 
 
=
55,000
 
 
+
5,53,000
(f)
Decrease in creditors
 
        
=
(55,000)
   
 
 
Decrease in cash
(53,000)
             
 
 
Increase in capital (Discount received)
 
             
2,000
  
1,62,000
+
1,33,000
+
2,00,000
+
60,000
 
 
=
NIL
 
 
+
5,55,000
(g)
Decrease in cash
(20,000)
             
 
 
Decrease in capital
 
             
(20,000)
  
1,42,000
+
1,33,000
+
2,00,000
+
60,000
 
 
=
NIL
 
 
+
5,35,000
(h)
Increase in cash
59,000
             
 
 
Decrease in capital (Discount allowed)
 
             
(1,000)
 
Decrease in debtors
 
     
60,000
       
 
  
2,01,000
+
1,33,000
+
2,00,000
+
NIL
 
 
=
NIL
+
 
+
5,34,000
(i)
Increase in outstanding Expenses
 
           
3,000
 
 
 
decrease in capital (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,000)
  
2,01,000
+
1,33,000
+
2,00,000
+
NIL
  
=
NIL
+
3,000
+
5,31,000
(j)
Decrease in prepaid expenses
 
       
2,000
     
 
 
Decrease in cash
(2,000)
             
 
  
1,99,000
+
1,33,000
+
2,00,000
+
NIL
 
2,000
=
NIL
+
3,000
+
5,31,000
(k)
Increase in cash
13,000
             
 
 
increase in capital (Income)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,000
  
2,12,000
+
1,33,000
+
2,00,000
+
NIL
+
2,000
=
NIL
+
3,000
+
5,44,000
(l)
Decrease in capital
 
             
(20,000)
 
Decrease in cash
(20,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
1,92,000
+
1,33,000
+
1,90,000
+
NIL
+
2,000
=
NIL
+
3,000
+
5,24,000
(m)
Decrease in capital
 
             
(10,000)
 
Decrease in building
 
 
 
 
(10,000)
 
 
 
 
 
 
 
 
 
 
  
1,92,000
+
1,33,000
+
1,90,000
+
NIL
+
2,000
=
NIL
+
3,000
+
5,14,000
(n)
Increase in cash
50,000
             
 
 
Increase in capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,000
  
2,42,000
+
1,33,000
+
1,90,000
+
NIL
+
2,000
=
NIL
+
3,000
+
5,64,000
(o)
Increase in stock
 
 
10,000
           
 
 
Increase in creditors
 
 
 
 
 
 
 
 
 
 
10,000
 
 
 
 
 
 
2,42,000
+
1,43,000
+
1,90,000
+
NIL
+ 
2,000
=
10,000
+
3,000
+
5,64,000
                 

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