PRATICAL PROBLEMS
Q1. What will be effect of the following on the Accounting Equation?
- Started business with cash Rs. 45,000
- Opened a bank account with a deposit of Rs. 4,500
- Purchase goods from M/s. Sun & Co. for Rs. 11,200
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + Bank + Stock = (Creditor ) |
| 1. | Started business with cash | 45,000 = 45,000 |
| 2. | Opened a bank account with a deposit | 45,000 = 45,000 (4,500) + 4,500 = |
| 3. | Purchase goods from M/s Sun & Co. | 40,500 + 4,500 = 45,000 11,200 = 11,200 |
| New Equation | 40,500 + 4,500 + 11,200 = 11,200 45,000 |
Assets = Liabilities + capital
(Cash+bank+stock) = (creditors) + capital
40,500+45, 00+11,200 = 11,200 + 45,000
56,200 = 56,200
Q2. Show the Accounting Equation for the following Transaction:
- Gopinath started business with cash 25,000
- Purchased goods from Shyam 10,000
- Sold goods to Sohan costing Rs. 1,800 1,500
- Gopinath Withdrew from Business 5,000
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + Bank + Debtors = (Creditor ) |
| 1. | Gopinath started business with cash | 25,000 = 25,000 |
| 2. | Purchased goods from Shyam | 25,000 = 25,000 10,000 = 10,000 |
| 3. | Sold goods to Sohan costing | 25,000 + 10,000 = 10,000 + 25,000 (1800) + 15,00 = (300) |
| 4. | New Equation Gopinath withdrew from business | 25,000 + 8,200 + 15,00 = 10,000 + 24,700 (5,000) = (5,000) |
| New Equation | 20,000 + 8,200 + 1,500 = 10,000 + 19,700 |
Assets = Liabilities + capital
(Cash+bank+Debtors) = (creditors) + capital
20,000+8,200+1,500 = 10,000 + 19,700
29,700 = 29,700
Q3. Prepare an Accounting Equation and Balance Sheet on the following basis:
- Ajeet started business with cash Rs. 20,000.
- He purchased furniture for Rs. 2,000.
- He paid rent of Rs. 200.
- He purchased goods on credit Rs. 3,000
- He sold goods (cost price Rs. 2,000) for Rs. 5,000 on cash.
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + furniture + Stock = (Creditor ) |
| 1. | Ajeet started business with cash | 20,000 = 20,000 |
| 2. | He Purchased furniture | 20,000 = 20,000 (2,000) + 2,000 = |
| 3. | He paid rent | 18,000 + 2,000 = 20,000 (200) = (200) |
| 4. | He purchased goods on credit | 17,800 + 2,000 = 19,800 3,000 = 3,000 |
| 5. | He sold goods on cash | 17,800 + 2,000 + 3,000 = 3,000 + 19,800 5,000 (2,000) = 3,000 |
| New Equation | 22,800 + 2,000 + 1,000 = 3,000 + 22,800 |
Assets = Liabilities + capital
(Cash+furniture+stock) = (creditors) + capital
22,800+2,000+1,000 = 3,000 + 22,800
25,800 = 25,800
Q4. Prepare Accounting Equation from the following:
- Started business with cash Rs. 1, 00,000 and Goods Rs. 20, 000.
- Sold goods worth Rs. 10,000 for cash Rs. 12,000.
- Purchased furniture on credit for Rs. 30,000.
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + Stock + Furniture = (Creditor ) |
| 1. | Started business with cash | 1,00,000 + 20,000 = 1,20,000 |
| 2. | Goods sold for cash | 1,00,000 + 20,000 = 1,20,000 12,000 (10,000) + 2,000 |
| 3. | Purchase furniture on credit. | 1,12,000 + 10,000 = 1,22,000 30,000 = 30,000 |
| New Equation | 1,12,000 + 10,000 + 30,000 = 30,000 + 1,22,000 |
Assets = Liabilities + capital
(Cash+Stock+Furniture) = (creditors) + capital
1, 12,000+10,000+30,000 = 30,000 + 1, 22,000
1, 52,000 = 1, 52,000
Q5. Develop an Accounting Equation from the following transactions:
- Mohan commenced business with cash 50,000
- Purchased goods for cash 30,000
- Purchased goods on credit 20,000
- Sold goods (costing Rs. 10,000) for 12,000
- Bought furniture on credit 2,000
- Paid cash to a creditor 15,000
- Salary paid 1,000
Ans –
| S.No | Transactions | Assets = Liabilities + Capital Cash + Stock + Furniture = (Creditor ) |
| 1. | Mohan started business with cash | 50,000 = 50,000 |
| 2. | Goods purchased on cash | 50,000 = 50,000 (30,000) + 30,000 |
| 3. | Goods Purchase on credit. | 20,000 + 30,000 = 50,000 20,000 = 20,000 |
| 4. | Goods sold | 20,000 + 50,000 = 20,000 + 50,000 12,000 + (10,000) = 2,000 |
| 5. | Purchased furniture on credit | 32,000 + 40,000 = 20,000 + 52,000 2,000 = 2,000 |
| 6. | Paid cash to a creditor | 32,000 + 40,000 + 2,000 = 22,000 + 52,000 (15,000) = (15,000) |
| 7. | Salary paid to employee | 17,000 + 40,000 + 2,000 = 7,000 + 52,000 (1,000) (1,000) |
| New Equation | 16,000 + 40,000 + 2,000 = 7,000 + 51,000 |
Assets = Liabilities + capital
(Cash+Stock+Furniture) = (creditors) + capital
16,000+40,000+2,000 = 7,000 + 51,000
58,000 = 58,000
Q6. Prepare an Accounting Equation on the basis of the following transaction:
- Started business with cash Rs. 70,000.
- Credit purchase of goods Rs. 18,000.
- Payment made to creditors in full settlement Rs. 17,500.
- Purchase of machinery for cash Rs. 20,000.
- Depreciation on machinery Rs. 2,000.
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + Stock + Machinery = (Creditor ) |
| 1. | Started business with cash | 70,000 = 70,000 |
| 2. | Credit Purchased of Goods | 70,000 = 70,000 18,000 = 18,000 |
| 3. | Payment made to creditors | 70,000 + 18,000 = 18,000 70,000 (17,500) = (500) |
| 4. | Purchased Machinery for cash | 52,500 + 18,000 = 70,500 (20,000) 20,000 |
| 5. | Depreciation on Machinery | 32,500 + 18,000 + 20,000 = + 70,500 (2,000) = ( 2,000) |
| New Equation | 32,500 + 18,000 + 18,000 = + 68,500 |
Assets = Liabilities + capital
(Cash+Stock+Machinery) = + capital
32,500+18,000+18,000 = 68,500
68,500 = 68,500
Q7. Show the effect of the following transactions on the Accounting Equation:
- Started business with cash Rs. 50,000.
- Salaries paid Rs. 2,000.
- Wages outstanding Rs. 200.
- Interest due but not paid Rs. 100.
- Rent paid in advance Rs. 150.
Ans –
| S.No. | Transactions | Assets = Liabilities + Capital Cash + Advances Outstanding Expenses = Expenses |
| 1. | Started business with cash | 50,000 = 50,000 |
| 2. | Salaries Paid | 50,000 = 50,000 (2,000) = (2,000) |
| 3. | Wages Outstanding | 48,000 = 48,000 = 200 + (200) |
| 4. | Interest Due but not paid | 48,000 = 200 47,800 = 100 + (100) |
| 5. | Rent paid in advance | 48,000 = 300 + 47,700 (150) + 150 = |
| New Equation | 47,850 + 150 = 300 + 47,700 |
Assets = Liabilities + capital
(Cash+Advances expenses) = (Outstanding Expenses) + Capital
(47,850+150) = 300 + 47,700
48,000 = 48,000
Q8. What will be the effect of the following on the Accounting Equation?
- Harish started business with cash Rs. 18,000.
- Purchased goods for cash Rs. 5,000 and on credit Rs. 2,000.
- Sold goods for cash Rs. 4,000 (costing Rs. 2,400)
- Rent paid Rs. 1,000 and rent outstanding Rs. 200.
Ans –
| S.No | Transactions | Assets = Liabilities + Capital Cash + Stock = Creditors + Outstanding Rent |
| 1. | Harish Started business with cash | 18,000 = 18,000 |
| 2. | Goods Purchased for cash and on credit | 18,000 = 18,000 (5,000) + 7,000 = 2,000 |
| 3. | Good sold for cash | 13,000 + 7,000 = 2,000 + 18,000 4,000 (2,400) = 1,600 |
| 4. | New Equation Rent paid and rent outstanding | 17,000 + 4,600 = 2,000 + 19,600 (1000) = 200 + (1,200) |
| New Equation | 16,000 + 4,600 = 2,000 + 200 + 18,400 |
Assets = Liabilities + capital
(Cash+Stock) = (Creditors+Outstanding Rent) + capital
(16,000+4,600) = (2,000+200) + 18,400
20,600 = 20,600
Q9. Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
- Started business with cash Rs. 1, 20,000.
- Purchased goods for cash Rs. 10,000.
- Rent received Rs. 5,000.
- Salary outstanding Rs. 2,000.
- Sold goods for cash (costing Rs. 5,000) Rs. 7,000.
- Goods destroyed by fire Rs. 500.
Ans –
| S.No | Transactions | Assets = Liabilities + Capital Cash + Stock = Outstanding Salary |
| 1. | Started business with cash | 1,20,000 = 1,20,000 |
| 2. | Purchased Goods for cash | 1,20,000 = 1,20,000 (10,000) + 10,000 |
| 3. | Rent received | 1,10,000 +10,000 = 1,20,000 5,000 = 5,000 |
| 4. | Salary Outstanding | 1,15,000 + 10,000 = 1,25,000 2,000 (2,000) |
| 5. | Good sold for cash | 1,15,000 + 10,000 = 2,000 + 1,23,000 7,000 (5,000) 2,000 |
| 6. | Goods destroyed by fire | 1,22,000 + 5,000 = 2,000 + 1,25,000 (500) (500) |
| New Equation | 1,22,000 + 45,00 = 2,000 + 1,24,500 |
Assets = Liabilities + capital
(Cash+Stock) = Outstanding Salary + capital
(1, 22,000+4,500) = 2,000 + 1, 24,500
1, 26,500 = 1, 26,500
Q10. Prove that the accounting equation is satisfied in all the following transactions of Suresh. Also prepare a Balance Sheet.
- Commenced business with cash Rs. 60,000.
- Paid rent in advance Rs. 500
- Purchased goods for cash Rs. 30,000 and credit Rs. 20,000.
- Sold goods for cash Rs. 30,000 costing Rs. 20,000.
- Paid salary Rs. 500 and salary outstanding being Rs. 100.
- Bought motorcycle for personal use Rs. 5,000.
Ans –
| S.No | Transactions | Assets = Liabilities +Capital Cash + Advance + Stock = Creditors + Outstanding rent Salary |
| 1. | Started business with cash | 60,000 = 60,000 |
| 2. | Rent paid in Advance | 60,000 = 60,000 (500) + 500 |
| 3. | Good purchased for cash and credit | 59,500 + 500 = 60,000 (30,000) + 50,000 = 20,000 |
| 4. | Good sold for cash | 29,500 + 500 + 50,000 = 20,000 60,000 30,000 + +(20,000) 10,000 |
| 5. | Salary paid and Outstanding Salary | 59,500 + 500 + 30,000 = 20,000 + 70,000 (500) = (500) 100 (100) |
| 6. | Purchased motorcycle for personal use | 59,000 + 500 + 30,000 = 20,000 + 100 + 69,400 (5,000) = (5,000) |
| New Equation | 54,000 + 500 + 30,000 = 20,000 + 100 + 64,400 |
Assets = Liabilities + capital
(Cash+Advance rent +Stock) = (Creditor +Outstanding Salary) + capital
(54,000+500+30,000) = (20,000+100) + 64,400
84,500 = 84,500
Balance Sheet
| Liabilities | Amount | Assets | Amount |
| capital | 64,400 | Cash | 54,000 |
| Creditors | 20,000 | Prepaid Rent | 500 |
| Salary Outstanding | 100 | Stock | 30,000 |
| 85,500 | 85,500 |