Page 45 - ISCDEBK-XI

Accounting Equation 6.11

(v) Purchased goods on credit for ` 20,000.
(vi) Paid rent ` 3,000 including ` 2,000 in advance.
(vii) Paid salaries ` 2,000.
(viii) Sold goods costing ` 8,000 for ` 10,000.
(ix) Salaries outstanding ` 1,000.
(x) Charge depreciation on furniture ` 500.
4. Show an Accounting Equation on the basis of the following transactions:
(i) D. Mahapatra commenced business with cash ` 1,50,000; goods ` 60,000; machinery ` 1,00,000 and
furniture ` 50,000.
(ii) 1/3rd of the above goods sold at a profit of 10% on cost and half of the payment is received in cash.
(iii) Depreciation on machinery provided @ 10%.
(iv) Cash withdrawn for personal use ` 10,000.
(v) Interest on drawings charged @ 5%.
(vi) Goods sold to Gupta for ` 10,000 and received a Bill Receivable for the same amount for 3 months.
(vii) Received ` 10,000 from Gupta against the Bills Receivable on its maturity.
5. Mr. B.K. Goyal started a real estate agency business with a cash investment of ` 3,50,000. Show the impact
of following transactions on the Accounting Equation and check whether the equation remains balanced
or not:
(a) Paid three month’s advance rent for office accommodation ` 21,000.
(b) Bought car for office use ` 2,10,000.
(c) Purchased office furniture ` 70,000.
(d) Bought office Laptop from Gupta Tech. & Co. ` 30,000.
(e) Sold extra office furniture at cost to Mohan for ` 10,000. Mohan paid ` 6,000 in cash and accepted a
bill at three months for the balance.
(f) Mohan paid the amount of the bill at maturity and Mr. B.K. Goyal paid half the amount he owed to
Gupta Tech. & Co.
(g) Collected commission ` 60,000.
(h) Paid telephone bill amounting to ` 1,500.

GUIDE TO ANSWERS

1. Assets—Cash ` 34,500 + Bank ` 10,000 + Stock ` 20,000 + Furniture ` 5,000 + Motorcycle ` 20,000 = ` 89,500;
Liabilities—Creditors ` 30,000 + Outstanding Rent ` 100 + Vendor for Furniture ` 5,000 + Capital ` 54,400 = ` 89,500.
2. Assets—Cash ` 27,100 + Building & Furniture ` 1,00,000 + Stock ` 43,500 + Debtor (Shyam) ` 9,000 = ` 1,79,600;
Liabilities—Creditor (Ram) ` 50,000 + Security Deposits ` 1,500 + Capital ` 1,28,100 = ` 1,79,600.
3. Assets—Cash ` 31,000 + Stock ` 66,000 + Furniture ` 19,500 + Debtor (Ajay) ` 5,000 + Prepaid Rent ` 2,000 = ` 1,23,500;
Liabilities—Creditor ` 20,000 + Outstanding Salary ` 1,000 + Capital ` 1,02,500 = ` 1,23,500.
[Hint: In transaction (x), furniture will be reduced by ` 500 and capital will also be reduced by ` 500
because of loss due to depreciation.]
4. Assets—Cash ` 1,61,000 + Stock (goods) ` 30,000 + Machinery ` 90,000 + Furniture ` 50,000 + Debtors ` 11,000
= ` 3,42,000;
Liabilities—Nil + Capital ` 3,42,000 = ` 3,42,000.
[Hints: 1. Opening Capital ` 3,60,000 = Cash ` 1,50,000 + Stock ` 60,000 + Machinery ` 1,00,000 +
Furniture ` 50,000.
2. Liabilities: Nil.]
5. Assets—Cash ` 1,02,500 + Bill Receivable 0 + Prepaid Rent ` 21,000 + Office Car ` 2,10,000 + Office Furniture
` 60,000 + Office Laptop: ` 30,000 = ` 4,23,500;
Liabilities—Gupta Tech. & Co.: ` 15,000 + Capital—` 4,08,500 = ` 4,23,500.