1. Analyze the following transactions under the Accounting Equation Approach. [10]
a. Commenced business with cash Rs 500000.
b. Purchased goods Rs 25000.
c. Paid salary Rs 10000.
d. Sold goods costing Rs 20000 at a profit of 25% on the cost.
e. Paid salary in advance Rs 2000.
f. Introduced additional capital Rs 10000.
g. Purchased computer Rs 15000.
h. Deposited Rs50000 into the bank .
Answers
1. Commenced business with cash Rs 5,00,000.
Cash as an asset is increased by Rs. 5 Lakh and capital is also increased by Rs. 5 Lakh.
2. Purchased goods for Rs. 25,000.
Stock (asset) will increase by Rs. 25,000 and cash (asset) will decrease by Rs. 25,000.
3. Paid Salary Rs. 10,000.
Cash or bank balance will decrease by Rs. 10,000 and capital will decrease (because expenses are deducted from capital) by Rs. 10,000.
4. Sold goods costing Rs. 20,000 at a profit of 25%.
Stock (asset) will decrease by Rs. 20,000 because goods are sold
Cash (asset) will increase by Rs. y = 20,000 + 25% of 20,000
y = 20,000 + 20,000/4 = 20,000 + 5,000
y = Rs. 25,000
Therefore, cash will increase by Rs. 25,000
And, capital will increase by Rs. 5,000 (profit)
5. Paid salary in advance Rs. 2,000.
Capital will be decreased by Rs. 2,000 because salary is an expense for the business.
Asset side will be increased by Rs. 2,000 because we have paid the salary in advance and now the employees will have to work for us for free in the upcoming time.
6. Introduced additional capital Rs. 10,000.
Cash (asset side) will increase by Rs. 10,000 and capital side will also increase by Rs. 10,000.
7. Purchased computer Rs. 15,000.
Since it is not mentioned that the computer is for sale, we assume that it is not for sale. So, our asset side will increase by Rs. 15,000 because it is kind of a machinery for the business. Also, our assets side will decrease by Rs. 15,000 because we paid for the computer either by bank or cash.
If it were a credit transaction, we would have increased the liabilities side.
8. Deposited into bank Rs 50,000.
Our asset side will decrease by Rs. 50,000 because cash is decreased.
And, it will also be increased by Rs. 50,000 because our bank balance will increase by Rs. 50,000.
Answer:
no
Explanation: