Question

1- show the effect of the following transactions on the accounting equation.
a) Started business with cash rs 50
000 and goods rs 20000.
b) Bought goods for cash 15000 and on credit for rs 10000.
c) Goods costing rs 24000 sold at a profit of 1/3, half the payment received in cash.
d) Purchased furniture for office use 6000 and for household use of sudhir 4000.​

Answer 1

Effects of the above transaction on the accounting equation:

Explanation:

A )

Started business with cash rs 50000

• 50,000 will increase on the asset side in cash and 50000 will increase in capital on the liability side

And goods rs 20000

• 20000 will increase in stock on the assets side and 20,000 will increase on the the liability side in the capital section.

Total balance will be 70000.

B)

Bought goods for cash 15000

• 15000 will increase in stock on the asset side and 15000 decrease in cash on the asset side

And on credit for rs 10000.

• 10000 will increase in stock on asset side and 10,000 will increase in creditors on the liability side.

Total balance will be 80000

C)

Goods costing rs 24000 sold at a profit of 1/3,

• 24000 will decrease in the the stock on the asset side
• 8000 will increase in capital on the liability side

Half the payment received in cash.

• 16000 will increase in cash on the asset side
• 16000 will increase in debtors on the asset side

Total balance will be 88,000

D)

Purchased furniture for office use 6000

• furniture will increase by 6000 on the asset side and cash will decrease by 6000 on the asset side

And for household use of sudhir 4000

• cash will decrease by 4,000 on the asset side and capital will decrease by 4,000 liability side.

Total balance will be 84,000