Question

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24. What will be the effect of the following on the Accounting Equation?
(1) Harish started business with cash 18.000
(11) Purchased goods for cash 5,000 and on credit 2,000
(ii) Sold goods for cash 4,000 (costing? 2,400)
20
(iv) Rent paid 1,000 and rent outstanding 200
(Delhi 1998)
[Assets: Cash 16,000 + Stock 7 4,600 = 20,600;
Liabilities: Capital 18,400 + Creditors 2,000 + Outstanding Rent 2001
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Answer 1

Answer:

1. ADD 18000 IN CASH [asset side]

  ADD 18000 IN CAPITAL [ liability side]

2. ADD 7000 IN STOCK AND SUBTRACT 5000 FROM CASH [asset side]

   ADD 2000 IN CREDITORS [ liability side]

3. ADD 4000 IN CASH AND SUBTRACT 2400 FROM STOCK [ asset side]

   ADD 1600 IN CAPITAL [ liability side]

4. SUBTRACT 1000 FROM CASH [ asset side]

   ADD 200 IN OUTSTANDING EXP. AND SUBTRACT 1200 FROM CAPITAL             .   [ liability side]

Explanation:

Cash = 18000 - 5000 + 4000 -1000 = 16000

Stock =  7000 - 2400 = 4600

Capital = 18000 + 1600 - 1200 = 18400

Creditors = 2000

Outstanding Exp. = 200

ASSET = LIABILITY + CAPITAL

20600 = 2200 + 18400