: Mr Robert commenced business on 1st January, 2011 with a capital of $100,000 in cash. On the same date he opened the bank account in ADCB and deposited $20,000. During the month of January 2011 the following transactions took place:
Jan 1 Bought goods for cash 70,000
2 Sold goods to Steve Co. (Credit) 38,000
15 Sold goods for cash 9,000
21 Steve Co. paid by cheque 35,000
22 Stationery bill paid by cheque 2,000
22 Telephone bill by cash 500
31 Paid rent by cash 2,000
Paid salaries by cash 3,000
Withdrew cash personal use 5,000
Answers
The net effect is $107,500.
Accounting equation is the total of capital and liability equivalent to assets.
Asset =Liability+ Equity
Cash +Bank +Goods +Debtors = Bills (S&T) + Rent + Salaries + Capital
1,00,000+20,000 = 120,000
(70,000) +70,000 =
(38,000) +38,000 = 9,000 (9,000) =
+35,000 (35,000)=
(2,000) = (2,000)
(500) = (500)
(2,000) = (2,000)
(3,000) = (3,000)
(5,000) (5,000)
28,500 + 53,000 + 23,000+ 3,000 =(2,000)+(500)+(2,000)+(3,000)+115,000
LHS = RHS = 107,500
These are the effects on accounting equation of the transactions.
In this question there are no liabilities, all the items in the RHS will be adjusted against equity.
Therefore, the net effect is $107,500.
#SPJ1