Question

Prepare an accounting equation on the basis of the following transactions: 1) Started business with Rs. 70000 2) Credit purchase of goods Rs. 18000 3) Payment made to creditors in full settlement Rs. 17500 4) Purchase of machinery for cash Rs. 20000 5) Depreciation on machinery Rs. 2000

Answer 1

1// Cash a/c dr. 70,000
.. To capital a/c.... 70,000
( being started business with cash )

2//Purchase a/c dr.. 18,000
.....To creditors a/c ........ 18,000

( being credit purchase).

3// Creditors a/c dr. 17500
.............. To cash a/c ...... 17500

( being cash paid to creditors )

4// Machinery a/c dr... 20,000
........ To cash a/c.................. 20,000

(being cash paid on purchasing of machinery)

5// Depreciation a/c dr. 2000
.......To Machinery.. a/c......... 2000

( being depreciation machinery )

Answer 2

1) cash account dr. 70000
to capital account 70000
(been cash invested)

2) purchases account dr. 18000
to supplier 18000
(being goods purchased on credit)

3) creditors dr.17500
to cash account 17500
(being cash paid to creditors)

4) machinery account dr. 20000
to cash account 20000
(being machinery purchased on cash)

5) Depreciation account dr 2000
to machinery account 2000
(being depreciation charged on machinery)