Question

Question 3.
Show the effect of the following transactions on the Accounting Equation:
(i) Started business with cash ₹ 50,000.
(ii) Salaries paid ₹ 2,000.
(iii) Wages Outstanding ₹ 200.
(iv) Interest due but not paid ₹ 100.
(v) Rent paid in advance ₹ 150.

Answer 1

(I) cash a/c. Dr. 50000

to capital a/c. 50000

(being business started with cash)

(ii) salary a/c. Dr. 2000

to cash a/c. 2000

(being salary paid in cash)

(iii)wages a/c. Dr. 200

to outstanding wages a/c. 200

(being wages are outstanding)

(iv) Interest a/c. Dr. 100

to interest payable a/c. 100

(being interest due but not paid)

(v) pre-paid rent a/c. Dr. 150

to rent a/c. 150

(being rent paid in advance)

Answer 2

An accounting equation exhibits the relationship between the assets and liabilities of a firm.

The effect of transactions on the accounting equation will be -

(i) Started business with cash = + ₹ 50,000.  ( Assets - Cash side )

(ii) Salaries paid = - ₹ 2,000 ( Assets - Cash side )

(iii) Wages Outstanding = -  ₹ 200 ( Liabilities - Outstanding Expense Side)

(iv) Interest due but not paid = -  ₹ 100.  ( Liabilities - Outstanding Expense Side)

(v) Rent paid in advance = - ₹ 150. ( Assets - Advance Expense Side)

Total of assets and liabilities side = 48,000