Question

Use accounting equation to show the effect of the following transactions of M/s Royal Traders: Rs (a) Started business with cash 1,20,000 (b) Purchased goods for cash 10,000 (c) Rent received 5,000 (d) Salary outstanding 2,000 (e) Prepaid Insurance 1,000 (f) Received interest 700 (g) Sold goods for cash (costing Rs 5,000) 7,000 (h) Goods destroyed by fire 500

Answer 1

1.increase in capital increase in cash.
2. increase in stock in decrease in cash
3.decrease in cash decreasing capital
4. increase in outstanding( liability )decrease in capital
5. increasing prepaid insurance decrease in cash
6.increase in cash increase in capital
7decrease in stock increasing cash
8.decrease in stock or decreasing in capital