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.  cash a/c dr.      1,20,000 
         to capital a/c                1,20,000
 
2.  purchased a/c dr.  10,000
          to cash                          10,000
3. cash/bank a/c dr.   5,000
          to rent                            5,000
4. outstanding a/c dr.   2000
          to salary a/c                   2000
5.prepaid insurance /
 in advance                  1000
         to insurance                      1000  
6.cash / bank a/c dr       700
          to interest                           700
7.     cash a/c dr             7000
              to sale                             5000
               to discount                      2000
8.    distroyed by fire        500
                to purchase                   500

Answer 2

Assets: Cash Rs.1,22,000 + Stock Rs.4500 = Liabilities : Outstanding Expenses Rs.2,000 + Capital Rs.1,24,500

Hint. Goods destroyed by fire in decrease in stock and decrease in capital

Answer 3

Assets: Cash Rs.1,22,000 + Stock Rs.4500 = Liabilities : Outstanding Expenses Rs.2,000 + Capital Rs.1,24,500

Hint. Goods destroyed by fire in decrease in stock and decrease in capital