ACCOUNTING EQUATION

1 Give one transaction for each of the following that will:

1. Increase an asset and Increase in liability

2. Decrease in asset and decrease in liability
3. Decrease an asset and decrease capital
2 How will you deal with the following items in Accounting Equation:

1. Interest on Capital
2. Interest on Drawings
3. Accrued Income
4. Unearned Income
5. Prepaid Expenses
6. Outstanding Expenses

3 Calculate total assets if Capital is Capital is Rs.40,000, Creditors Rs.30,000, Revenue earned
during the period Rs.75,000, Expenses incurred during the period Rs.20,000.Value of Stock
unsold
Rs.20,000.
4 Peter has the following assets and liabilities as on 31st December 2014.Ascertain his capital:
Cash Rs.2,500; Bank Rs.4750; Debtor Rs.1,800; Creditor Rs.2,200; Plant and Machinery
Rs.8,000; Building Rs.20,000; Furniture Rs.2,400; Bills receivable Rs.5,650: Bills Payable
Rs.2,350.
5 Prepare an Accounting Equation from the following:

1. Started business with Cash Rs.50,000.

2. Paid Salary Rs.5,000.
3. Rent Outstanding Rs.1,000.
4. Accrued Interest Rs.1,500
5. Interest on Capital Rs.2, 500.
6. Bought goods for cash Rs.30,000 and on Credit for Rs.50,000.
7. Goods costing Rs.10,000 sold at a profit of 25%, out of which Rs.7,000 received in cash.
8. Purchased a Television for personal use Rs.2,500.
6 Prepare Accounting Equation from the following:

1.Nitin started business with cash Rs.75,000; goods Rs.30,000; Machinery Rs.50,000 and
 Furniture Rs.25,000.

2. 1/3rd of the above goods sold at a profit of 10% on cost and half of the payment is
received In cash.

3.Depreciation on Machinery provided at 10%.

4. Cash withdrawn for personal use Rs.10,000.

5. Interest on drawing charged @ 5%.

6. Goods sold to Jacob for Rs.5,000 and received a Bill Receivable for the same amount for
three Months.

7 . Received Rs.5,000 from Jacob against the Bill Receivable on its maturity.

7 Show the accounting equation on the basis of the following transactions & also show the
Balance Sheet.

1. Started the business with Cash Rs.80,000; Goods Rs.30,000; Furniture Rs.40,000.

2. Purchased goods on credit from Nidi, Rs.15,000 and on cash from Meera Rs.10,000.

3. Bought a refrigerator for personal use Rs.5,000.

4. Goods costing Rs.6,000 sold at the loss of 10% out of which Rs.2,000 received in cash.

5. Received cash from debtor Rs.3,200 in full settlement .

6. Sold goods for cash Rs.5,000.

7. Introduced fresh capital Rs.1,00,000.

8. Rent outstanding Rs.5,000.

9. Accrued interest Rs.10,000.

8 Prepare an Accounting Equation from the following:

1. Started the business with Cash Rs.1,00,000; goods Rs.50,000 and loan Rs.15,000.

2. Goods costing Rs.24,000 sold at a profit of 33 1/3 % and 3/4th payment received in Cash.

3. Paid three months rent in advance for office Rs.6,000.

4. Goods withdrawn for personal use Rs.10,000.

5. Interest on drawings at the rate of Rs.55.

6. Goods given as charity Rs.1,000.

7. Loss of Cash by theft Rs.1,000.

8. Loan taken was repaid with interest Rs.150.

9. Purchased Securities Rs.10,000.

10. Sold Securities costing Rs.3000 for Rs.3,500.

9 Prepare an Accounting Equation from the following information:

 Jacob Started business with Rs.15,00,000.

1. Opened a bank account in State Bank Of India with Rs.4,80,000.

2. Bought Furniture for Rs.60,000 and a cheque was issued on the same day.

3.Bought Plant and Machinery for business for Rs.1,25,000 and advance of Rs.10,000 in
cash is paid to M/s Ramjee Lal.

4. Goods purchased from M/s Sunil TradeRs. for Rs.55,000.

5. Goods costing Rs.25,000 sold to Rajani Enterprises for Rs.35,000.

6. Paid Salary Rs.2,500 and Salary outstanding Rs.1,000.

7. Depreciation on Plant and Machinery Rs.1,200.

10 Prepare an Accounting Equation from the following

information: 1-4-2011 Business started with Cash Rs.1,50,000.
1-4-2011 Goods purchased from Manisha Rs.36,000.
1-4-2011 Stationery purchased for cash Rs.2,200.
2-4-2011 Opened a bank account with SBI for Rs.32,000.
3-4-2011 Goods sold to Priya for Rs.16,000.
5-4-2011 Purchased goods from Namita for Rs.20,000.
10-4-2011 Insurance paid by cheque Rs.2,250.
11-4-2011 Cash withdrawn for household purpose Rs.5,000.
13-4-2011 Interest received Rs.250 in cash.
14-4-2011 Rent paid in advance Rs.550.

11 Calculate the capital as on 1-1-2012 in each of the following cases

1. On 31-12-2012 the total assets and external liabilities were Rs.30,000 and Rs.900
respectively. During the year the proprietor earned Rs.3,000.

2.If in the preceding case the proprietor had introduced additional capital Rs.3,000 and
had withdrawn Rs.1,800 for personal use.

12 Calculate total equity and owner equity if:

1. Owner’s equity in the beginning Rs.36,000.

2. Equity of Creditor at the end Rs.30,000.

3. Revenue during the period is Rs.42,000.

4. Expenses during the same period are Rs.39,000.

13 Show the effect of the following transactions on Accounting Equation and also prepare a
Balance Sheet.
1. Started business with cash amounting to Rs.35,000 and goods Rs.15,000.
 2. Salaries paid Rs.2,000.

3. Wages Outstanding Rs.200.

4. Prepaid Insurance Rs.700.

5. Interest due but not paid Rs.100.

6.Rent paid in advance Rs.150.

14 Show the accounting equation on the basis of the following transactions

1. Started business with Cash Rs.60,000.

2. Rent received Rs.2,000.

3. Accrued Interest Rs.500.

4. Commission received in advance Rs.1,000.

15 Mr.Pai started a business with a cash investment of Rs.21,00,000.The following

business transactions have been recorded:

1. Paid three months advance rent for office accommodation Rs.2,520.

2. Bought Car for Office Rs.12,00,000.

3. Purchased furniture Rs.42,250.

4. Bought Computer from Computer Visions Rs.25,000.

5. Sold furniture at cost to Peter for Rs.21,000.

6. Peter paid Rs.15,000 in Cash and accepted a bill at three months for the balance.

7. Paid telephone bill Rs.2,500 and electricity bill of Rs.4,500.

8. Peter paid the amount of the bill due on maturity.

9. Collected Rs.3,500 as Commission and Commission received in advance Rs.2,500.

10. Purchased goods for Rs.11,250 at a trade discount of 10%.

16 Amit had the following transactions. Use accounting equation to show the effect on his assets
liabilities and Capital.
1. Commenced business with Cash Rs.12,50,000.

2. Purchased securities for Rs.15,000 in cash.

3. Purchased goods for 1,00,000 at a trade discount of 10% and cash discount of 5% from
Mahek. Paid the cash on the same day and availed the cash discount.

4. Sold goods costing Rs.1000 for 1,200.

5. Received dividend on securities Rs.250.

6. Goods lost by fire Rs.1000.

7. Purchased goods for cash Rs.12,000 and on credit Rs.15,000.

 8. Mr.White sold goods to us Rs.23,500.

9. Settled White’s account by paying Rs.23,000.

10. Mr.Black purchased goods from us Rs. 10,000 and accepted a bill of exchange.

11. Settled the Creditor account by paying 14,500.

17 Show the Accounting equation on the basis of the following transactions and prepare a Balance
Sheet.
1. Shyam commenced business with cash Rs.35,00,000; Goods Rs.80,000; Furniture Rs.2,00,000.

2. Sold goods costing Rs.24,000 for cash to Ramesh Rs.26,500.

3. Commission received in advance Rs.2,500.

4. Depreciation on furniture Rs.4050.

5. Deposited in the bank Rs.2,50,000.

6. Purchased household goods for Rs.15,000 giving Rs.5,000 in cash and balance through a loan.

7. Paid Rs.7500 for loan and Rs.250 as interest.

8. Accrued interest Rs.250.

9.Goods destroyed by fire (Cost Rs.500, Sale price Rs.600)

10. Withdrew Rs.550 for personal use.

18 Show the accounting equation on the basis of the following transactions:

1) Shri Ganesh commenced business with cash Rs.35,000, goods Rs.8,000 and furniture
Rs.7,000.
2) Bought furniture from M/s Mohan Furnitures on credit for Rs.3,000.
3) Purchased goods from Sohan for cash Rs.35,000.
4) Sold goods to Shyam for cash Rs.40,000(costing Rs.30,000).
5) Bought goods from Ramesh Rs.30,000.
6) Sold goods to Shyam costing Rs.30,000 for Rs.50,000.
7) Received Rs.49,500 from Shyam in full settlement.
8) Paid Rs.29,700 to Ramesh in full settlement.
9) Paid half the amount owed to M/s Mohan.
10) Withdrew Rs.1,000 for peRs.onal use.
11) Withdrew goods for peRs.onal use(cost Rs.500, sale price Rs.600).
12) Purchased household goods for Rs.15,000 giving Rs.5,000 in cash and the balance
through a loan.
13) Paid cash Rs.500 for loan and Rs.300 for interest.
14) Goods destroyed by fire (cost Rs.500, sale price Rs.600)
15) Paid salary Rs.500 and salary outstanding Rs.100.
16) Paid rent in advance Rs.2,000.
17) Accrued interest Rs. 500.
18) Commission received in advance Rs. 1,000.
19) Charged depreciation of Rs. 400 on furniture.