Question

Show the effect of following transaction on the accounting equation:

(a)	Manoj started business with
	(i) Cash	₹ 2,30,000
	(ii) Goods	₹ 1,00,000
	(iii) Building	₹ 2,00,000
(b)	He purchased goods for cash	₹ 50,000
(c)	He sold goods (costing ₹ 20,000)	₹ 35,000
(d)	He purchased goods from Rahul	₹ 55,000
(e)	He sold goods to Varun (Costing ₹ 52,000)	₹ 60,000
(f)	He paid cash to Rahul in full settlement	₹ 53,000
(g)	Salary paid by him	₹ 20,000
(h)	Received cash from Varun in full settlement	₹ 59,000
(i)	Rent outstanding	₹ 3,000
(j)	Prepaid Insurance	₹ 2,000
(k)	Commission received by him	₹ 13,000
(l)	Amount withdrawn by him for personal use	₹ 20,000
(m)	Depreciation charge on building	₹ 10,000
(n)	Fresh capital invested	₹ 50,000
(o)	Purchased goods from Rakhi	₹ 6,000

Answer 1

S.No.	Explanation	Assets									=	Liabilities			+	Capital
		Cash	+	Stock	+	Building	+	Debtors	+	Prepaid Expenses		Creditors	+	Outstanding Expenses
(a)	Increase n cash, stock and building	2,30,000	+	1,00,000	+	2,00,000
	Increase in capital															5,30,000
		2,30,000	+	1,00,000	+	2,00,000					=				+	5,30,000
(b)	Increase in stock					50,000
	Decrease in cash	(50,000)
		1,80,000	+	1,50,000	+	2,00,000					=				+	5,30,000
(c)	Increase n cash	35,000
	Decease in stock			(20,000)
	Increase in capital (Profit)															15,000
		2,15,000	+	1,30,000	+	2,00,000									+	5,45,000
(d)	Increase in stock
	Increase in creditors
		2,15,000	+	1,30,000	+	2,00,000					=	55,000			+	5,45,000
(e)	Increase in debtors							60,000
	Decease in debtors			(52,000)
	Increase in capital (profit)															8,000
		2,15000	+	1,33,000	+	2,00,000	+	60,000			=	55,000			+	5,53,000
(f)	Decrease in creditors										=	(55,000)
	Decrease in cash	(53,000)
	Increase in capital (Discount received)															2,000
		1,62,000	+	1,33,000	+	2,00,000	+	60,000			=	NIL			+	5,55,000
(g)	Decrease in cash	(20,000)
	Decrease in capital															(20,000)
		1,42,000	+	1,33,000	+	2,00,000	+	60,000			=	NIL				5,35,000
(h)	Increase in cash	59,000
	Decrease in capital (Discount allowed)															(1,000)
	Decrease in debtors							60,000
		2,01,000	+	1,33,000	+	2,00,000	+	NIL			=	NIL				5,34,000
(i)	Increase in outstanding Expenses													3,000
	Decrease in capital (Expenses)															(3,000)
		2,01,000	+	1,33,000	+	2,00,000	+	NIL			=	NIL	+	3,000	+	5,31,000
(j)	Decrease in prepaid expenses									2,000
	Decrease in cash	(2,000)
		1,99,000	+	1,33,000	+	2,00,000	+	NIL	+	2,000	=	NIL	+	3,000	+	5,31,000
(k)	Increase in cash	13,000
	Increase in capital (Income)															13,000
		2,12,000	+	1,33,000	+	2,00,000	+	NIL	+	2,000	=	NIL	+	3,000	+	5,44,000
(l)	Decrease in capital															(20,000)
	Decrease in cash	(20,000)
		2,12,000	+	1,33,000	+	2,00,000	+	NIL	+	2,000	=	NIL	+	3,000	+	5,24,000
(m)	Decrease in capital															(10,000)
	Decrease in building					(10,000)
		2,12,000	+	1,33,000	+	1,90,000	+	NIL	+	2,000	=	NIL	+	3,000	+	5,14,000
(n)	Increase in cash	50,000
	Increase in capital															50,000
		2,42,000	+	1,33,000	+	1,90,000	+	NIL	+	2,000	=	NIL	+	3,000	+	5,64,000
(o)	Increase in stock			10,000
	Increase in creditors											10,000
		2,42,000	+	1,43,000	+	1,90,000	+	NIL	+	2,000	=	10,000	+	3,000	+	5,64,000