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Question
For the following transactions, show the effect on the accounting equation.
- Raj started business with cash - ₹ 40,000
- Opened bank account with a deposit of - ₹ 30,000
- Bought goods from Hari on credit for - ₹ 12,000
- Raj withdrew cash for personal use - ₹ 1,000
- Bought furniture by using debit card for - ₹ 10,000
- Sold goods to Murugan and cash received - ₹ 6,000
- Money withdrawn from bank for office use - ₹ 1,000
Ledger
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Solution
| Transaction | Assets | Capital ₹ | Creditors ₹ | |||||
| Cash ₹ | Stock ₹ | Furniture ₹ | Debtors ₹ | Bank ₹ | ||||
| a. Raj started business with cash | + 40,000 | + 40,000 | ||||||
| Equation | + 40,000 | + 30,000 | = | + 40,000 | ||||
| b. Opened bank account | − 30,000 | + 30,000 | = | + 40,000 | ||||
| Equation | + 10,000 | + 30,000 | = | + 40,000 | ||||
| c. Bought goods from Hari on credit | + 12,000 | + 12,000 | ||||||
| Equation | + 10,000 | + 12,000 | + 30,000 | = | + 40,000 | + 12,000 | ||
| d. Raj withdrew cash for personal use | − 1,000 | − 1,000 | ||||||
| Equation | + 9,000 | + 12,000 | + 30,000 | = | + 39,000 | + 12,000 | ||
| e. Bought furniture by using debit card for | + 10,000 | − 10,000 | ||||||
| Equation | + 9,000 | + 12,000 | + 10,000 | + 20,000 | = | + 39,000 | + 12,000 | |
| f. Sold goods to Murugan for cash | + 6,000 | − 6,000 | ||||||
| Equation | + 15,000 | + 6,000 | + 10,000 | + 20,000 | = | + 39,000 | + 12,000 | |
| g. Money withdrawn from bank for office use | + 1,000 | − 1,000 | ||||||
| Equation | + 16,000 | + 6,000 | + 10,000 | + 19,000 | = | + 39,000 | + 12,000 | |
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Approaches of Recording Transactions
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Chapter 3: Books of Prime Entry - Exercises [Page 59]
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What is the accounting equation?
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Write a brief note on accounting equation approach of recording transactions.
What is an Account?
Complete the accounting equation.
Assets = Capital + Creditors
? = ₹ 1, 60,000 + ₹ 80,000
What will be the effect of the following on the accounting equation?
- Sunil started business with ₹ 1,40,000 cash and goods worth ₹ 60,000
- Purchased furniture worth ₹ 20,000 by cash
- Depreciation on furniture ₹ 800
- Deposited into bank ₹ 40,000
- Paid electricity charges through net banking ₹ 500
- Sold goods to Ravi costing ₹ 10,000 for ₹ 15,000
- Goods returned by Ravi ₹ 7,500 (costing ₹ 5,000)
Create an accounting equation on the basis of the following transactions:
- Started business with cash ₹ 80,000 and goods ₹ 75,000
- Sold goods to Shanmugam on credit for ₹ 50,000
- Received cash from Shanmugam in full settlement ₹ 49,000
- Salary outstanding ₹ 3,000
- Goods costing ₹ 1,000 given as charity
- Insurance premium paid ₹ 3000
- Out of insurance premium paid, prepaid is ₹ 500
