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Question
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)
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Solution
| Transaction | Assets | Capital ₹ | Creditors ₹ | |||||
| Cash ₹ | + Stock ₹ | + Furniture ₹ | + Debtors ₹ | + Bank ₹ | ||||
| a. Sunil started business with cash and goods | + 1,40,000 | + 60,000 | + 2,00,000 | |||||
| Equation | + 1,40,000 | + 60,000 | = | + 2,00,000 | ||||
| b. Purchased furniture for cash | − 20,000 | + 20,000 | ||||||
| Equation | + 1,20,000 | + 60,000 | + 20,000 | = | + 2,00,000 | |||
| c. Depreciation on furniture | − 800 | − 800 | ||||||
| Equation | + 1,20,000 | + 60,000 | + 19,200 | = | + 1,99,200 | |||
| d. Deposited into bank | − 40,000 | + 40,000 | ||||||
| Equation | + 80,000 | + 60,000 | + 19,200 | + 40,000 | = | + 1,99,200 | ||
| e. Paid electricity charges through net banking | − 500 | − 500 | ||||||
| Equation | + 80,000 | + 60,000 | + 19,200 | + 39,500 | = | + 1,98,700 | ||
| f. Sold to Ravi goods costing ₹ 10,000 for ₹ 15,000 | − 10,000 | + 15,000 | + 5,000 | |||||
| Equation | + 80,000 | + 50,000 | + 19,200 | + 15,000 | + 39,500 | = | + 2,03,700 | |
| g. Goods returned by Ravi | + 5,000 | − 5,000 | ||||||
| Equation | + 80,000 | + 55,000 | + 19,200 | + 10,000 | + 39,500 | = | + 2,03,700 | |
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