CA.

Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org

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Basics of Accounting

AoA
Email: ca.naresh.vc@gmail.com
& Website: academyofaccounts.org

Accounting Equations

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 (1)
CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Meaning of Accounting
Accounting is the process of recording business transactions in a systematic manner,
in term of money and analysing the results thereof. Accounting is needed to maintain
records of all money related transaction of an organisation in a very systematic way.
According to American Institute of Certified Public Accountants “Accounting is the art
of recording, classifying and summarising in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial character, and
interpreting results thereof.
Benefits/Advantages of Accounting
(1) Replaces Memory: When we record transactions in books of accounts, we
need not to remember them for future needs. We can refer our accounts books
for any past transaction, as accounting provided information about all the incomes
and expenses.
(2) Faciliciate in ascertaining Profits: Accounting helps in recording all financial
transactions of the business which can be used later in finding the Net Profit
earned or Net Loss suffered by the business.
(3) Faciliciate in ascertaining Position: Accounting helps in ascertaining the
financial position of the assets and liabilities of the organisation.
(4) Faciliciate to complying with legal requirements: To comply with the some
legal requirements we must have to maintain books of accounts. For Income
Tax, Sales Tax, Companies Act and other commercial laws it is necessary that
all financial transactions are properly recorded.
(5) Accounting helps in minimising disputes: Through accounting proper records
of all the financial transactions are maintained which results more accuracy and
avoid disputes. Further, even if a dispute arises with customers, suppliers or
other parties, Books of Accounts can be referred for settlement of the disputes.
(6) Assistance in Management: Accounting provide vital information to the owner
and managers of the organisations for their planning, decision making and
(2)
management purposes. It gives information related with Profits or Losses, position
of Assets and Liabilities etc. which are very helpful in proper management.
Basic Accounting Assumptions
Accounting assumption is the foundation of on which the structure of modern accounting
is based. It provides general framework on which our accounting is based.
(1) Business Entity Assumption: According to this assumption, business is
considered as a separate unit which is distinct from its owners, suppliers,
customers, managers and others. A business unit should have a completely
separate set of Books of Accounts. We should have to record every transaction
only from the business point of view and not from the owners or any other persons
point of view.
(2) Money Measurement Assumption: According to this assumption, in accounting
only those events and transactions are recorded which are in terms of money.
AoA
We do not record a happening in the Books of Accounts, if that can not be measured
in term of money with a fair degree of accuracy. For example: honesty of employees
and intelligence of managers etc. will not get place in books of accounts.
(3) Going on Concern Assumption: As per this assumption, it is assumed that
business will be continued for a long period in the future. All the financial
transactions are recorded on the assumption that it is a continuing enterprise.
(4) Accounting Period Assumption: According to this assumption the total life of
the business is divided in small periods, generally of one year. As the business is
intended to continue indefinitely for a long period, the true result of profit or loss
can be ascertain only when the business is completely wound off. But at that
point of time the result is very less useful as it will be too late to take corrective
steps. Therefore it is very important that users of the accounting information get
information in frequent intervals. For this purpose the life of the business is so
divided in small intervals for the measurement of the performance of the enterprise.
Basic Accounting Terms
(1) Assets: Assets refers to any valuable thing which is owned by the enterprise or
any benefit which will come in future to it. It includes Cash, Bank Balance, Furniture,
Machine, Building, Goods, Sum due on customers (Debtors), Expenses paid in
advance (Prepaid Expenses) etc.
(2) Liabilities: It refers to all the sums which the enterprise owes to the outsiders. It
 (3) (4)

(9) Business Transaction: Happening of an event with someone which result a

CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
is the sum which will required to be paid out. It includes money due to suppliers
(Creditors), Expenses due but not paid (Outstanding Expenses), Loan taken from
others etc.
(3) Capital: It is the amount invested by the owner in the business. For running any
business owner has to invest some money. For example if you want to start a
retail shop which need an investment of Rs.8,00,000 and you invest Rs.1,00,000
in cash, uses your own house worth Rs.5,00,000 as the shop and borrow
Rs.2,00,000 from the bank then your capital will be Rs.6,00,000 which is the total
amount invested by you from your side in the business as an owner.
change in the composition of the financial position of an enterprise is a Business
Transaction. It may be like started business with cash, sale of goods, loan taken,
payment of salary, cash paid to supplier and fees received etc.
Double Entry System of Accounting
The modern system of accounting is based on the duality nature of the transactions.
Every financial transaction always has a double effect on the financial position of the
enterprise. For example if you buy Goods for Rs. 10,000 then it affects twice: first
effect is on the cash balance as it decreases and second effect is that the stock in
hand is increased. Or if you take a loan from a Bank of Rs.50,000 not only you get an
asset in form of cash but also a liability that you have to pay the debt. Similarly all the
transactions always have two aspects. Therefore, in modern accounting system all
the transactions are recorded in two parts one is Debit and other is Credit.

AoA
(4) Drawings: Any cash or other valuable thing which is withdrawn by the owner,
from the business, for his personal use or for the use of his family, friends and ••••••••••••••••••••••
relatives is called drawings. It includes cash withdrawn for private use, payment
of home electricity bill, payment of children’s school fees, goods used for home
consumption etc.

(5) Debtors: It represents those persons or enterprises to whom goods have been
sold or services have been rendered but full payment has not yet received. They
will remain debtors till the full payment is not received from them or any settlement
is not made.

(6) Creditors: It represents those persons or enterprises from whom goods have
been purchased or services have been received but full payment has not yet
made. They will remain creditors till the full payment is not made to them or any
settlement is not made.

(7) Expenses: It represents value of services used for the purpose of generating
revenues/profits. It includes Rent, Interest, Commission, Brokerage, Fees, Wages,
Salaries, Depreciation, Printing & Stationery, Electricity Bill, Telephone Bill etc., if
paid or payable.

(8) Incomes: It represents increase in the economic benefits due to increase in

assets or decrease in liabilities. It includes Rent, Interest, Commission, Brokerage,
Fees, Discount etc., if received or receivable.
 (5)
CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
ys[kkadUk dk vFkZ
(Meaning of Accounting)
ys[kkadUk dk vFkZ ml izfd;k ls gS ftles O;olkf;d ysu -nsuks dks izÒkoiw.kZ rjhd¢ ls
eqnzk d¢ #i esa fy[kk tkrk gS ,oa mud¢ ifj.kkeks dh O;k[;k dh tkrh gSA ys[kkadUk dh
vko”;drk lÒh ekSfnzd ysu -nsuks dks fof/kor #i ls fy[kus d¢ fy, gksrh gSA
vefjdu baLVhV~;wV vkWQ ifCyd vdkmVsaV~l d¢ vuwlkj “ys[kkadUk lkSnksa ,oa ?kVukvksa
dks] tks fd de ls de va”kRk% fofÙk; izÑfRk d¢ gSa] izÒkoiw.kZ rjhd¢ ls vkSj eqnzk esa
vfÒys[k djus] oxhZdj.k djus] rFkk lkjka{k esa O;Dr djus ,oa mud¢ ifj.kkeks dh
O;k[;k djus dh dyk gSA”
ys[kkadUk d¢ ykÒ
(Benefits/Advantages of Accounting)
(1) Lej.k “kfDr dk foLFkkiu %& tc ge ?kVukvksa dk ys[kkadUk dh iqLrdksa esa
fy[k ysrs gSa rc gesa mUgs Òfo’; d¢ fy, ;kn j[kus dh dksbZ vko ”;drk ugh
gksrhA fdlh Òh iqjkuh ?kVuk dh tkudkjh gesa ys[kkadUk dh iqLrdksa ls fey
ldrh gSA
(2) ykÒ-gkfu dh x.kuk djus esa lqfo/kk %& ys[kkadUk lkSnksa ,oa ?kVukvksa dks
izÒkoiw.kZ rjhd¢ ls fy[kus esa gekjh lgk;rk djrk gS ftls ge ckn esa ykÒ-gkfu
dh x.kuk djus esa iz;ksx dj ldrs gSaA D;ksafd lÒh vk; ,oa O;;ksa dh tkudkjh
gesa ys[kkadUk dh iqLrdksa ls fey tkrh gSA
(3) O;olk; dh fLFkfr tkuus esa lgk;d %& ys[kkadUk O;olk; dh vkfFkZd
fLFkfr tkuus esa gesa lgk;rk iznku djrk gSA ;g gesa O;olk; dh lÒh lEifÙk;ksa
,oa nkf;Roksa dh fLFkfr d¢ ckjs eSa tkudkjh iznku djrk gSA
(4) dkuwuh vko”;drkvksa dh iwfrZ %& dqN dkuwuh fu;eksa d¢ varxZr cgh-[kkrs
cukuk ,oa fofÙk; ysu-nsuks dk iw.kZ C;kSjk j[kuk vko”;d gksrk gSA vk;dj]
fcØhdj] dEiuh vf/kfu;e ,oa vU; dkuwukas d¢ varxZr ys[kkadUk vfuok;Z gks tkrk
gSA
(5) Hkwy&pwd esa deh %& ys[kkdu ds varZxr lHkh fofÙk; ysu nsuksa dks le; ij
ntZ dj fy;k tkrk gS ftlds dkj.k Hkwy&pwd dh lEHkkouk de gks tkrh gSA bl
ij Hkh dksbZ fookn mRiUu gksus ij [kkrksa dh tkap dj mls fuiVk;k tk ldrk gSA
(6)
(6) izca/k esa lgk;d %& ys[kkadu Lokeh ,oa izca/kdksa dks /ku laca/kh egRoiw.kZ lwpuk,a
iznku djrk gS ftlds dkj.k ;kstuk cukus] fu.kZ; ysus ,oa O;kikj lapkyu esa enn
feyrh gSA ys[kkadu ykHk&gkfu ,oa lEifÙk;ksa ,oa nkf;Roksa dh fLFkfr Hkh n'kkZrk gS
tks mfpr izca/k ds fy, vfr vko';d gksrk gSA
vk/kkjHkwr ys[kkadu ekU;rk,a
(Basic Accounting Assumptions)
ys[kkadu ekU;rk,a os vk/kkj gS ftu ij vk/kqfud ys[kkadu fuHkZj gSA ;g og okrkoj.k
iznku djrk gS ftlds varxrZ ys[kkadu dk;Z djrk gSA
1- ys[kkadu bdkbZ dh ekU;rk (Business Entity Assumption) %& bl ekU;rk ds
vuqlkj ys[kkadu esa O;kikj dks mlds Lokeh] ysunkjks] xzkgdksa] izca/kdksa bR;kfn ls
i`Fkd ,d vyx vfLrRo izkIr gksrk gSA O;olk; ds lkSnksa ,oa ?kVukvksa ds fy,
vyx ls cgh [kkrs cuk, tkrs gSaA bu cgh [kkrksa esa lHkh ysu&nsu dsoy O;olk;
ds i{k dks /;ku esa j[kdj fd, tkrs gS] u fd O;kikjh ;k fdlh vU; ds i{k dks
/;ku esa j[kdjA
AoA
2- eqnzk esa eki dh ekU;rk (Money Measurement Assumption) %& bl ekU;rk ds
vuqlkj ys[kkadu esa dsoy mu lkSnksa ,oa ?kVukvksa dks fy[kk tkrk gS tks eqnzk ds :i
esa iznf'kZr gks ldrh gSA ge mu ?kVukvksa dks ys[kkadu esa ugha fn[kkrs tks eqnzk esa
lgh <ax ls iznf'kZr ugha fd, tk ldrs] tSls deZpkfj;ksa dh dq'kyrk] izca/kdksa dh
cqf)ekurk bR;kfn ys[kkadu esa ugha fn[kk, tkrsA
3- pkyw O;kikj dh ekU;rk (Going on Concern Assumption) %& bl ekU;rk ds
vuqlkj ;g ekuk tkrk gS fd O;olk; dks Hkfo"; esa yEcs le; rd tkjh j[kk
tk,xkA O;olk; ds lHkh lkSns blh ckr dks /;ku esa j[kdj fd, tkrs gS fd
O;olk; tkjh jgsxkA
4- ys[kk vof/k dh ekU;rk (Accounting Period Assumption) %& bl ekU;rk ds
vuqlkj O;olk; ds dqy thou dks NksVh vof/k;ksa esa ckaV fn;k tkrk gS tks
lkekU;r% ,d o"kZ gksrh gSA pqafd O;olk; dks yEcs lke; rd pykus dh Òkouk
gksrh gS] O;olk; ds okLrfod ykÒ vFkok gkfu dh x.kuk mldh lekfIr ij gh dh
tk ldrh gSA ijUrq bl fLFkfr esa og vf/kd mi;ksxh ugh gksxk] D;ksafd vc rd
dfe;ksa dks nwj djus esa cgqr nsj gks pqdh gksxhA blfy, ;g vR;kf/kd egRoiw.kZ
gS fd izca/kdksa dks bldh lwpuk le;&le; ij feyrh jgsA blh mns'; dh iwfrZ
dss fy, O;olk; ds dqy thou dks NksVh vof/k;ksa esa ckaVk tkrk gS rkfd O;olk;
dh dq'kyrk dh tkudkjh le;&le; ij feyrh jgsA
 (7)
CA. Naresh Aggarwal’s
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
vk/kkjHkwr ys[kkadu 'kCnkoyh
(Basic Accounting Terms)
1- lEifÙk;ka (Assets) %& lEifÙk;ks ls vfHkizk; fdlh Hkh ewY;oku oLrq ftl ij
O;kikj dk LokfeRo gks] ls gSA blls Hkfo"; esa feyus okys /ku@ykHk 'kkfey gSA
lEifÙk;ksa esa jksdM+] cSad 'ks"k] QuhZpj] e'khusa] Hkou] Hkwfe] eky] xzkgdksa dh cdk;k
jkf'k] [kpksZa dk is'kxh Hkqxrku bR;kfn 'kkfey gSA
2- nkf;Ro (Liabilities) %& nkf;Roksa ls vfHkizk; ml jkf'k ls gS tks O;kikj ij ckgjh
yksxksa dk m/kkj gSA ;g og /kujkf'k gS ftls pqdk;k tkuk gSA blesa foØsrkvksa dk
cdk;k] ysunkj [kpsZ ftUgsa pqdk;k ugha x;k gS] nwljksa ls fy;k x;k dtZ bR;kfn
'kkfey gksrs gSaA
3- iwath (Capital) %& ;g og /ku gS ftls O;olk; ds Lokeh us O;olk; esa yxk;k gSA
fdlh Hkh O;olk; dks pykus ds fy, O;kikj dk Lokeh mlesa viuk Lo;a dk /ku
vo'; yxkrk gSA mnkgj.k ds fy, ;fn vki ,d QqVdj nqdku pykuk pkgrs gSa
ftlesa 8 yk[k : yxsaxsA vki mlesa Lo;a dk 1 yk[k :0 udn rFkk viuk edku
ftldh dher 5 yk[k :0 gS dks iz;ksx esa ykrs gSa rFkk ckdh ds 2 yk[k :0 cSad
ls _.k ysrs gSa rks vkidh iwath 6 yk[k :0 gksxh tks fd vkidk Lo;a dk O;olk;
esa fuos'k gSA
4- vkgj.k (Drawings) %& O;kikj ds Lokeh }kjk O;kikj ls fudkyh xbZ dksbZ Hkh
ewY;oku oLrq vkgj.k dgykrh gSA ;s oLrq,a og vius Lo;a ds iz;ksx ds fy,] vius
ifjokj ds fy, vFkok vius fe=ksa bR;kfn ds fy, fudky ldrk gSA blesa futh
iz;ksx ds fy, jksdM+ fudkyuk] ?kj ds fctyh fcy ds fy, /ku fudkyuk] cPpksa dh
Qhl vFkok ?kj ds fy, lkeku fudkyuk bR;kfn 'kkfey gksrk gSA
5- nsunkj (Debtors) %& nsunkj os O;fDr vFkok bdkbZ;ka gSa ftUgss lkeku cspk x;k
gS vFkok dksbZ lsok iznku dh xbZ gSa ijUrq mlds ewY; dk iw.kZ Hkqxrku vHkh ugha
fd;k x;k gSA tc rd os iw.kZ Hkqxrku ugha dj nsrs ;k muls iw.kZ fuiVkjk ugha gks
tkrk rc rd os nsunkj cus jgrs gSaA
6- ysunkj (Creditors) %& ysunkj os O;fDr vFkok bdkbZ;ka gSa ftuls lkeku [kjhnk
x;k gS vFkok dksbZ lsok izkIr dh xbZ gSa ijUrq mlds ewY; dk iw.kZ Hkqxrku vHkh ugha
fd;k x;k gSA tc rd ge mUgs iw.kZ Hkqxrku ugha dj nsrs ;k muls iw.kZ fuiVkjk
ugha gks tkrk rc rd os ysunkj cus jgrs gSaA
(8)
7- [kpsZ (Expenses) %& blls vfHkizk; mu lsokvksa ds ewY; ls gS ftUgsa O;kikj pykus
ds fy, iz;ksx esa yk;k x;k gSA blesa fdjk;k] C;kt] deh'ku] Qhl] etnwjh] osru]
ewY;gkl] dkxt ,oa NikbZ] fctyh dk fcy] VsfyQksu dk fcy bR;kfn ftUgsa
Hkqxrku dj fn;k x;k gS vFkok nsuk cdk;k gS] 'kkfey gSA
8- vk; (Incomes) %& vk; ls vfHkizk; ml vkfFkZd ykHk ls gS tks lEifr;ksa esa o`f)
vFkok nkf;Roksa esa deh ds ifj.kkeLo:i izkIr gksrk gSA blesa fdjk;k] C;kt] deh'ku]
Qhl bR;kfn ftUgsa izkIr dj fy;k x;k gS vFkok ftUgsa izkIr djuk vHkh ckdh gS]
Hkh 'kkfey gSA
9- O;olkf;d ysu&nsu (Business Transactions) %& ,slk dksbZ Hkh lkSnk ,oa ?kVuk
ftlds dkj.k O;kikj dh vkfFkZd fLFkfr esa vFkok mldh enksa dh jkf'k esa ifjorZu
vkrk gS mls O;olkf;d ysu&nsu dgrs gSA blesa O;kikj 'kq: djuk] eky [kjhnuk]
_.k ysuk] osru dk Hkqxrku djuk] foØsrkvksa dk Hkqxrku djuk ,oa Qhl izkIr
djuk bR;kfn 'kkfey gSA
ys[kkadu dh nksgjk ys[kk iz.kkyh
AoA
(Double Entry System of Accounting)
vk/kqfud ys[kkadu fofÙk; lkSnksa ,oa ?kVukvksa ds nksgjs i{k gksus dh izd`fr ij
vk/kkfjr gSA lHkh fofÙk; ?kVukvksa ds lnSo nks i{k gksrs gSaA os O;olk; dh fofÙk; fLFkfr
dks nks ckj izHkkfor djrs gSaA mnkgj.k ds fy, ;fn vki dksbZ lkeku 10]000 :0 esa
[kjhnrs gSa rks ;g vkidks nks rjg ls izHkkfor djsxkA igyk vkids ikl /ku esa deh gks
tk,xh] nwljk vkids ikl lkeku esa o`f) gks tk,xhA blh izdkj ;fn vki cSad ls
50]000 : dtZ ys rks ;g Hkh vkidks nks rjg ls izHkkfor djsxk] igyk vkids ikl /
ku esa o`f) gks tk,xh] nwljk vki ij ml /ku dks okfil djus dk nkf;Ro c<+ tk,xkA
blh izdkj lHkh fofÙk; ?kVukvksa ds nks i{k gksrs gSaA blfy, vk/kqfud ys[kkadu esa lHkh
?kVukvksa dks nks Hkkxksa esa fy[kk tkrk gSA igys Hkkx dks MsfcV rFkk nwljs Hkkx dks
ØsfMV dgk tkrk gSA
••••••••••••••••••••••
 (9) (10)

3. Sold goods costing Rs. 1,000 for Rs. 1,400.

CA. Naresh Aggarwal’s 4. Paid rent Rs. 500.
ACADEMY of ACCOUNTS 5.
6.
Cash deposited into Bank Rs.5,000.
Withdrawn cash for private expenses Rs. 600.
Accounting • Costing • Taxation • Financial Management [Capital 14,300; Creditors 4,000 = Cash 10,300; Goods 3,000; Bank 5,000]
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org Q-5: Make the ‘Accounting Equation’ of the following transactions:
1. Pooja started business with Rs. 12,000.
2. Purchased goods costing Rs. 4,000.
Accounting Equation 3. Sold goods to Monika on credit costing Rs. 1,200 at 25% profit on cost.
4. Paid General Expenses Rs. 1,000 and for Wages Rs. 200.
5. Sold good costing Rs. 800 for cash Rs. 1,000.
Q-1: Make the ‘Accounting Equation’ of the following transactions:
6. Received from Monika Rs. 1,000.
1. Sonu started business with cash Rs. 30,000.
[Capital 11,300 = Cash 8,800; Goods 2,000; Debtors 500]
2. Purchased goods worth Rs. 5,000.
3. Purchased Furniture of Rs. 3,500. Q-6: Make the ‘Accounting Equation’ of the following transactions:
4. Sold goods for cash Rs. 1,800 (cost Rs. 1,500). 1. Anjali started business with Rs. 15,000 and goods worth Rs. 5,000.
5. Sonu withdrawn Rs. 1,000 for personal use in cash. 2. Purchased goods costing Rs. 3,000.
6. Paid Salaries Rs. 1,200. 3. Sold goods to Mohan costing Rs. 1,500 for Rs. 1,800 on credit

AoA
7. Paid office Rent Rs. 800. 4. Sold goods on credit at 20% profit on cost of Rs.3,000.
[Capital 27,300 = Cash 20,300; Goods 3,500; Furniture 3,500] 5. Sold good costing Rs. 1,800 for cash Rs. 2,000.
6. Received from Mohan Rs. 1,200.
Q-2: Make the ‘Accounting Equation’ of the following transactions:
7. Sold an obsolete item of goods for Rs.600 (costing Rs.1,000).
1. Sumit started business with Rs. 18,000.
[Capital 20,700 = Cash 15,800; Goods 700; Debtors 4,200]
2. Purchased goods from Neetu on credit Rs. 4,000
3. Sold goods costing Rs. 1,500 for Rs. 1,800. Q-7: Make the ‘Accounting Equation’ of the following transactions:
4. Paid Wages Rs. 700. 1. Bharat commenced business with Rs. 15,000.
5. Withdrawn cash for private expenses Rs. 600. 2. Purchased goods for cash Rs. 2,000
6. Paid to Neetu Rs. 3,000. 3. Purchased goods on credit Rs. 6,000.
[Capital 17,000; Creditors 1,000 = Cash 15,500; Goods 2,500] 4. Sold goods costing Rs. 3,000 on credit for Rs. 3,500.
5. Sold goods costing Rs. 2,000 for cash Rs. 2,300.
Q-3: Make the ‘Accounting Equation’ of the following transactions:
6. Paid to creditors Rs. 2,500.
1. Sonia started business with cash Rs. 25,000.
7. Sold a defective item of goods costing Rs.1,800 for Rs.1,000.
2. Cash deposited into bank Rs. 15,000.
8. Received from debtors Rs. 2,000.
3. Purchased goods worth Rs. 4,000 and paid by cheque.
[Capital 15,000; Creditors 3,500 = Cash 15,800; Goods 1,200; Debtors 1,500]
4. Purchased Equipments of Rs. 2,500.
5. Sold goods for cash Rs. 1,200 (cost Rs. 1,000).
Q-8: Make the ‘Accounting Equation’ of the following transactions:
6. Sonia withdrawn Rs. 3,000 for personal use in cash.
1. Poonam commenced business with Rs. 25,000.
7. Paid Salaries Rs. 2,500 and office Rent Rs. 1,200.
2. Purchased goods for cash Rs. 7,000
8. Paid Telephone Bill Rs. 2,000 by cheque.
3. Purchased goods on credit Rs. 5,000.
9. Purchased goods worth Rs. 3,000 on credit.
4. Sold goods costing Rs. 2,500 for cash Rs. 3,000.
[Capital 16,500; Creditors 3,000 = Cash 2,000; Bank 9,000; Equipments 2,500; Goods 6,000]
5. Sold goods costing Rs. 1,000 on credit for Rs. 1,500.
Q-4: Make the ‘Accounting Equation’ of the following transactions: 6. Paid to creditors Rs. 4,000.
1. Sunil started business with Rs. 15,000. 7. Received from debtors Rs. 1,200.
2. Purchased goods from Naveen on credit Rs. 4,000 8. Paid for Electricity Bill Rs. 2,000.
 (11) (12)

10. Paid to Neeru for loan Rs. 3,000 and for interest Rs. 500.
CA. Naresh Aggarwal’s [Capital 43,000; Loan 7,000 = Cash 23,500; Bank 18,000; Goods 2,500; Machine 6,000]
ACADEMY of ACCOUNTS Q-12: Make the ‘Accounting Equation’ of the following transactions:
Accounting • Costing • Taxation • Financial Management 1. Mukesh started business with Rs. 20,000 in bank and Rs. 10,000 in cash.
2. Purchased goods for cash costing Rs. 4,000
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org 3. Goods costing Rs. 1,000 sold for cash at Rs. 1,200.
4. Sold goods costing Rs. 1,200 for Rs. 1,500 received by cheque.
[Capital 24,000; Creditors 1,000 = Cash 16,200; Goods 8,500; Debtors 300] 5. Paid Rs. 800 for Electricity and Rs. 1,200 for Salaries.
6. Mukesh paid Rs. 2,000 from bank for his personal expense.
Q-9: Make the ‘Accounting Equation’ of the following transactions: 7. Rs.6,000 taken from Raju as loan.
1. Ram started business with cash Rs. 20,000. 8. Received commission Rs. 2,800.
2. Purchased goods for cash Rs. 5,000. 9. Paid to Raju for loan Rs. 3,000 and for interest Rs. 1,000.
3. Sold goods costing Rs.2,000 for cash Rs. 3,000. [Capital 28,300; Loan 3,000 = Cash 10,000; Bank 19,500; Goods 1,800]
4. Purchased goods from Mohan on credit worth Rs. 2,500.
5. Sold goods costing Rs. 1,500 to Sohan on credit for Rs. 2,000. Q-13: Make the ‘Accounting Equation’ of the following transactions:
6. Paid wages amounted to Rs. 1,000. 1. Started business with cash Rs.8,000, goods Rs.4,000 and Machine Rs.5,000.
7. Paid salaries to Rs. 2,500 2. Purchased Machine for Rs. 2,000.
8. Received commission Rs. 2,000. 3. Purchased goods on credit from Neha Rs. 3,000.

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9. Cash Received from Sohan Rs. 1,200. 4. Purchased goods for cash Rs. 2,200.
10. Purchased furniture worth Rs. 2,000. 5. Purchased goods on credit Rs. 1,300.
[Capital 20,000; Creditors 2,500 = Cash 15,700; Goods 4,000; Debtors 800; Furniture 2,000] 6. Paid to Neha Rs. 2,800 in full settlement of her claim.
7. Charge depreciation Machinery by Rs.1,000.
Q-10: Make the ‘Accounting Equation’ of the following transactions: [Capital 16,200; Creditors 1,300 = Cash 1,000; Goods 10,500; Machinery 6,000]
1. Rahul started business with cash Rs. 50,000.
2. Purchased goods for cash Rs. 15,000. Q-14: Make the ‘Accounting Equation’ of the following transactions:
3. Purchased Equipments worth Rs. 2,000. 1. Started business with cash Rs. 10,000.
4. Sold goods costing Rs.4,000 for cash Rs. 5,000. 2. Purchased machine for Rs. 3,000.
5. Purchased goods from Deepak on credit worth Rs. 7,500. 3. Purchased goods for cash Rs. 1,500.
6. Sold goods costing Rs. 6,000 to Sohan on credit for Rs. 7,000. 4. Purchased goods on credit Rs. 1,200 from Pramod.
7. Paid wages amounted to Rs. 3,000. 5. Paid to Pramod Rs. 1,150 in full settlement.
8. Received Rent Rs. 2,500. 6. Depreciation of Rs. 500 charged on Machine.
9. Cash Received from Sohan Rs. 4,000. [Capital 9,550 = Cash 4,350; Machine 2,500; Goods 2,700]
[Capital 51,500; Creditors 7,500 = Cash 41,500; Goods 12,500; Equipment 2,000; Debtors 3,000] Q-15: Make the ‘Accounting Equation’ of the following transactions:
Q-11: Make the ‘Accounting Equation’ of the following transactions: 1. Sanjay started business with Cash Rs. 20,000 and Furniture Rs. 5,000.
1. Sudhir started business with Rs. 25,000 in bank and Rs. 20,000 in cash. 2. He purchased goods from Rosy on credit Rs. 7,000.
2. Purchased goods for cash costing Rs. 7,000 3. He sold goods for cash costing Rs. 1,500 for Rs. 2,000.
3. Goods costing Rs. 3,000 sold for cash at Rs. 4,000. 4. Purchased more furniture for cash Rs. 3,000.
4. Sold goods costing Rs. 1,500 for Rs. 2,000 received by cheque. 5. Sold goods on credit to Dinesh costing Rs. 2,500 for Rs. 3,200.
5. Purchased Machine costing Rs. 6,000 and paid by cheque. 6. Paid wages Rs. 500.
6. Sudhir withdrawn Rs. 3,000 from bank for private use. 7. Received Rs. 3,000 from Dinesh in full settlement of the claim.
7. Rs. 10,000 taken from Neeru as loan. 8. Withdrawn cash for personal use Rs. 3,000.
8. Received commission Rs. 2,000. 9. Paid cash to Rosy Rs. 6,800 in full settlement.
9. Paid General Expenses Rs. 1,800 and for Stationery Rs. 200. 10. Received Rent from tenant Rs. 1,200.
[Capital 23,900 = Cash 12,900; Furniture 8,000; Goods 3,000]
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5. Paid cash for salaries Rs. 1,000 and outstanding salaries were Rs. 200.
CA. Naresh Aggarwal’s 6. Bought Furniture in cash for personal use Rs. 1,500.
ACADEMY of ACCOUNTS [Capital 15,300; O/s Exp. 200 = Bank 3,000; Furniture 5,000; Cash 5,000; Advance Exp. 2,500]

Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-16: Make the ‘Accounting Equation’ of the following transactions:
1. Rajesh started business with Cash Rs. 15,000 and Machine of Rs. 8,000.
2. He purchased goods from Ajay on credit Rs. 6,000.
3. He sold goods for cash costing Rs. 2,500 for Rs. 2,000.
4. Purchased more Machine for cash Rs. 4,000.
5. Sold goods on credit to Mona costing Rs. 1,500 for Rs. 1,800.
6. Paid wages Rs. 500, Rent Rs. 700 and Municipal Taxes Rs. 800.
7. Received Rs. 1,700 from Mona in full settlement of the claim.
8. Paid cash to Ajay Rs. 5,800 in full settlement.
9. Received Rent from tenant Rs. 2,800 and Fees from client Rs. 1,200.
Q-20: Make the ‘Accounting Equation’ of the following transactions:
1. Mukesh started business with Bank balance of Rs.10,000.
2. Bought Furniture for Rs. 3,000 and paid by cheque.
3. Bought Furniture for personal use Rs. 900.
4. Withdrawn cash for office use Rs. 5,000.
5. Paid Fees in advance Rs. 1,000 in cash.
6. Paid cash for Commission Rs.800 (including advance Rs. 500).
7. Paid cash for Rent Rs. 1,200 and Outstanding Rent were Rs. 300.
8. Cash paid for Salaries Rs. 800 and remain Outstanding Rs. 200.
[Capital 6,300; O/s Exp. 500 = Bank 1,100; Furniture 3,000; Cash 1,200; Advance Exp. 1,500]
Q-21: Make the ‘Accounting Equation’ of the following transactions:
1. Started business with cash Rs. 10,000.
2. Paid Rent Rs. 600 including Rs. 100 as advance.
3. Received commission Rs. 1,000 and remain outstanding Rs. 400.

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[Capital 24,900 = Cash 10,900; Machine 12,000; Goods 2,000] 4. Received fees in advance Rs. 800 to complete an assignment.
Q-17: Make the ‘Accounting Equation’ of the following transactions: 5. Paid son’s school fees Rs. 300 from office cash.
1. Started business with Rs. 8,000. 6. Assignment could not be completed therefore all fees returned.
2. Bought goods on credit Rs. 1,000. 7. Purchased a Machine for Rs.5,000; paid only Rs.1,500 and took loan from Bank
3. Bought Machinery for Rs. 2,000. for the balance.
4. Paid Rent Rs. 1,500 and Security deposit Rs. 1,000. [Capital 10,600; Loan 3,500= Cash 8,600; Advance Expenses 100; O/s Incomes 400; Machine 5,000]
5. Paid to creditors Rs. 980 in full settlement. Q-22: Make the ‘Accounting Equation’ of the following transactions:
6. Depreciate Machine by Rs. 300. 1. Ravi started business with cash Rs. 15,000.
7. Outstanding salaries are Rs. 500. 2. Paid Rent Rs.1,500 including Rs. 200 as advance.
[Capital 5,720; O/s Expenses 500 = Cash 2520; Goods 1,000; Machine 1,700; Deposit 1,000] 3. Received Interest Rs. 600 and remain outstanding Rs. 300.
Q-18: Make the ‘Accounting Equation’ of the following transactions: 4. Received fees in advance Rs. 500 to complete an assignment.
1. Started business with Rs. 25,000. 5. Paid wife’s insurance premium Rs. 400 from office cash.
2. Bought Furniture for Rs. 6,000. 6. Assignment could not be completed therefore all fees returned.
3. Bought goods on credit Rs. 5,000. 7. Purchased Scooter for Rs.7,000; paid only Rs.2,000 and took loan for the balance.
4. Paid Rent Rs. 2,500 and Security deposit Rs. 5,000. [Capital 14,200; Loan 5,000 = Cash 11,700; Advance Exp. 200; O/s Income: 300; Scooter: 7,000]
5. Paid to creditors Rs. 4,800 in full settlement. Q-23: If Capital of a business is Rs 60,000 and outside liabilities are Rs 20,000 then
6. Depreciate Furniture by Rs. 1,000. calculate total assets of the business.
7. Paid for Wages Rs. 1,500 and remain outstanding Rs. 500. [Rs.80,000]
[Capital 19,700; O/s Exp. 500 = Cash 5,200; Furniture 5,000; Goods 5,000; Security Deposit 5,000]
Q-19: Make the ‘Accounting Equation’ of the following transactions: Q-24: If total assets of a business are Rs 80,000 and net worth/capital is Rs.60,000.
1. Mukesh started business with Bank balance of Rs. 18,000. Calculate external equities/liabilities.
2. Bought Furniture for Rs. 5,000 and paid by cheque. [Ans.: Rs 20,000]
3. Withdrawn cash for office use Rs. 10,000.
4. Paid rent in advance Rs. 2,500.
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She also withdrawn Rs.20,000 for her private use. What is the total of her assets and
CA. Naresh Aggarwal’s her capital in the business on 31.12.2012.
ACADEMY of ACCOUNTS [Total Assets: Rs.1,10,000; Capital: Rs.85,000]

Accounting • Costing • Taxation • Financial Management
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
Q-25: If capital of a business is Rs.1,00,000 and liabilities are of Rs. 30,000 calculate
total assets of the business.
[Rs.1,30,000]
Q-26: A had a capital of Rs. 70,000 on 31.03.2013. He had also purchased good
amounting to Rs.10,000 on credit and the payment had not been made. Find the value
of the total assets of the business.
[Rs.80,000]
Q-27: Ram started business on 01.01.2012 with capital of Rs.50,000. On 31.12.2012
Q-32: Ram started a business on 01.01.2012 with a capital of Rs. 90,000 and he
borrowed Rs.30,000 from a friend which is not yet paid. He earned a profit of Rs.
15,000 during 2012 and withdrew cash Rs. 10,000 for private use. What is amount of
his capital and total assets on 31.12.2012.
[Capital: Rs.95,000; Total Assets: Rs.1,25,000]
Q-33: Rohit Started a business on 01.04.2012 with a capital of Rs. 45,000 and a loan
of Rs. 15,000 borrowed from Bank. During the year he had paid Rs.5,000 of loan. On
31.03.2013 his assets were Rs.80,000. Find out his capital as on 31.03.2013 and
profit/loss made during the year 2012-13.
[Capital: Rs.70,000; Profit: Rs.25,000]
Q-34: Neeru started a business on 01.04.2012 with a capital of Rs.45,000 and a loan
of Rs. 25,000 borrowed from Bank. During the year she had introduced additional

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his assets were Rs.75,000 and liabilities of Rs. 10,000. Find out his closing capital capital of Rs. 20,000; paid bank loan of Rs.10,000 and had withdrawn Rs. 5,000 for
and profits earned during the year. personal use. On 31.03.2013 her assets were Rs.1,10,000. Find out her capital as on
[Capital Rs. 65,000; Profit Rs. 15,000] 31.03.2013 and profit/loss made during the year 2012-13.
[Closing capital: Rs.95,000; Profit: Rs.35,000]
Q-28: A starts a business and invests Rs. 60,000 on 01.04.2012. On 31.03.2013 his
assets are Rs. 95,000 and liabilities are Rs. 10,000. Find the amount of capital on
31.03.2013. Also find his profit.
[Capital: Rs.85,000; Profit: Rs.25,000]

Q-29: Calculate total equity/Assets and amount of owner’s equity/capital, if: ••••••••••••••••••••••
Owner’s equity at the beginning is Rs. 80,000.
Equity of creditors is Rs. 20,000.
Revenue during the period is Rs. 30,000.
Expenses during the same period are Rs. 25,000.
[Total Equity Rs. 1,05,000, Owner’s Equity Rs. 85,000]

Q-30: Calculate total equity/Assets and amount of owner’s equity/capital, if:

Owner’s equity at the beginning is Rs. 50,000.
Equity of creditors is Rs. 10,000.
Revenue during the period is Rs. 20,000.
Expenses during the same period are Rs. 15,000.
[Total Equity Rs. 65,000, Owner’s Equity Rs. 55,000]

Q-31: Sangeeta started a business with a capital of Rs. 75,000 on 01.01.2012. During
the year, she made a profit of Rs. 30,000. She owes Rs. 25,000 to suppliers of goods.
 (if taken) etc.
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Hints:

Capital + Liabilities = Assets

Total Equities = Total Assets

CA. Naresh Aggarwal’s

Net Worth = Owners Equity = Capital

External Equities = Outside Liabilities
Outstanding Incomes, Bills Receivable, Loan (if given to others) etc.

Salaries, Depreciation, Printing & Stationery, Electricity, Telephone etc.

- Drawings + Profit - Loss = Closing Capital/Capital at the End

Opening Capital/Capital at the Beginning + Additional/Further Capital
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management

Assets : Cash, Bank, Furniture, Machine, Goods, Debtors, Prepaid Expenses,

Income/Expenses : Rent, Interest, Commission, Brokerage, Fees, Discount, Wages,

Liabilities : Creditors, Outstanding Expenses, Advance Incomes, Bills Payable, Loan

General Key to Accounting Equations

S.N. Different Situations Treatment Effected Head

1. Business started with Assets Increase in Capital Add: In Capital

Increase in Assets Add: In Related Assets

2. Withdrawn for personal use / Drawings Decrease in Capital Less: In Capital

Decrease in Assets Less: in Related Assets

3. Purchase of Asset for Cash Increase in Assets Add: In Related Assets

Decrease in Assets Less: In Cash

4. Purchase of Asset on Credit Increase in Assets Add: In Related Asset

Increase in Liabilities Add: In Creditors
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5. Goods returned to Creditors/Suppliers Decrease in Assets Less: In Goods

Decrease in Liabilities Less: In Creditors

6. Paid to Creditors/Suppliers Decrease in Assets Less: In Cash/Bank

Decrease in Liabilities Less: In Creditors

7. Paid to Creditors/Suppliers Decrease in Assets (Amount Paid) Less: In Cash/Bank

and Discount Received Increase in Capital (Discount Amount) Add: In Capital
Decrease in Liabilities (Total Amount) Less: In Creditors
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8. Loan Taken Increase in Assets Add: In Cash/Bank

Increase in Liabilities Add: In Loan
 (19)

9. Loan Paid with Interest Decrease in Assets (Total Amount) Less: In Cash/Bank
Decrease in Liabilities (Loan Amount) Less: In Loan
Decrease in Capital (Interest Amount) Less: In Capital

10. Sale of Goods for Cash Increase in Assets (Sales Price) Add: In Cash
Decrease in Assets (Cost Price) Less: In Goods
*Increase in Capital (Profit Amount) Add: In Capital
*Decrease In Capital (Loss Amount) Less: In Capital
* There will be one item at a time, either Profit or Loss. Both will not come simultaneously.

11. Sale of Goods on Credit Increase in Assets (Sales Price) Add: In Debtors
Decrease in Assets (Cost Price) Less: In Goods
*Increase in Capital (Profit Amount) Add: In Capital
*Decrease In Capital (Loss Amount) Less: In Capital
* There be one Item at a time, either Profit or Loss. Both will not come simultaneously.
CA. Naresh Aggarwal’s

12. Goods returned by Debtors Decrease in Assets Less: In Debtors

Increase in Assets Add: In Goods

13. Cash Received from Debtors/Customers Decrease in Assets Less: In Debtors

Increase in Assets Add: In Cash
West Patel Nagar, New Delhi. Ph:8800215448. Website: www.academyofaccounts.org
ACADEMY of ACCOUNTS
Accounting • Costing • Taxation • Financial Management

14. Cash Received from Debtors/Customers Increase in Assets (Amount Received) Add: In Cash
and Discount allowed Decrease in Capital (Discount Amount) Less: In Capital
Decrease in Assets (Total Amount) Less: In Debtors

15. Expenses Paid Decrease in Assets Less: In Cash

Decrease in Capital Less: In Capital

16. Unpaid/Outstanding/Due Expenses Increase in Liabilities Add: In O/S Expenses

Decrease in Capital Less: In Capital

17. Prepaid/Advance Expenses Increase in Assets Add: In Prepaid Expenses

Decrease in Assets Less: In Cash

18. Income Received Increase in Assets Add: In Cash

Increase in Capital Add: In Capital

19. Outstanding Income Increase in Assets Add: In O/S Incomes

Increase in Capital Add: In Capital

20. Advance/Unearned Income Increase in Assets Add: In Cash

Increase in Liabilities Add: In Advance Incomes

21. Depreciation on Assets Decrease in Assets Less: In Related Assets

Decrease in Capital Less: In Capital

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