SOLUTIONS - ACCOUNTING EQUATION

Solution 1:
No. Transactions Assets = Liabilities + Capital
Cash + Stock + Machinery = Creditors + Capital
Rs. Rs. Rs. Rs. Rs.
1. Started business with cash
Rs. 70,000 70,000 + 0 + 0 = 0 + 70,000
2. Credit Purchases of goods
Rs. 18,000 0 + 18,000 + 0 = 18,000 + 0
New Equation 70,000 + 18,000 + 0 = 18,000 70,000
3. Payment made to creditors in
full settlement -17,500 + 0 + 0 = -18,000 + 500
New Equation 52,500 + 18,000 + 0 = 0 + 70,500
4. Purchase of machinery for -20,000 + 0 + 20,000 = 0 + 0
cash
New Equation 32,500 + 18,000 + 20,000 = 0 + 70,500

Solution 2:
No. Transactions Assets = Liabilities + Capital
Cash + Furniture + Stock + Debtors = Creditors + Commn. + Capital
Reed, in
Advance
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
1. Rakesh 1,50,000 + 0 +0 + 0 0 + 0 + 1,50,000
Commenced
business with cash
2. Furniture -20,000 + 20,000 +0 + 0 — 0 + 0 + 0
purchased for cash
New Equation 1,30,000 20,000 +0 + 0 = 0 + 0 + 1,50,000
3. Purchased goods 0 + 0 + 25,000 + 0 ::
25,000 + 0 •+. 0
from Mahesh
New Equation 1,30,000 + 20,000 + 25,000 + 0 = 25,000 + 0 + 1,50,000
4. Cash Sales
(Profit Rs. 14,000- 14,000 + 0 - 10,000 + 0 = 0 + 0 + 4,000
Rs. 10,000)
New Equation 1,44,000 20,000 + 15,000 + 0 If ". 25,000 + 0 1,54,000
5. Additional capital 20,000 + 0 +0 + 0 = 0 + 0 + 20,000
introduced
New Equation 1,64,000 + 20,000 + 15,000 + 0 = 25,000 + 0 + 1,74,000
6. Commission 2,000 + 0 +0 0 = 0 + 2,000 + 0
received in
advance
New Equation 1,66,000 -f- 20,000 + 15,000 + 0 = 25,000 + 2,000 + 1,74,000
7. Paid to creditor -22,500 + 0 +0 + 0 -25,000 + 0 + 2,500
Mahesh Rs. 22,500
in full settlement
New Equation 1,43,500 + 20,000 + 15,000 0 = 0 + 2,000 + 1,76,500
8. Sold goods (costing 5,000 + 0 - 15,000 + 13,000 0 + 0 3,000
Rs. 15,000) for Rs.
18,000 out of which
Rs. 5,000 received
in cash
New Equation 1,48,500 + 20,000 + 0 + 13,000 0 + 2,000 + 1,79,500
9. Depreciation on 0 2,000 +0 '+ 0 0 + 0 2,000
furniture @ 10% on
Rs. 20,000
 New Equation 1,48,500 + 18,000 + 0 + 13,000 = 0 + 2,000 + 1,77,500

Solution 3:
S. Transactions Assets = Capital + Liabilities
No. Cash + Bank + Stock + Furniture + Debtors = Capital + Creditors
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
1. Ram started 25,000 + 25,000 + 0 + 0 + 0 50,000 + 0
business with cash
Rs. 25,000 and
cheque of Rs.
25,000
2. Purchased goods
on
credit for Rs. 4,000 0 + 0 + 4,000 + 0 + 0 = 0 + 4,000
New Equation 25,000 + 25,000 + 4,000 + 0 + 0 = 50,000 + 4,000
3. Purchased goods
for
cash for Rs. 1,000 -1,000 + 0 + 1,000 + 0 + 0 = 0 + 0
New Equation 24,000 + 25,000 + 5,000 + 0 + 0 = 50,000 + 4,000
4. Purchased furniture
for cash for Rs. 500 -500 + 0 + 0 + 500 + 0 = 0 + 0
New Equation 23,500 + 25,000 + 5,000 + 500 + 0 = 50,000 4,000
5. Withdrew cash for
personal use Rs.
700
from Bank 0 - 700 + 0 0 + 0 = -700 + 0
New Equation 23,500 + 24,300 + 5,000 + 500 + 0 =: 49,300 + 4,000
6. Paid rent Rs. 200 -200 + 0 + 0 + 0 + 0 = -200 + 0
(Note 1)
New Equation 23,300 + 24,300 + 5,000 + 500 0 = 49,100 + 4,000
7. Received interest
Rs. 100 (Note 2) 0 + 100 + 0 + 0 + 0 = 100 + 0
New Equation 23,300 + 24,400 + 5,000 + 500 + 0 = 49,200 + 4,000
8. Sold goods costing
Rs. 500 for Rs. 700
on credit (Note 3) 0 + 0 - 500 + 0 + 700 = 200 + 0
9. New Equation 23,300 + 24,400 + 4,500 + 500 + 700 = 49,400 + 4,000
Paid to creditors
Rs. 400 -400 + 0 + 0 + 0 + 0 = 0 — 400
New Equation 22,900 + 24,400 4,500 + 500 + 700 = 49,400 + 3,600
10. Paid Petty
Expenses
Rs. 200 (Note 4) -200 + 0 + 0 + 0 + 0 = -200 + 0
New Equation 22,700 + 24,400 + 4,500 + 500 700 = 49,200 + 3,600

Solution 4:
(i) Interest due but not received shall be added to assets on one side and to the capital on other side.
(ii) It will increase cash on the assets side and increase the liabilities.
(iii) It will decrease one asset (cash) and increase another asset (Prepaid insurance).
(iv) Salary being an expense will be deducted from the capital and being unpaid will be added to liabilities.
Solution 5:
s. Transactions Assets = Liabilities + Capital
No. Cash + Stock + Furniture + = Creditors* + Expenses Capital
Computer +
Outstanding
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
1. Commenced
business
with cash Rs. 50,000 + 0 + 0 + 0 = 0 + 0 + 50,000
50,000
2. Purchased goods
for
cash Rs. 20,000
and
credit Rs. 30,000 -20,000 + 50,000 + 0 + 0 = 30,000 + 0 + 0
New Equation 30,000 + 50,000 + 0 + 0 = 30,000 + 0 + 50,000
3. Sold goods for
cash
Rs. 40,000 costing
Rs. 30,000 40,000 - 30,000 + 0 + 0 = 0 + 0 + 10,000
New Equation 70,000 + 20,000 + 0 + 0 = 30,000 + 0 + 60,000
4. Rent paid -500 + 0 + 0 + 0 = 0 + 0 - 500
Salaries Paid -5,000 - 5,000
New Equation 64,500 + 20,000 + 0 + 0 = 30.000 + 0 + 54,500
5. Rent Outstanding + 100 - 100
Salaries 0 + 0 + 0 + 0 = 0 + 1,000 - 1,000
Outstanding
New Equation 64,500 + 20,000 + 0 + 0 = 30,000 + 1,100 + 53,400
6. Bought furniture for
Rs. 5,000 on credit 0 + 0 + 5,000 + 0 = 5,000 + 0 + 0
New Equation 64,500 + 20,000 + 5,000 + 0 = 35,000 + 1,100 +' 53,400
7. Bought refrigerator
for personal use
Rs. 5,000 -5,000 + 0 + 0 + 0 = 0 + 0 - 5,000
New Equation 59,500 + 20,000 + 5,000 + 0 = 35,000 + 1,100 + 48,400
8. Purchased
computer
for cash Rs. 20,000 -20,000 + 0 + 0 + 20,000 = 0 + 0 + 0
New Equation 39,500 + 20,000 + 5,000 + 20,000 35,000 + 1,100 + 48,400
9. Cash withdrawn for
personal use -10,000 + 0 + 0 + 0 = 0 + 0 - 10,000
New Equation 29,500 + 20,000 + 5,000 + 20,000 = 35,000 + 1,100 + 38,400
10. Interest on 0 + 0 + 0 + 0 = 0 + 0 + 500
drawings
- 500
Interest on Capital - 1,000
+ 1,000
New Equation 29,500 + 20,000 + 5,000 + 20,000 _ 35,000 + 1,100 + 38,400
BALANCE SHEET OF ANIL as at...
Liabilities Rs. Assets Rs.
Creditors 35,000 Cash in Hand 29,500
(including creditor for furniture Rs. 5,000) Stock 20,000
Expenses Outstanding 1,100 Furniture 5,000
Capital 38,400 Computer 20,000
74,500 74,500
Solution 6:
1. Purchase of furniture for cash—Increase in furniture and decrease in cash.
2. Purchase of furniture on credit—Increase in furniture and increase in liability.
3. Capital introduced by proprietor—Increase in cash and increase in capital.
4. Payment to creditors—Decrease in cash and decrease in creditors.
5. Cash withdrawn by proprietor—Decrease in cash and decrease in capital.
6. Conversion of partner’s loan into capital—Increase in capital and decrease in loan.
7. Bills Payable accepted—Increase in bills payable and decrease in creditors.
8. Outstanding expenses provided—Increase in creditors for outstanding expenses and decrease in capital.

Solution 7:
Total Assets = Capital + Liabilities Rs. 50,000 = Capital + Rs. 10,000 Closing Capital = Rs. 50,000 - Rs.
10,000 = Rs. 40,000
Profit = Closing Capital - Opening Capital = Rs. 40,000 - Rs. 30,000 = Rs. 10,000.

Solution 8:
Assets = Liabilities + Capital Or Capital = Assets - Liabilities
Or Capital = (Cash + Bank + Debtors + Plant and Machinery + Building +
Furniture + Bills Receivable) - (Creditors + Bills Payable) = Rs. (25,000 + 47,500 + 18,000 + 80,000 +
2,00,000 + 24,000 + 56,500) - Rs. (22,000 + 23,500)
= Rs. (4,51,000 - 45,500) = Rs. 4,05,500.

Solution 9 :
Closing Capital = Closing Assets - Closing Liabilities (i.e., Y’s Loan)
= Rs. 1,50,000 - Rs. 25,000 = Rs. 1,25,000.
Profit - Closing Capital + Drawings - Additional Capital - Opening Capital
= Rs. 1,25,000 + Rs. 15,000 - Rs. 25,000 - Rs. 50,000 = Rs. 65,000.

Solution 10:
Closing Capital = Closing Assets - Closing External Liabilities
= Rs. 1,00,000 - Rs. 3,000 = Rs. 97,000.
Opening Capital = Closing Capital + Drawings - Additional Capital - Profits = Rs. 97,000 + Rs. 6,000 - Rs.
10,000 - Rs. 10,000 = Rs. 83,000.

Solution 11:
ACCOUNTING EQUATION
S. Transaction Assets = Liabilities + Capital
No.
Cash + Stock + Debtors = Creditors + Capital
(a) Started business with Cash 1,00,000 + 0 + 0= 0 + 1,00,000
Equation 1,00,000 0 + 0= 0 + 1.00,000
(b) Purchased goods for Cash (--) 20,000 + 50,000 + 0= 30,000 + 0
Rs.20,000 and on Credit
Rs.30,000
New Equation 80,000 + 50,000 + 0= 30,000 + 1,00,000
(c) Sold goods for Cash costing (+) 12,000 (-) 25,000 + 18,000 = 0 5,000
Rs. 10,000 and on Credit
costing Rs. 15,000 both at a
profit of 20%
Final Equation 92,000 + 25,000 + 18,000 = 30,000 1,05,000
SOLUTION 12
ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
(i) Started business with Cash Cash + Stock + Prepaid = Creditors + + Capital
Exp. Outstandi
1,00,000 =0 ng exp. + 1,00,000
Equation 1,00,000 + 3,000 0 + 1,00,000
(ii) Paid rent in advance* - 3,000
New Equation 97,000 + 70,000 + 3,000 =0 + 1,00,000
{Hi) Purchased goods for cash
Rs.50,000 and credit - 50,000 +0 = 20,000
Rs.20,000
New Equation 47,000 + 70,000 + 3,000 + = 20,000 + 1,00,000
(tv) Sold goods for cash Rs. + 80,000 - 40,000 0
80,000 costing Rs.40,000 =0 + 40,000
New Equation 1,27,000 + 30,000 + 3,000 = 20,000 + 1,000 + 1,40,000
(v) Paid salary in cash
Rs.4,500 and salary
outstanding* Rs. 1,000 - 4,500 + 0 +0 =0 +0 - 5,500
New Equation 1,22,500 + 30,000 + 3,000 = 20,000 + 1,000 + 1,34,500
(vi) Bought motor cycle for
personal use Rs.30,000 - 30,000 + 0 +0 =0 +0 - 30,000
Final Equation 92,500 + 30,000 + 3,000 20,000 + 1,000 + 1,04,500

SOLUTION 13
ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
1. Started business with Cash Cash + Stock + Debtors + Furniture = Creditors + Capital
Rs.50,000 and goods Rs.20,000 +0 +0 = 0 + 70,000
50,000 + 20,000
Equation 50,000 + 20,000 +0 +0 = 0 + 70,000
2. Bought goods for Cash Rs.
15,000 and on credit for Rs. (-) 15,000 + 25,000 +0 +0 = 10,000 + 0
10,000
New Equation 35,000 + 45,000 +0 +0 = 10,000 + 70,000
3. Goods costing Rs. 24,000 sold
at a profit of33j%. Half the + 16,000 - 24,000 + 16,000 +0 =0 + 8,000
payment received in Cash
New Equation 51,000 + 21,000 + 16,000 +0 = 10,000 + 78,000
4. Purchased furniture for office
use Rs.6,000 and for household
use of Sudhir Rs.4,000 (-) 10,000 +0 +0 + 6,000 = 0 (-) 4,000
Final Equation 41,000 + 21,000 + 16,000 + 6,000 10,000 + 74,000

SOLUTION 14 :
Assets : Cash Rs. 1,83,000 + Stock Rs.98,000 + Debtors Rs.90,000 = Liabilities : Creditors Rs.1,50,000 +
Capital Rs.2,21,000