Fundamental Accounting Equation: Problems and Solutions

No. Problems & Solutions
01.
Show that the accounting equation is satisfied after taking into consideration each of the following transactions in the books of Mr. N
  1. Started business with capital Rs. 1,00,000
  2. Bought furniture Rs. 25,000
  3. Bought goods for cash Rs. 20,000
  4. Bought goods from Ram on Credit Rs. 5,000
  5. Sold goods for cash for Rs. 15,000
  6. Sold goods to Shyam on credit Rs. 8,000
  7. Paid cash to Ram Rs. 4,000
  8. Received cash from Shyam Rs. 5,000
  9. Paid Cash into Bank Rs. 25,000
  10. Withdrawn from bank Rs. 10,000

Solution »

 
 
(a)
Capital + Liabilities = Assets
1,00,000 + 0 = Cash (1,00,000)
(b)
Capital + Liabilities = Assets
1,00,000 + 0 = Cash (75,000) + Furniture (25,000)
(c)
Capital + Liabilities = Assets
1,00,000 + 0 = Cash (55,000) + Furniture (25,000) + Goods (20,000)
(d)
Capital + Liabilities = Assets
1,00,000 + Ram (5,000) = Cash (55,000) + Furniture (25,000) + Goods(25,000)
(e)
Capital + Liabilities = Assets
1,00,000 + Ram (5,000) = Cash (70,000) + Furniture(25,000) + Goods(10,000)
(f)
Capital + Liabilities = Assets
1,00,000 + Ram (5,000) = Cash (70,000) + Furniture (25,000) + Goods (2,000) + Shyam (8,000)
(g)
Capital + Liabilities = Assets
1,00,000 + Ram (1,000) = Cash (66,000) + Furniture (25,000) + Goods (2,000) + Shyam (8,000)
(h)
Capital + Liabilities = Assets
1,00,000 + Ram (1,000) = Cash (71,000) + Furniture (25,000) + Goods (2,000) + Shyam (3,000)
(i)
Capital + Liabilities = Assets
1,00,000 + Ram (1,000) = Cash (46,000) + Furniture (25,000) + Goods (2,000) + Shyam (3,000) + Bank (25,000)
(j)
Capital + Liabilities = Assets
1,00,000 + Ram (1,000) = Cash (56,000) + Furniture (25,000) + Goods (2,000) + Shyam (3,000) + Bank (15,000)

No. Problems & Solutions
02. Following are the accounting transactions relating to Mr. P's business. Use the accounting equation to show their effect on his assets, liabilities and capital.
  1. Commenced business with a Capital of Rs. 50,000
  2. Bought Machinery for cash Rs. 10,000
  3. Purchased goods for cash Rs. 15,000
  4. Purchased goods from A on credit Rs. 5,000
  5. Sold goods for cash Rs. 10,000
  6. Paid to A Rs. 2,000
  7. Sold goods to B on credit Rs. 3,000
  8. Paid into Bank Rs. 6,000
  9. Paid to A by cheque Rs. 1,000
  10. Received from B a cheque for Rs. 2,000

Solution »

 
 
(a)
Capital + Liabilities = Assets
50,000 + 0 = Cash (50,000)
(b)
Capital + Liabilities = Assets
50,000 + 0 = Cash (40,000) + Machinery (10,000)
(c)
Capital + Liabilities = Assets
50,000 + 0 = Cash (25,000) + Machinery (10,000) + Goods (15,000)
(d)
Capital + Liabilities = Assets
50,000 + A (5,000) = Cash (25,000) + Machinery (10,000) + Goods (20,000)
(e)
Capital + Liabilities = Assets
50,000 + A (5,000) = Cash (35,000) + Machinery (10,000) + Goods (10,000)
(f)
Capital + Liabilities = Assets
50,000 + A (3,000) = Cash (33,000) + Machinery (10,000) + Goods (10,000)
(g)
Capital + Liabilities = Assets
50,000 + A (3,000) = Cash (33,000) + Machinery(10,000) + Goods (7,000) + B (3,000)
(h)
Capital + Liabilities = Assets
50,000 + A (3,000) = Cash (27,000) + Machinery (10,000) + Goods (7,000) + B (3,000) + Bank (6,000)
(i)
Capital + Liabilities = Assets
50,000 + A (2,000) = Cash (27,000) + Machinery (10,000) + Goods (7,000) + B (3,000) + Bank (5,000)
(j)
Capital + Liabilities = Assets
50,000 + A (2,000) = Cash (27,000) + Machinery (10,000) + Goods (7,000) + B (1,000) + Bank (7,000)
Author Credit : The Edifier  

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