Question No 6 Chapter No 5
6. Prepare an Accounting Equation and Balance Sheet on the following basis:
(i) Ajeet started business with cash Rs 20,000.
(ii) He purchased Furniture for Rs 2,000.
(iii) He paid rent of Rs 200.
(iv) He purchased goods on credit Rs 3,000.
(v) He sold goods(cost price Rs 2,000) for Rs 5,000 on cash
Solution of Question No 6 Chapter No 5: –
|(i)||Ajeet started business with cash Rs 20,000.||+20,000||–||+20,000|
|(ii)||He purchased Furniture for Rs 2,000.||-2,000||+2,000||–||–|
|(iii)||He paid rent of Rs 200.||-200||-200|
|(iv)||He purchased goods on credit Rs 3,000.||–||–||+3,000||+3,000||–|
|(v)||He sold goods(cost price Rs 2,000) for Rs 5,000 on cash||+5,000||–||-2,000||–||+3,000|
Assets = Cash 22,800 + Furniture 2,000 + Stock 1,000= 25,800/-
Liabilities = 3,000/-
Capital = 22,800/-
3,000 + 22,800 = 25,800/-
Explanation of All Transactions with images: –
This is not a part of the solution, So you don’t have to write it in the exam. So why we explained if it is not needed. Because This explanation will help you to understand all transactions with logic so don’t need to remember all the transactions but just understand and remember the logic use behind it.
Transaction No. 1
As we discuss in the previous topic, A owner and the business both have a separate identity in the eye of law. So, the business will be treated as an Artificial Person and anything invested by the owner into the business will be treated as capital.
So, In this transaction, as shown in the above image owner investing her cash into the business, this will be treated as capital of the business. The business receiving an asset i.e. cash.
Transaction No. 2
In this transaction, as shown in the above image two accounts are involved Furniture and Cash:
Furniture a/c (Purchase):- Because business receiving goods.
Cash a/c : – Because business transaction is not clear about the payment so it assumed that it is paid in cash.
Transaction No. 3
In this transaction, as shown in the above image the two accounts are involved i.e. Cash and capital
Cash a/c:- Business paying cash so it will deducted.
Capital a/c:- because this is expenses for the business. “ All expenses and losses are deducted from the amount of capital.
Transaction No. 4
In this transaction, as shown in the above image two accounts are involved one is Stock (Purchase) and another is Creditor
Stock :- Because business receiving another asset i.e. goods.
Creditor: – Because Business bought goods on credit, they did not pay anything. But it has to pay in future.so that’s why seller of good become our creditor.
Transaction No. 5
In this transaction, as shown in the above image three accounts are effected i.e. Stock(Sale), Cash and Capital(Profit):
Stock a/c (Sale):- Because business giving(selling) its goods.
Cash : – Because Business received cash from customer.
Capital(Profit): Because owner has right on all profit of the business so the amount of the profit will be added in the capital a/c. (Profit = sale price – cost price) 5,000-2,000 = 3,000(Profit)
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