Solution

ACCOUNTING EQUATION WORKSHEET

Class 11 - Accountancy
1. Calculation of Closing Capital (Capital as on March 31, 2014)
Assets = Liabilities + Capital
1,75,000 = 50,000 + Capital
Capital = ₹1,25,000
Calculation of Profit Earned during the Year
Closing Capital = Opening Capital + Additional Captial + Profit - Drawings
1,25,000 = 1,00,000 + 0 + Profit - 0
Profit = 1,25,000 - 1,00,000
= ₹25,000

ES
2. Closing Capital = Closing Assets - Closing Liabilities
= 10,75,000 - 2,92,500
= ₹ 7,82,500
Additional Capital = Closing Capital - Opening Capital

SS
= 7,82,500 - 5,50,000
= ₹ 2,32,500
3. i. External Liabilities = Assets - Capital
= ₹ 15,00,000 - ₹ 8,50,000 = ₹ 6,50,000

LA
ii. Closing Capital = Opening Capital + Additional Capital + Profit - Drawings
= ₹ 2,00,000 + 0 + ₹ 50,000 - 0 = ₹ 2,50,000
External Liabilities = Assets - Closing Capital
SC
= ₹ 6,00,000 - ₹ 2,50,000 = ₹ 3,50,000
iii. Closing Capital = ₹ 5,00,000 + ₹ 3,00,000 + ₹ 2,50,000 - ₹ 1,50,000 = ₹ 9,00,000
External Liabilities = ₹ 20,00,000 - ₹ 9,00,000 = ₹ 11,00,000
4. a. Total Assets = Capital + Creditors for purchase of Goods
= 75,000 + 15,000
I

= ₹ 90,000
YS

b. Capital at the end = Capital - Loss - Drawings

= 75,000 - 1,700 - 800
= ₹ 72,500
AL

Assets = Capital at the end + Creditors for purchase of Goods

= 72,500, + 15,000
= ₹ 87,500
5. Calculation of Closing Capital (Capital as on March 31, 2014)
AN

Assets = Liabilities + Capital

3,80,000 = 75,000 + Capital
Capital = ₹3,05,000
Calculation of Profit Earned during the Year
Closing Capital = Opening Capital + Additional Capital + Profit - Drawings
3,05,000 = 2,00,000 + 60,000 + Profit - 36,000
3,05,000 = 2,24,000 + Profit
Profit = 3,05,000 - 2,24,000
= ₹81,000
Opening Capital Additional Capital Drawing Profit or Loss Closing Capital Total Assets Liabilities
Case
6. (₹) (₹) (₹) (₹) (₹) (₹) (₹)

(i) 2,50,000 1,25,000 15,000 20,000 3,80,000 5,00,000 1,20,000

(ii) 1,37,500 37,500 12,500 -17,500 1,45,000 1,87,500 42,500

(iii) 2,50,000 28,000 16,000 20,000 2,82,000 2,89,800 7,800

(iv) 5,00,000 7,000 67,000 18,000 4,58,000 7,00,000 2,42,000

1 / 37
 (v) 2,50,000 37,500 20,000 33,750 3,01,250 3,77,000 75,750
7. Closing Capital = Closing Assets - Closing External Liabilities
= ₹ 1,00,000 - ₹ 3,000 = ₹ 97,000
Opening Capital = Closing Capital + Drawings - Additional Capital - Profits
= ₹ 97,000 + ₹ 6,000 - ₹ 10,000 - ₹ 10,000 = ₹ 83,000
8. Accounting equation is:
Assets = Liabilities + Capital
Or Capital = Assets - Liabilities
Or Capital = (Cash + Bank + Debtors + Plant and Machinery + Building + Furniture + Bills Receivable) - (Creditors + Bills Payable)
= ₹ (25,000 + 47,500 + 18,000 + 80,000 + 2,00,000 + 24,000 + 56,500) - ₹ (22,000 + 23,500)
= ₹ (4,51,000 - 45,500) = ₹ 4,05,500
9. a. Capital on March 31, 2023 = Capital on April 01, 2022 + Profit - Drawings
= 10,000 + 5,000 - 4,000 = ₹ 11,000
b. Total Assets on March 31 , 2023 = Capital on April 01, 2022 + Profit + Creditors

ES
= 15,000 + 3,000 + 2,500 = ₹ 20,500
10. i. Purchase of furniture for cash - Increase in furniture and decrease in cash.
ii. Purchase of furniture on credit - Increase in furniture and increase in liability.

SS
iii. Capital introduced by proprietor - Increase in cash and increase in capital.
iv. Payment to creditors - Decrease in cash and decrease in creditors.
v. Cash withdrawn by proprietor - Decrease in cash and decrease in capital.

S.
LA
vi. Conversion of partner’s loan into capital - Increase in capital and decrease in loan.
vii. Outstanding expenses provided - Increase in creditors for outstanding expenses and decrease in capital.

Assets =
Liabilities
+ Capital
SC
Transactions
11. No. Cash Bank Stock Machinery Furniture Debtors Capital
+ + + + + =
(₹) (₹) (₹) (₹) (₹) (₹) (₹)
(i) Started business 50,000 + 1,00,000 + 60,000 + 1,00,000 + 50,000 = 3,60,000
I

3
rd of above goods sold at
YS

a profit of 10% on cost and 2,000

(ii) 11,000 + - (20,000) + + 11,000 =
half of it received in cash (Profit)
(WN)

New equation 61,000 + 1,00,000 + 40,000 + 1,00,000 + 50,000 + 11,000 = 3,62,000

AL

Depreciate machinery by (10,000)

(iii) - (10,000) =
10% (₹ 1,00,000 × 10%) Expenses

New equation 61,000 + 1,00,000 + 40,000 + 90,000 + 50,000 + 11,000 = 3,52,000

AN

Cash withdrawn for

(iv) (10,000) = -(10,000)
personal use
New equation 51,000 + 1,00,000 + 40,000 + 90,000 + 50,000 + 11,000 = 3,42,000

Interest on drawings -(500)

(v) =
charged @ 5% +500

New equation 51,000 + 1,00,000 + 40,000 + 90,000 + 50,000 + 11,000 = 3,42,000

Goods sold for cash ₹

(vi) +10,000 - (10,000) =
10,000

New equation 61,000 + 1,00,000 + 30,000 + 90,000 + 50,000 + 11,000 = 3,42,000

12. ACCOUNTING EQUATION
Assets Capital
Transaction
Cash + Stock + Debtors = Capital

2 / 37
 (a) Started business +1,00,000 + 20,000 + 0 1,20,000

Sold 50% of above

(b) 0 - 10,000 + 12,000 +2,000
goods at a profit of ₹ 2,000 on credit

New equation 1,00,000 + 10,000 + 12,000 1,22,000

Rishi paid 90%

(c) +10,800 - 0 - 12,000 (-)1,200
amount in full settlement

Final Equation 1,10,800 + 10,000 + 0 1,20,800

13. a. Closing Capital = Closing Assets - Closing Liabilities(loan)
= ₹ 15,00,000 - ₹ 2,00,000
= ₹ 13,00,000
Profit = Closing Capital - Opening Capital
= ₹ 13,00,000 - ₹ 7,50,000

ES
= ₹ 5,50,000
b. Profit = Closing Capital + Drawings - Additional or further Capital - Opening Capital
= ₹ 13,00,000 + ₹ 40,000 - ₹ 1,25,000 - ₹ 7,50,000
= ₹ 4,65,000

SS
14. Accounting Equation
Particulars Asset = Capital +Liabilities

Cash furniture Stock

(1)

(2)
Started business

Purchase furniture
20,000

-2,000
LA+2,000
= 20,000
SC
New Equation 18,000 +2,000 = 20,000

(3) Paid Rent -200 = -200

New Equation 17,800 +2,000 = 19,800

(4) Goods Purchased +3,000 = +3,000

I
YS

New Equation 17,800 +2,000 +3,000 = 19,800 +3,000

(5) sold goods +5,000 -2,000 = +3,000

New equation 22,800 +2,000 +1,000 = 22,800 +3,000

AL

15. Accounting Equation

Assets = Liabilities + Capital
S.No. Transaction
Cash + Stock = Outstanding Salary
AN

(a) Started business with cash + 1,20,000 + 1,20,000

(b) Purchased goods for cash - 10,000 + 10,000

New equation 1,10,000 + 10,000 1,20,000

(c) Rent received + 5,000 + 5000 (Income)

New equation 1,15,000 + 10,000 1,25,000

(d) Outstanding salary + 2,000 - 2,000 (Expense)

New equation 1,15,000 + 10,000 2,000 + 1,23,000

(e) Interest received + 700 + 700 (Income)

New equation 1,15,700 + 10,000 2,000 + 1,23,700

(f) Sold goods costing ₹ 5,000 for ₹ 7,000 + 7,000 - 5,000 + 2,000 (Profit)

New equation 1,22,700 + 5,000 2,000 1,25,700

(g) Goods destroyed by fire - 500 - 500

3 / 37
 1,22,700 + 4,500 2,000 + 1,25,200
Profit is added on capital and losses are reduced from capital.
Assets Liabilities

16. No. Particulars Cash Bank Stock Machinery Capital Liabilities

(i) Started Business with cash and goods 8,00,000 - 2,00,000 - = 10,00,000 -

(ii) Cash deposited into bank (5,00,000) 5,00,000 - - - -

New Equation - -
(iii) 3,00,000 5,00,000 2,00,000 = 10,00,000
Purchased Machinery + 10,000 + 10,000

New Equation 3,00,000 2,00,000

(iv) 5,00,000 + 10,000 = 10,00,000 10,000
Purchased goods for cash (80,000) + 80,000

New Equation 2,20,000 10,000

(v) 5,00,000 2,80,000 10,000 = 10,00,000

ES
Paid to Arjun by cash (10,000) (10,000)

New Equation 5,00,000 = 10,00,000

(vi) 2,10,000 2,80,000 10,000 + Nil
Salary paid (20,000) (20,000)

S
Final New Equation 2,10,000 4,80,000 2,80,000 10,000 = 9,80,000 Nil

AS
17. i. Calculation of Closing Capital (Capital as on March 31, 2023)
Assets = Liabilities + Capital
8,00,000 = 1,00,000 + Capital
Capital = ₹ 7,00,000
CL
Calculation of Profit Earned during the Year
Closing Capital = Opening Capital + Addition Capital + Profit - Drawings
7,00,000 = 5,00,000 + 0 + Profit - 0
Profit = 7,00,000 - 5,00,000
= ₹ 2,00,000
IS

ii. Calculation of Closing Capital (Capital as on March 31, 2023)

Assets = Liabilities + Capital
8,00,000 = 1,00,000 + Capital
YS

Capital = ₹ 7,00,000
Calculating of Profit Earned during the Year
Closing Capital = Opening Capital + Additional Capital + Profit - Drawings
AL

7,00,000 = 5,00,000 + 40,000 + Profit - 10,000

7,00,000 = 5,30,000 + Profit
Profit = 7,00,000 - 5,30,000
= ₹ 1,70,000
AN

Assets = Liabilities + Capital

S.
Transactions Cash Stock Creditors Outstanding Rent
18. No. + + (₹)
(₹) (₹) (₹) (₹)

(i) Harsh started business with cash 18,000 = + 18,000

Purchased goods for Cash ₹ 5,000 and on credit

(ii) (5,000) + 7,000 = 2,000
₹ 2,000

New equation 13,000 + 7,000 2,000 + 18,000

1,600
(iii) Sold goods for cash ₹ 4,000 costing ₹ 2,400 4,000 - (2,400) = +
(Profit)

New equation 17,000 + 4,600 = 2,000 + 19,600

(iv) Rent paid ₹ 1,000 and Rent Outstanding ₹ 200 (1,000) = 200 - (1,200)

New equation 16,000 + 4,600 = 2,000 + 200 + 18,400

4 / 37
19. Capital = Assets - Liabilities
Capital of Laxman on 31st March, 2023 Current Year = Total Assets - Loan
= ₹ 50,000 - ₹ 12,500
= ₹ 37,500
Profit of Laxman for the year ended 31st March, 2023 (Current Year)
= Capital on 31st March, 2023 (Current year) - Capital on 1st April (Last Year)
= ₹ 37,500 - ₹ 25,000
= ₹ 12,500
20. STATEMENT OF EQUATION ACCOUNTING EQUATION
+
S.No. Transaction Assets = Liabilities
Capital

+ + Prepaid = + Outstanding
Cash + Capital
Stock Exp. Creditors exp.

ES
+
(i) Started business with Cash 1,00,000 =0
1,00,000

(ii) Paid rent in advance - 3,000 + 3,000

SS
New Equation 97,000 3,000 =0 1,00,000
(iii) Purchased goods for cash ₹ 50,000 and credit ₹ + =
- 50,000 +0

(iv)
20,000

New Equation

Sold goods for cash ₹ 80,000 costing ₹ 40,000

47,000

+
LA 70,000

70,000 3,000

-
+0
+20,000

20,000

=0
1,00,000

+ 40,000
80,000 40,000
SC
New Equation 1,27,000 30,000 3,000 = 20,000 1,40,000
(v) Paid salary in cash ₹ 4,500 and salary outstanding
- 4,500 +0 +0 =0 + 1,000 - 5,500
₹ 1,000
I

New Equation 1,22,500 30,000 3,000 = 20,000 1,000 1,34,500

YS

(vi)
Bought motor cycle for personal use ₹ 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

21. Closing Capital = Closing Assets - Closing Liabilities (i.e., Y’s Loan)
AL

= ₹ 1,50,000 - ₹ 25,000 = ₹ 1,25,000.

Profit = Closing Capital + Drawings - Additional Capital - Opening Capital
= ₹ 1,25,000 + ₹ 15,000 - ₹ 25,000 - ₹ 50,000 = ₹ 65,000
Assets = Liabilities + Capital
AN

22. S. No. Transactions

Cash (₹) + Advances Expenses (₹) = Outstanding Expenses (₹) (₹)

(i) Started business with cash 50,000 = 50,000

(2,000)
(ii) Salary paid (2,000) = -
(Expenses)

New equation 48,000 = + 48,000

(iii) Wages Outstanding = 200 - (200)

New equation 48,000 = 200 + 47,800

(iv) Interest due but not paid = 100 - (100)

New equation 48,000 = 300 + 47,700

(v) Rent paid in advance (150) + 150 =

New equation 47,850 + 150 = 300 + 47,700

5 / 37
23. In this Capital as on 31st March,2013 means the closing capital, Closing capital means: (a) Current Assets and Long-Term Prepaids,
less (b) Total Liabilities, determined as of the close of business on the Closing date i.e. 31st March, 2013 which will be calculated as
follows:-
Closing Capital = Closing Assets - Closing Liabilities (i.e., Ram’s Loan)
= Rs 3,00,000 - Rs 50,000 = Rs 2,50,000
Profit = Closing Capital + Drawings - Additional Capital - Opening Capital
= Rs 2,50,000 + Rs 30,000 - Rs 50,000 - Rs 1,00,000 = Rs 1,30,000
24. 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.

Assets = Liabilities + Capital

25. S. No. Transactions
Cash (₹) Stock (₹) Debtors (₹) Creditors (₹) (₹)

ES
(i) Girish started business with 25,000 25,000

(ii) Purchased goods from Suraj 10,000 10,000

New equation 25,000 + 10,000 = 10,000 + 25,000

SS
(iii) Sold goods to Sanjay - (1,800) + 1,500 = - (300)

New equation 25,000 + 8,200 + 1,500 = 10,000 + 24,700

(iv)

Here,
Girish withdrew from business

New equation
(5,000)

20,000 + LA 8,200 + 1,500 =

=

10,000 +
- (5,000)

19,700
SC
Liabilities = ₹ 10,000
Capital = ₹ 19,700
Assets = ₹ 20,000 + ₹ 9,700 = ₹ 29,700
26. Accounting Equation
=
I

Assets + Capital
Liabilities
YS

S.No. Transaction
+ + =
Cash
Stock Debtors Creditors

+ +
AL

(i) Started business with cash and goods + 90,000

60,000 30,000

- +
(ii) Purchased goods for cash and credit + 25,000
40,000 65,000
AN

+
New equation 20,000 25,000 + 90,000
95,000
(iii)
Goods costing ₹ 48,000 sold at a profit of 33 %. 3/4th payment
1
+ - +
3 + 16,000
received in cash 48,000 48,000 16,000

+ +
New equation 68,000 25,000 + 1,06,000
47,000 16,000
(iv)
Goods costing ₹ 20,000 sold at a loss of 5% out of which ₹ 12,000 + - - 1,000
+ 7,000
were received in cash 12,000 20,000 (Loss)

+ +
New equation 80,000 25,000 + 1,05,000
27,000 23,000
(v)
- - 10,000
Paid rent and salary
10,000 (Expense)

(vi) New equation 70,000 + + 25,000 + 95,000

6 / 37
 27,000 23,000

+
Received cash from debtor - 15,000
15,000

+
New equation 85,000 + 8,000 25,000 +95,000
27,000
(vii)
- 800
Paid telephone bill - 800
(Expense)

+
New equation 84,200 + 8,000 25,000 + 94,200
27,000
Calculation of Selling Price
Cost of Goods Sold = 48,000
1
Add: Profit 33 % of ₹ 48,000 = 16,000
3

ES
Selling Price = 64,000
3
Cash Sales = 64,000 × 4
= 48,000
1
Credit Sales = 64,000 × 4
= 16,000
Calculation of Selling Price

SS
Cost of Goods Sold = 20,000
Less: Loss of 5% on ₹ 20,000 = 1,000
Selling Price = 19,000
Cash Received = 12,000
Hence, Credit Sales = 7,000
LA
Balance Sheet
as on ...
SC
Liabilities Amount (₹) Assets Amount (₹)

Creditors 25,000 Cash 84,200

Capital 94,200 Stock 27,000

I

Debtors 8,000
YS

1,19,200 1,19,200
27. Total Liability = Owner's Capital at the end + Creditors
= ₹ 65,000 + ₹ 50,000 = ₹ 1,15,000
AL

Owner's Capital at the end = Owner's Capital in the beginning + Revenue - Expenses
= ₹ 60,000 + ₹ 70,000 - ₹ 65,000 = ₹ 65,000.
S.
Transactions Assets = Liabilities + Capital
28. No.
AN

Commission
Cash Furniture Stock Debtors Creditors Capital
+ + + = + Received in +
(₹) (₹) (₹) (₹) (₹) (₹)
Advance (₹)

Rahul Commenced business

1. 1,50,000 + 0 + 0 + 0 = 0 + 0 + 1,50,000
with cash

2. Furniture purchased for cash -20,000 + 20,000 + 0 + 0 = 0 + 0 + 0

New Equation 1,30,000 + 20,000 0 + 0 = 0 + 0 + 1,50,000

3. Purchased goods from Manish 0 + 0 + 25,000 + 0 = 25,000 + 0 + 0

New Equation 1,30,000 + 20,000 + 25,000 + 0 = 25,000 + 0 + 1,50,000

Cash Sales (Profit ₹ 14,000 - ₹

4. 14,000 + 0 - 10,000 + 0 = 0 + 0 + 4,000
10,000)

New Equation 1,44,000 + 20,000 + 15,000 + 0 = 25,000 + 0 + 1,54,000

5. Additional capital introduced 20,000 + 0 + 0 + 0 = 0 + 0 + 20,000

7 / 37
 New Equation 1,64,000 + 20,000 + 15,000 + 0 = 25,000 + 0 + 1,74,000

Commission received in
6. 2,000 + 0 + 0 + 0 = 0 + 2,000 + 0
advance

New Equation 1,66,000 + 20,000 + 15,000 + 0 = 25,000 + 2,000 + 1,74,000

Paid to creditor Manish

7. -22,500 + 0 + 0 + 0 = -25,000 + 0 + 2,500
22,500 in full settlement

New Equation 1,43,500 + 20,000 + 15,000 + 0 = 0 + 2,000 + 1,76,500

Sold goods (costing ₹ 15,000)

8. for ₹ 18,000 out which ₹ 5,000 + 0 - 15,000 + 13,000 = 0 + 0 + 3,000
5,000 received in cash

New Equation 1,48,500 + 20,000 + 0 + 13,000 = 0 + 2,000 + 1,79,500

ES
Depreciation on furniture @
9. 0 - 2,000 + 0 + 0 = 0 + 0 - 2,000
10% on ₹ 20,000

New Equation 1,48,500 + 18,000 + 0 + 13,000 = 0 + 2,000 + 1,77,500

SS
29. No. Transaction Assets (₹) = Liabilities + Capital

(i) A commenced business with cash ₹ 50,000 50,000 = 0 + 50,000

(ii)

(iii)
Purchased goods for cash ₹ 20,000 and credit ₹ 30,000

New Equation

Sold Goods for cash ₹ 40,000 costing ₹ 30,000

LA 30,000 =

80,000 =

10,000 =
30,000

30,000

0
+

+
50,000

10,000
0
SC
New Equation 90,000 = 30,000 + 60,000

(iv) Rent Paid ₹ 500 (500) = 0 - (500)

New Equation 89,500 = 30,000 + 59,500

I

(v) Rent Outstanding ₹ 500 0 = 500 + (500)

YS

New Equation 89,500 = 30,500 + 59,000

(vi) Bought furniture for ₹ 5,000 on credit 5,000 = 5,000 + 0

AL

New Equation 94,500 = 35,500 + 59,000

(vii) Bought refrigerator for personal use for ₹ 5,000 (5,000) = 0 + (5,000)

New Equation 89,500 = 35,500 + 54,000

AN

(viii) Purchase building for cash ₹ 20,000 0 0 + 0

New Equation 89,500 = 35,500 + 54,000

30. Accounting Equation
=
Assets + Capital
Liabilities
S.No. Transaction +
+ =
Cash Prepaid Furniture Capital
Stock Creditors
Rent

+
(i) Started business with cash + 50,000
50,000

- 3,000
(ii) Paid rent ₹ 4,000 including ₹ 1,000 as advance - 4,000 + 1,000
(Expense)

(iii) New equation 46,000 + 1,000 + 47,000

8 / 37
 Purchased goods for cash ₹ 30,000 and on credit ₹ - + + 20,000
20,000 30,000 50,000

+
New equation 16,000 + 1,000 20,000 47,000
50,000
(iv)
+ - + 5,000
Sold goods (costing ₹ 20,000) for ₹ 25,000
25,000 20,000 (Profit)

+
New equation 41,000 1,000 20,000 + 52,000
30,000
(v)
Purchased furniture ₹ 10,000 for office use and ₹ 5,000 - 5,000
-15,000 + 10,000
for domestic use (Drawings)

+
New equation 26,000 + 1,000 + 10,000 20,000 + 47,000
30,000

ES
Goods cost ₹ 20,000 sold for ₹ 25,000, profit of ₹ 5,000 added to capital and 20,000 reduce from stock and 25,000 in cash.
31. The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities,
and owner's equity of a person or business. It is the foundation for the double-entry book keeping system. For each transaction, the
total debits equal the total credits.

S
Accounting equation

AS
Transaction Assets = Liabilties + Capital

Cash + Stock + Machinery = Creditors + Capital

(i)Started business with cash Rs 70,000 70,000 + 0 + 0 = 0 + 70,000

CL
New equation 70,000 + 0 + 0 = 0 + 70,000

(ii) Credit purchases of goods Rs 18,000 0 + 18,000 + 0 = 18,000 + 0

New equation 70,000 + 18,000 + 0 = 18,000 + 0

IS

(iii) Payment made to creditors in full settlement Rs 17,500 (17,500) + 0 + 0 = (18,000) + 500

New Equation 52,500 + 18,000 + 0 = 0 + 70,500

YS

(iv) Purchase of machinery for cash Rs 20,000 (20,000) + 0 + 20,000 = 0 + 0

Final equation 32,500 + 18,000 + 20,000 = 0 + 0

32. S.No. Transaction Assets (₹) = Liabilities (₹) + Capital (₹)

AL

i. Ganesh started business with cash 1,00,000 = 0 1,00,000

ii. Purchase goods in cash +50,000

-50,000
AN

New Equation 1,00,000 = 0 + 1,00,000

iii. Purchase furniture from M/s Sanjay Furnitures (Note 1) +20,000 = 20,000 + 0

New Equation 1,20,000 = 20,000 + 1,00,000

iv. Sold goods costing ₹ 25,000 -25,000

for ₹ 35,000 (Note 2) +35,000 = 0 + 10,000

New Equation 1,30,000 = 20,000 + 1,10,000

v. Paid to M/s Sanjay Furnitures -20,000 = -20,000 + 0

New Equation 1,10,000 = 0 + 1,10,000

Notes:
1. The transaction with M/s Sanjay Furnitures (₹ 20,000) is a credit transaction since it is not stated to be cash payment.
2. Sale of goods has resulted in a profit of ₹ 10,000. It has been added to capital because net profit at the year end is transferred to
Capital Account.

9 / 37
 Liabilities
S.No. Transaction Assets = Capital
33. +

=
Cash + Stock + Debtors
Creditors

(i) Started business with cash 2,00,000 2,00,000

(ii) Bought product for ₹ 60,000 cash and on ₹ 1,50,000 credit -60,000 +2,10,000 +1,50,000

New equation +1,40,000 2,10,000 1,50,000 2,00,000

Sold goods for ₹ 40,000 cash at 20% profit on ₹ 72,000 credit at +26,000
(iii) + 48,000 -1,12,000 +90,000
25% profit (Profit)

New equation +1,88,000 98,000 90,000 1,50,000 2,26,000

-5,000
(iv) Rent paid -5,000

ES
(Expenses)

+
New equation 98,000 90,000 1,50,000 2,21,000
1,83,000

SS
Working Note:
Calculating selling price of product sold
Cost of goods sold = 40,000
Add: 20% profit of ₹ 40,000 = 8,000
Hence, selling price for goods sold for cash = 48,000
Cost of goods sold = 72,000
Add: 20% profit of ₹ 72,000 = 18,000
LA
Hence, selling price for goods sold for credit = 90,000
SC
Total Profit = 8,000 + 18,000 = ₹ 26,000 (add in capital)
Total Cost of Goods Sold = 40,000 + 72,000 = ₹ 1,12,000 (reduced in stock)
Debtors value = ₹ 90,000
34. Ravi's A/c (Creditor)
I

Dr. Cr.
YS

Particulars Amount (₹) Particulars Amount (₹)

Record decrease in Creditors on this side- Record increase in Creditors on this side-
AL

ii. Returned goods to Ravi 5,000 i. Purchased goods on credit from Ravi 50,000

iii. Paid to Ravi 30,000 iv. Purchased goods on credit from Ravi 16,000

v. Paid to Ravi 20,000

AN

Total 55,000 Total 66,000

Balance 11,000

66,000 66,000
Working Note:
Decrease in liabilities will be debit and increase in liabilities will be credited. Here Ravi is a creditor (liability).
S,
Transactions Assets = Capital + Liabilities
35. No.
Cash Bank Stock Furniture Debtors Capital Creditors
+ + + + = +
(₹) (₹) (₹) (₹) (₹) (₹) (₹)

Gopal started business with Cash ₹

1. 25,000 + 25,000 + 0 + 0 + 0 = 50,000 + 0
25,000 and cheque of ₹ 25,000

2. Purchased goods on credit for ₹ 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

10 / 37
 3. Purchased goods for cash for ₹ 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 ₹ 500 -500 + 0 + 0 + 500 + 0 = 0 + 0

New Equation 23,500 + 25,000 + 5,000 + 500 + 0 = 50,000 + 4,000

Withdrew cash for personal use ₹ 700

5. 0 - 700 + 0 + 0 + 0 = -700 + 0
from Bank

New Equation 23,500 + 24,300 + 5,000 + 500 + 0 = 49,300 + 4,000

6. Paid rent ₹ 200 (Note 1) -200 + 0 + 0 + 0 + 0 = -200 + 0

New Equation 23,300 + 24,300 + 5,000 + 500 + 0 = 49,100 + 4,000

7. Received interest ₹ 100 (Note 2) 0 + 100 + 0 + 0 + 0 = 100 + 0

New Equation 23,300 + 24,400 + 5,000 + 500 + 0 = 49,200 + 4,000

ES
Sold goods costing ₹ 500 for ₹ 700 on
8. 0 + 0 - 500 + 0 + 700 = 200 + 0
credit (Note 3)

S
New Equation 23,300 + 24,400 + 4,500 + 500 + 700 = 49,400 + 4,000

9. Paid to Creditors ₹ 400 -400 + 0 + 0 + 0 + 0 = 0 - 400

AS
New Equation 22,900 + 24,400 + 4,500 + 500 + 700 = 49,400 + 3,600

10. Paid Petty Expenses ₹ 200 (Note 4) -200 + 0 + 0 + 0 + 0 = -200 + 0

New Equation
CL
22,700 + 24,400 + 4,500 + 500 + 700 = 49,200 + 3,600
Notes:
1. Rent paid will reduce cash by ₹ 200. Rent being an expense will reduce profit by ₹ 200. Thus, capital will be reduced by ₹ 200.
2. Interest received from Bank will increase Bank Balance. It being an income will increase profit by ₹ 100. Thus, capital will be
increased.
IS

3. Stock will be reduced by ₹ 500 and Debtors will be increased by ₹ 700. Capital will be increased by ₹ 200 (i.e., ₹ 700 - ₹ 500)
being profit.
4. As explained in Note 1.
YS

Assets Liabilities + Capital

S. Building
Transactions Security
AL

Bank and Stock Debtors Creditors

36. No. Cash (₹) + + + + = + Deposit + (₹)
(₹) Furniture (₹) (₹) (₹)
(₹)
(₹)

Sanjay started
AN

business with
(i) 1,50,000 = 1,50,000
cash ₹
1,50,000

Opened Bank
Account by
(ii) depositing ₹ (25,000) + 25,000 =
25,000 from
cash

New equation 1,25,000 + 25,000 = 1,50,000

Sold personal
car for ₹
50,000 and
(iii) + 50,000 = + 50,000
deposited
money in Bank
A/c

11 / 37
 New equation 1,25,000 + 75,000 = 2,00,000

Building and
Furniture
(iv) (1,00,000) + 1,00,000 =
purchased for
₹ 1,00,000

New equation 25,000 + 75,000 + 1,00,000 = 2,00,000

Purchased
goods from
(v) + 50,000 = 50,000
Laxman on
credit

New equation 25,000 + 75,000 + 1,00,000 + 50,000 = 50,000 + 2,00,000

Paid Cartage ₹ (500)

(vi) (500) -

ES
500 (Expense)

New equation 24,500 + 75,000 + 1,00,000 + 50,000 = 50,000 + 1,99,500

Sold to Sundar

S
on credit
3,000
(vii) goods costing - (6,000) + 9,000 = +

AS
(Profit)
₹ 6,000 for ₹
9,000

New equation 24,500 + 75,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 2,02,500

CL
Received rent
1,000
(viii) from tenants of 1,000 = +
(Income)
₹ 1,000

New equation 25,500 + 75,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 2,03,500

IS

Received
Security
YS

(ix) Deposits from 1,500 = + 1,500

tenants of ₹
1,500

New equation 27,000 + 75,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 1,500 + 2,03,500
AL

Purchased
(100)
(x) Stationery for (100) = -
(Expense)
Cash of ₹ 100
AN

New equation 26,900 + 75,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 1,500 + 2,03,400

Invested in
Shares (50,000)
(xi) - (50,000) = -
(personal) ₹ (Drawings)
50,000

New equation 26,900 + 25,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 1,500 + 1,53,400

Received
200
(xii) interest of ₹ 200 = +
(Income)
200 in Cash

New equation 27,100 + 25,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 1,500 + 1,53,600

Introduced
(xiii) fresh Capital 25,000 = + 25,000
of ₹ 25,000

12 / 37
 New equation 52,100 + 25,000 + 1,00,000 + 44,000 + 9,000 = 50,000 + 1,500 + 1,78,600

Goods of ₹
500 were (500)
(xiv) - (500) = -
destroyed by (Loss)
fire

Total 52,100 + 25,000 + 1,00,000 + 43,500 + 9,000 + 50,000 + 1,500 + 1,78,100

37. The accounting equation shows on a company's balance sheet whereby the total of all the company's assets equals the sum of the
company's liabilities and shareholders' equity. By applying accounting equation capital= Assets-Liabilities
Closing Capital = Assets - Liabilities
= 6,00,000 - 18,000
= Rs 5,82,000
Opening capital = Closing capital + Drawings - Profit - Additional Capital
= 5,82,000 + 36,000 - 60,000 - 60,000

ES
= Rs 4,98,000
38. Accounting Equation
S. No. Particular Assets = Capital + Liabilities

SS
Cash + Stock + Furniture

(i) Stated business 40,000 + 50,000 + 75,000 = 1,65,000

(ii) Depreciation on Furniture -7,500 = -7,500

(iii)
New equation

Good sold
40,000

+11,000
LA
+ 50,000

-10,000
+67,500 = 1,57,500

= +1,000

New equation 51,000 +40,000 +67,500 = 1,58,500

SC
S.
Transactions Assets = Liabilities + Capital
39. No.

Cash Prepaid Stock Creditors Outstanding

+ + = + + (₹)
I

(₹) Rent (₹) (₹) (₹) Salary (₹)

YS

Commenced business with cash ₹

(i) 60,000 60,000
60,000

(ii) Paid Rent in advance ₹ 500 (500) + 500

AL

New equation 59,500 + 500 = 60,000

Purchased goods for cash ₹ 30,000

(iii) (30,000) + + 50,000 20,000
and credit 20,000
AN

New equation 29,500 + 500 + 50,000 = 20,000 60,000

Sold goods for cash 30,000 costing ₹ 10,000

(iv) 30,000 - (20,000) +
20,000 (Profit)

New equation 59,500 500 + 30,000 = 20,000 70,000

Paid salary ₹ 500 and salary

(v) (500) = (600)
outstanding being ₹ 100

New equation 59,000 + 500 + 30,000 = 20,000 + 100 + 69,400

Bought motorcycle for personal use ₹

(vi) (5,000) + 500 + 30,000 = 20,000 + 100 - (5,000)
5,000.

New equation 54,000 + 500 + 30,000 = 20,000 + 100 + 64,400

Here,
Liabilities = ₹ 20,000 + ₹ 100 = 20,100

13 / 37
 Capital = ₹ 64,600
Balance sheet is prepared as follows:
BALANCE SHEET
Liabilities Amount (₹) Assets Amount (₹)

Capital 64,400 Cash 54,000

Creditors 20,000 Prepaid Rent 500

Salary Outstanding 100 Stock 30,000

84,500 84,500
40. Accounting equation
Transaction Assets = Liabilities + Capital

Cash + Furniture + Stock = Creditors + Capital

ES
(i) Kamlesh started business with cash 2,50,000 + 0 + 0 = 0 + 2,50,000

(ii) He Purchased furniture for cash (35,000) + 35,000 + 0 = 0 + 0

New equation 2,15,000 + 35,000 + 0 = 0 + 2,50,000

SS
(iii) He paid commission (2,000) + 0 + 0 = 0 + (2,000)

New Equation 2,13,000 + 35,000 + 0 = 0 + 2,48,000

(iv) He purchased goods on credit

New equation

(v) He sold goods (costing ₹ 20,000) for cash

0

2,13,000

26,000
LA + 0

+ 35,000

+ 0
+ 40,000

+ 40,000

(20,000)
= 40,000

= 40,000

= 0
+ 0

+ 2,48,000

+ 6,000
SC
Final equation 2,39,000 + 35,000 + 20,000 = 40,000 + 2,54,000
41. The total of all the assets of a business should be equal to the total of all its liabilities in the balance sheet. Assets = Liabilities +
Capital
Capital = Assets - Liabilities Capital = (Cash + Bank + Debtors + Plant and Machinery + Building + Furniture + Bills Receivable) -
I

(Creditors + Bills Payable)

YS

= Rs 50,000 + 95,000 + 36,000 + 1,60,000 + 4,00,000 + 48,000 +1,13,000) - Rs (44,000 + 47,000)

= Rs (9,02,000 - 91,000)
= Rs 8,11,000.
42. The accounting equation is considered to be the foundation of the double-entry accounting system. The total of all the assets of a
AL

business should be equal to the total of all its liabilities in the balance sheet. Based on this double-entry system, the accounting
equation ensures that the balance sheet remains “balanced,” and each entry made on the debit side should have a corresponding entry
(or coverage) on the credit side.
Accounting equation
AN

Transaction Assets = Liabilties + Capital

Cash + Stock + Debtors + Furniture = Creditors + Capital

(i) Started business with cash Rs 1,00,000 and

1,00,000 + 40,000 + 0 + 0 = 0 + 1,40,000
goods Rs 40,000

New equation 1,00,000 + 40,000 + 0 + 0 = 0 + 1,40,000

(ii) Bought goods or cash Rs 30,000 and on credit

(30,000) + 50,000 + 0 + 0 = 20,000 + 0
for Rs 20,000.

New equation 70,000 + 90,000 + 0 + 0 = 20,000 + 1,40,000

(iii)Goods costing Rs 48,000 sold at a profit of

32,000 + (48,000) + 32,000 + 0 = 0 + 16,000
33.33%. Half the payment received in cash.

New Equation 1,02,000 + 42,000 + 32,000 + 0 = 20,000 + 1,40,000

(iv) Purchased furniture for office use Rs 12,000 20,000 + 0 + 0 + 12,000 = 0 + (8,000)
and for household use of Sudhir Rs 8,000.

14 / 37
 Final equation 82,000 + 42,000 + 32,000 + 12,000 = 20,000 + 1,48,000
43. Based on the accounting equation Assets=Liabilities + Capital, closing capital can be found by the following formula:
Closing Capital= Assets - Liabilities
= 1,00,000 - 20,000
= 80,000
Profit = Closing Capital + Drawings - Opening Capital
= 80,000 - 60,000
= 20,000
44. ACCOUNTING EQUATION
= +
S.No. Transaction Assets
Liabilities Capital

+ + + = +
Cash
Stock Debtors Furniture Creditors Capital

ES
+ +
1. Started business with Cash ₹ 50,000 and goods ₹ 20,000 50,000 +0 +0 =0
20,000 70,000

(-) +

SS
2. Bought goods for Cash ₹ 15,000 and on credit for ₹ 10,000 +0 +0 = 10,000 +0
15,000 25,000

+ +
New Equation 35,000 +0 +0 = 10,000
45,000 70,000
3.

payment received in Cash

1
Goods Costing ₹ 24,000 sold at a profit of 33 %. Half the
3

LA + - +
16,000 24,000 16,000

+ +
+0 =0 + 8,000

+
New Equation 51,000 +0 = 10,000
SC
21,000 16,000 78,000
4.
Purchased furniture for office use ₹ 6,000 and for household use (-) (-)
+0 +0 + 6,000 =0
of Sham ₹ 4,000 10,000 4,000

+ + +
I

Final Equation 41,000 + 6,000 = 10,000

21,000 16,000 74,000
YS

1
Profit = ₹ 24,000 × 3
= ₹ 8,000
Selling price = ₹ 24,000 + 8,000 = ₹ 32,000
45. Case-(i)
AL

Totel Assets = ₹ 15,00,000

Closing Capital ⇒ ₹ 10,50,000
External Equities (Liabilities) ⇒ ?
Total Assets = External Equities(Liabilities) + Closing Capital
AN

15,00,000 = External Equities (Liabilities) + 10,50,000

External Equities(Liabilities) ⇒ 15,00,000 - 10,50,000
⇒ ₹ 4,50,000

Case-(ii)
Closing Capital = Opening Capital + Profit
= 3,00,000 + 1,50,000
= ₹ 4,50,000
Total Assets = External Equities (Liabilities) + Closing Capital
15,00,000 = External Equities (Liabilities) + 4,50,000
External Equities (Liabilities) = 15,00,000 - 4,50,000
= ₹ 10,50,000
Case (ii)
Opening Capital ₹ 3,00,000 Total Assets 15,00,000

Liabilities (Loan) ₹ 3,00,000

Profit ₹ 1,50,000

15 / 37
 Additional Capital ₹ 1,80,000

Drawings ₹ 90,000
Closing Capital = Opening Capital + Additional Capital - Drawings + Profit
⇒ 3,00,000 + 1,80,000 - 90,000 + 1,50,000

⇒ ₹ 5,40,000

Total Assets = Liabilities (External Equity) + Closing Capital

15,00,000 ⇒ Liabilities (External Equity) + 5,40,000
Liabilities (External Equity) ⇒ 15,00,000 - 5,40,000
⇒ ₹ 9,60,000

S.
Assets = Liabilities + Capital
46. No.
Motor
Cash Bank Stock Furniture Creditors Outstanding
Transactions + + + + Cycle = + + (₹)
(₹) (₹) (₹) (₹) (₹) Rent (₹)

ES
(₹)

Commenced
business with
(i) 50,000 = 50,000

S
Cash ₹
50,000

AS
Paid in to
(ii) bank ₹ - (10,000) + 10,000
10,000
CL
New
40,000 + 10,000 = + 50,000
equation

Purchased
goods for
IS

(iii) cash ₹ 20,000 - (20,000) + + 20,000

costing ₹
30,000
YS

+ 30,000 = 30,000

New
20,000 + 10,000 + 50,000 = 30,000 50,000
equation
AL

Sold goods
for cash ₹
10,000
(iv) 40,000 + 40,000 - (30,000) = +
(profit)
AN

Costing ₹
30,000

New
60,000 + 10,000 + 20,000 = 30,000 60,000
equation

Rent paid ₹ (500)

(v) - (500) -
500 (Expenses)

New
59,500 + 10,000 + 20,000 = 30,000 + 59,500
equation

Rent
(100)
(vi) outstanding ₹ + 100 -
(Drawings)
100

New
59,500 10,000 20,000 = 30,000 + 100 + 59,400
equation

(vii) Bought 5,000 = 5,000

16 / 37
 Furniture on
credit ₹ 5,000

New
54,500 + 10,000 + 20,000 + 5,000 = 35,000 + 100 + 59,400
equation

Bought
refrigerator (5,000)
(viii) - (5,000) -
for personal (Drawings)
use ₹ 5,000

New
54,500 + 10,000 + 20,000 + 5,000 = 35,000 + 100 + 54,400
equation

Purchased
(ix) motorcycle - (20,000) + 20,000 =
for cash

ES
Total 34,500 + 10,000 + 20,000 + 5,000 + 20,000 = 35,000 + 100 + 54,400
Balance sheet is prepared as follows:
BALANCE SHEET

SS
Liabilities Amount (₹) Assets Amount (₹)

Capital 54,400 Cash 34,500

Creditors

Rent Outstanding LA
35,000 Bank

100 Stock

Furniture
10,000

20,000

5,000
SC
Motor Cycle 20,000

89,500 89,500

Assets Liabilities
I

= Creditor+
47. No. Particulars Cash Stock Debtor Furniture
YS

Capital

(i) Started business with cash Rs 1,75,000 1,75,000 +0 +0 - = 0 + 1,75,000

(ii) Purchased goods from Rohit Rs 50,000 0 + 50,000 +0 0 = 50,000 + 0

AL

= 50,000 +
New Equation 1,75,000 + 50,000 +0 0
1,75,000

Sold goods on credit to Manish (costing Rs 17,500) for Rs +

(iii) 0 + 20,000 0 = 0 + 2,500
AN

20,000 (17,500)

= 50,000 +
New Equation 1,75,000 + 32,500 + 20,000 0
1,77,500

(iv) Purchased furniture for office use of Rs 10,000 (10,000) +0 +0 + 10,000 = 0 + 0

= 50,000 +
New Equation 1,65,000 + 32,500 + 20,000 + 10,000
1,77,500

(v) Cash paid to Rohit in full settlement of rs 48000 (48,000) +0 +0 +0 = (50,000) + 2,000

New Equation 1,17,000 + 32,500 + 20,000 + 10,000 = 0 + 1,79,500

+
(vi) Cash received from Manish RS 20000 20,000 +0 +0 = 0 + 1,79,500
(20,000)

New Equation 1,37,000 + 32,500 +0 + 10,000 = 1,79,500

48. S. No. Transactions Assets = Liabilities + Capital

Cash (₹) + Stock (₹) + Furniture (₹) = Creditors (₹) (₹)

17 / 37
 (i) Manoj commenced business with cash 50,000 = 50,000

(ii) Purchased goods for cash (30,000) + 30,000 = 50,000

New equation 20,000 + 30,000 = 50,000

(iii) Purchased goods on credit + 20,000 = 20,000

New equation 20,000 + 50,000 = 20,000 + 50,000

2,000
(iv) Sold goods costing ₹ 10,000 12,000 - (10,000) = +
(Profit)

New equation 32,000 + 40,000 = 20,000 + 52,000

(v) Bought furniture on credit + 2,000 = 2,000

New equation 32,000 + 40,000 + 2,000 = 22,000 + 52,000

ES
(vi) Paid cash to a creditor (15,000) = (15,000)

New equation 17,000 + 40,000 + 2,000 = 7,000 + 52,000

(1,000)
(vii) Salary Paid (1,000) -

S
(Expenses)

AS
New equation 16,000 + 40,000 + 2,000 = 7,000 + 51,000
49. The accounting equation is considered to be the foundation of the double-entry accounting system. The total of all the assets of a
business should be equal to the total of all its liabilities in the balance sheet. Based on this double-entry system, the accounting
equation ensures that the balance sheet remains “balanced,” and each entry made on the debit side should have a corresponding entry
CL
(or coverage) on the credit side.
Accounting equation
S.No. Transaction Assets = Liabilities + Capital

Cash + Stock + Debtors = Creditors + Capital

IS

(a) Started business with Cash 1,00,000 +0 +0 =0 + 1,00,000

Purchased goods for Cash ₹20,000 and on Credit ₹30,000 (-) 20,000 + 50,000 +0 = 30,000 +0
YS

(c) New Equation 80,000 + 50,000 +0 = 30,000 + 1,00,000

Sold goods for Cash costing ₹10,000 and

(+) 12,000 (-) 25,000 + 18,000 =0 + 5,000
on Credit costing ₹15,000 both at a profit of 20%
AL

Final Equation 92,000 + 25,000 + 18,000 = 30,000 + 1,05,000

Working notes
i. Goods costing ₹ 10,000 sold at a profit of 20 %
AN

Profit = 10, 000 × = 2,000, Sale Price 10,000 + 2,000 = 12,000

20

100

ii. Goods costing ₹ 15,000 sold at a profit of 20 %

20
Profit = 15, 000 × 100
= 3,000, Sale Price 15,000 + 3,000 = 18,000
iii. Profit on sale ₹ 2,000 + ₹ 3,000 = ₹ 5,000 is added to capital.
50. Opening Capital + Additional capital + Profit for the year - Drawings for the year = Closing capital
Closing Capital = Closing Assets - Closing External Liabilities = ₹ 2,00,000 - ₹ 6,000 = ₹ 1,94,000
Opening Capital = Closing Capital + Drawings - Additional Capital - Profits
= ₹ 1,94,000 + ₹ 12,000 - ₹ 20,000 - ₹ 20,000
= ₹ 1,66,000
51. Accounting Equation
Assets = Liabilities + Capital
S.No. Transaction
Cash + Stock + Debtors + Furniture = Creditors

(i) Started business with cash + 70,000 + 70,000

(ii) Purchased goods on credit +14,000 + 14,000

18 / 37
 (iii) New equation 70,000 + 14,000 = 14,000 + 70,000

Withdrew for private use - 1,700 - 1,700 (Drawings)

New equation 68,300 + 14,000 =14,000 68,300

(iv)
Purchased goods for cash - 10,000 + 10,000

New equation 58,300 + 24,000 = 14,000 + 68,300

(v)
Wages paid - 300 - 300 (Expense)

New equation 58,000 + 24,000 = 14,000 + 68,000

(vi)
Paid to creditors - 10,000 - 10,000

New equation 48,000 + 24,000 = 4,000 + 68,000

(vii)
Sold goods on credit at par - 15,000 + 15,000

ES
New equation 48,000 + 9,000 + 15,000 = 4,000 + 68,000
(viii)
Sold goods (costing ₹3,000) for ₹4,000 + 4,000 - 3,000 + 1,000 (Profit)

New equation 52,000 + 6,000 + 15,000 = 4,000 + 69,000

S
(ix)
Furniture purchased - 500 + 500

AS
51,500 + 6,000 + 15,000 + 500 = 4,000 + 69,000
Balance Sheet
as on ...
CL
Liabilities Amount (₹) Assets Amount (₹)

Creditors 4,000 Cash 51,500

Capital 69,000 Stock 6,000

Debtors 15,000
IS

Furniture 500

73,000 73,000
YS

Assets (Rs)
No. Transaction = Liabilities (Rs) + Capital (Rs)
52. Cash+Building+Stock+Furniture
AL

(i) Started with cash,building 40,000+90,000+0+0 + 1.30,000

New equation 1,30,000 1,30,000

(ii) Purchase goods for cash - 15,000+0+15000+0

AN

New equation 1,30,000 1,30,000

(ii) Purchases goods on credit 0+0+20,000+0 = (+) 20,000

New equation 1,50,000 = 20,000 1,30,000

(iii) Sold Goods + 50,000+0- 20,000+0 (+ 30,000)

New equation 1,80,000 = 20,000 1,60,000

(iv) Bought office furniture - 10,000+0+0+10,000

New equation 1,80,000 = 20,000 1,60,000

53. The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet. The equation is as follows:
Assets = Liabilities + Shareholder’s Equity
This equation sets the foundation of double-entry accounting and highlights the structure of the balance sheet. Double-entry
accounting is a system where every transaction affects both sides of the accounting equation. For every change to an asset account,
there must be an equal change to a related liability or shareholder’s equity account.
Accounting equation

19 / 37
 Transaction Assets = Liabilities + Capital

Cash + Machinery + Stock = Creditors + Unassured Income + Capital

(i) Commenced business with cash 1,50,000 + 0 + 0 = 0 + 0 + 1,50,000

New equation 1,50,000 + 0 + 0 = 0 + 0 + 1,50,000

(ii) Purchased machiinery on credit 0 + 40,000 + 0 = 40,000 + 0 + 0

New equation 1,50,000 + 40,000 + 0 = 40,000 + 0 + 1,50,000

(iii) Purchased goods for cash (20,000) + 0 + 20,000 = 0 + 0 + 0

New Equation 1,30,000 + 40,000 + 20,000 = 40,000 + 0 + 1,50,000

(iv) Purchased Car for personal Use (80,000) + 0 + 0 = 0 + 0 + (80,000)

New equation 50,000 + 40,000 + 20,000 = 40,000 + 0 + 70,000

ES
(v) Paid to creditors in full settlement (38,000) + 0 + 0 = (40,000) + 0 + 2,000

New equation 12,000 + 40,000 + 20,000 = 0 + 0 + 72,000

(vi) Sold goods for cash costing ₹ 5,000 4,500 + 0 + (5,000) = 0 + 0 + (500)

S
New equation 16,500 + 40,000 + 15,000 = 0 + 0 + 71,500

AS
(vii) Paid rent (1,000) + 0 + 0 = 0 + 0 + (1,000)

New equation 15,500 + 40,000 + 15,000 = 0 + 0 + 70,500

(viii) Commission Received in advance 2,000 + 0 + 0 = 0 + 2,000 + 0

CL
Final equation 17,500 + 40,000 + 15,000 = 0 + 2,000 + 70,500
54. Accounting Equation
S.No. Transaction Assets = Liabilities + Capital
IS

Cash + Furniture +Stock = Creditors

(i) Manav began his company with cash +50,000 +50,000

YS

(ii) Bought furniture -500 + 500

New equation 49,500 500 50,000

(iii) Bought goods on credit + 4,000 + 4,000

AL

New equation 49,500 500 4,000 4,000 50,000

(iv) Sold goods on cash (cost ₹ 500) for +700 -500 (+200 profit)

New equation 50,200 500 3,500 4,000 50,200

AN

(v) Received rent +200 (+200 Income)

New equation 50,400 500 3,500 4,000 50,400

(vi) Bought goods for cash -1,000 +1,000

New equation 49,400 500 4,500 4,000 50,400

(vii) Withdrew for personal use -700 -700(withdrew)

New equation 48,700 500 4,500 4,000 49,700

(viii) Paid to creditors -400 -400

New equation 48,300 500 4,500 3,600 49,700

(ix) Salaries paid -200 -200

New equation 48,100 500 4,500 3,600 49,500

Balance Sheet
Liabilities Amount (₹) Assets Amount (₹)

20 / 37
 Creditors 3,600 Cash 48,100

Capital 49,500 Furniture 500

Stock 4,500

TOTAL 53,100 TOTAL 53,100

All the expenses are reduced from the capital and all the incomes are added to capital.
55. The fundamental accounting equation seeks to explain the relationship between the assets constituting a business and the funds that
have been used to finance their purchase. Also known as the balance sheet equation, it forms the basis of double entry system of
bookkeeping.As per the Fundamental Accounting Equation,
Assets = Liabilities + Owners Equity (Capital)
Assets = Liabilities + Capital

Sl.No. Particulars Cash +Purchase +Debtors = Creditors + Capital

ES
1. Raghu started a business with cash 4,50,000 +0 +0 = 0 + 4,50,000

Bought goods for cash Rs 2,40,000 and on credit for Rs

2. (2,40,000) +3,60,000 +0 = 1,20,000 + 0
1,20,000.

S
New Equation 2,10,000 +3,60,000 +0 = 1,20,000 + 4,50,000

Goods costing Rs 2,25,000 sold at a profit of 33 1/3%. Half +

AS
3. 1,50,000 +1,50,000 = 0 + 75,000
the payment received in cash. (2,25,000)

New Equation 3,60,000 +1,35,000 +1,50,000 = 1,20,000 + 5,25,000

4. Goods costing Rs 30,000 sold for Rs 36,000 on credit. 0 +(30,000) +36,000 = 0 + 6,000
CL
New Equation 3,60,000 +1,05,000 +1,86,000 = 1,20,000 + 5,31,000

5. Paid for rent Rs 6,000 and for salaries Rs 12,000. (18,000) +0 +0 = 0 + (18,000)

New Equation 3,42,000 +1,05,000 +1,86,000 = 1,20,000 + 5,13,000

IS

6. Goods costing Rs 60,000 sold for Rs 55,500 for cash. 55,500 +(60,000) +0 = 0 + (4,500)

New Equation 3,97,500 +45,000 +1,86,000 = 1,20,000 + 5,08,500

YS

56. Accounting equation

S. No. Transaction Assets = Liabilities + Capital

Cash + Shares + Stock + Bank = Creditors + Capital

AL

(a) Started business with Cash ₹ 1,20,000 1,20,000 +0 +0 +0 =0 + 1,20,000

(b) Rent received ₹ 10,000 + 10,000 +0 +0 +0 =0 + 10,000

New Equation 1,30,000 +0 +0 +0 =0 + 1,30,000

AN

(c)
Invested in shares ₹ 50,000 (-) 50,000 + 50,000 + 0 +0 =0 +0

New Equation 80,000 + 50,000 + 0 +0 =0 + 1,30,000

(d)
Received Dividend ₹ 5,000 (+) 5,000 +0 +0 +0 =0 + 5,000

New Equation 85,000 + 50,000 + 0 +0 =0 + 1,35,000

(e)
Purchased goods on credit ₹ 35,000 0 +0 + 35,000 +0 = 35,000 +0

New Equation 85,000 + 50,000 + 35,000 +0 = 35,000 + 1,35,000

(f)
Paid cash for household expenses ₹ 7,000 (-) 7,000 +0 +0 +0 =0 (-) 7,000

New Equation 78,000 + 50,000 + 35,000 +0 =0 + 1,28,000

(g)
Sold goods for cash (Costing ₹ 10,000) for ₹ 14,000 (+) 14,000 + 0 (-) 10,000 + 0 =0 + 4,000

New Equation 92,000 + 50,000 + 25,000 +0 = 35,000 + 1,32,000

(h)
Cash paid to Mehak ₹ 35,000 (-) 35,000 + 0 +0 +0 = (-) 35,000 +0

21 / 37
 (i) New Equation 57,000 + 50,000 + 25,000 +0 =0 + 1,32,000

Deposited into bank ₹ 20,000 (-) 20,000 + 0 +0 + 20,000 = 0 +0

Final Equation 37,000 + 50,000 + 25,000 + 20,000 = 0 + 1,32,000

57. Accounting equation (Assets = liabilities + owners' equity) describes that the total value of assets of a business is always equal to its
liabilities plus owner’s equity. This equation is the foundation of modern double entry system of accounting being used by small
proprietors to large multinational corporations. Other names used for accounting equation are balance sheet equation and fundamental
or basic accounting equation.
S.no. Particulars Assets = Liabilities + Capital

Cash +Stock Debtors Furniture = Creditors + Capital

1 Kartik started a business with cash 1,40,000 +0 +0 +0 = 0 + 1,40,000

2 Purchased goods on Credit 0 +28,000 +0 +0 = 28,000 + 0

ES
New Equation 1,40,000 +28,000 +0 +0 = 28,000 + 1,40,000

3 Withdrew for private use (3,400) +0 +0 +0 = 0 (3,400)

New Equation 1,36,600 +28,000 +0 +0 = 28,000 + 1,36,600

SS
4 Goods purchased for cash (20,000) +20,000 +0 +0 = 0 + 0

New Equation 1,16,600 +48,000 +0 +0 = 28,000 + 1,36,600

6
Paid wages

New Equation

Paid to creditors
LA
(600)

1,16,000 +48,000

(20,000)
+0

+0
+0

+0

+0
+0

+0

+0
=

=
0

28,000

(20,000)
+ (600)

+ 1,36,000

+ 0
SC
New Equation 96,000 +48,000 +0 +0 = 8,000 + 1,36,000

7 Sold goods on credit 0 (30,000) +30,000 +0 = 0 + 0

New Equation 96,000 +18,000 +30,000 +0 = 8,000 + 1,36,000

8 Sold goods for cash Rs 8,000(cost price was Rs 6,000) 8,000 (6,000) +0 +0 = 0 + 2,000
I
YS

New Equation 1,04,000 +12,000 +30,000 +0 = 8,000 + 1,38,000

9 Purchased furniture (1,000) +0 +0 +1,000 = 0 + 0

New Equation 1,03,000 +12,000 +30,000 +1,000 = 8,000 + 1,38,000

AL

= +
S.No. Transaction Assets
58. Liabilities Capital

+ + = + Outstanding +
Cash + Stock
AN

Building Debtors Creditors exp. Capital

Started business with Cash, goods and + + +

(1) +2,30,000 =0
building 1,00,000 2,00,000 5,30,000

+
(2) Purchased goods for Cash - 50,000 +0 +0
50,000

+ + +
New Equation 1,80,000
1,50,000 2,00,000 5,30,000
(3)
+
Sold goods costing ₹20,000 for ₹35,000 + 35,000 - 20,000 + 0
15,000

+ +
New Equation 2,15,000 5,45,000
1,30,000 2,00,000
(4)
+
Purchased goods from Rohit 0 +0 = +55,000 +0
55,000

22 / 37
 (5) New Equation 2,15,000 + + = 55,000 +
1,85,000 2,00,000 5,45,000

Sold goods to Vishal costing ₹52,000 for +

0 - 52,000 + 0 =0 + 8,000
₹60,000 60,000

+ + + +
New Equation 2,15,000 = 55,000
(6) 1,33,000 2,00,000 60,000 5,53,000

Paid cash to Ravi in full settlement ₹53,000 - 53,000 +0 +0 +0 = - 55,000 + 2,000

+ + + +
New Equation 1,62,000 =0
(7) 1,33,000 2,00,000 60,000 5,55,000

Salary paid - 20,000 +0 +0 +0 =0 - 20,000

+ + + +
New Equation 1,42,000 =0
1,33,000 2,00,000 60,000 5,35,000

ES
(8)
Received cash from Vishal in full -
+ 59,000 +0 +0 =0 - 1,000
settlement ₹59,000 60,000

+ +

SS
New Equation 2,01,000 +0 =0 5,34,000
(9) 1,33,000 2,00,000

Rent Outstanding 0 +0 +0 +0 =0 + 3,000 - 3,000

(10)
New Equation

Commission received
2,01,000

+ 13,000
LA
+

+0
+
1,33,000 2,00,000

+0
+0

+0
=0

=0
+ 3,000

+0
+
5,31,000

+
13,000
SC
+ + +
New Equation 2,14,000 +0 =0 + 3,000
(11) 1,33,000 2,00,000 5,44,000

Withdrawn for personal use - 20,000 +0 +0 +0 =0 +0 - 20,000

I

+ + +
New Equation 1,94,000 +0 =0 + 3,000
YS

(12) 1,33,000 2,00,000 5,24,000

Depreciation on Building 0 +0 - 10,000 + 0 =0 +0 - 10,000

+ + +
Final Equation 1,94,000 +0 =0 + 3,000
AL

1,33,000 1,90,000 5,14,000

All expenses are reduced from capital in accounting equations and in same way income is added in capital in accounting equations.
Similarly drawing is reduced from capital in accounting equations.
59. The accounting equation is considered to be the foundation of the double-entry accounting system. The total of all the assets of a
AN

business should be equal to the total of all its liabilities in the balance sheet. Based on this double-entry system, the accounting
equation ensures that the balance sheet remains “balanced,” and each entry made on the debit side should have a corresponding entry
(or coverage) on the credit side.
Accounting equation
Transaction Assets = Liabilities + Capital

Prepaid Outstanding
Cash + Stock + = Creditors + + Capital
Expenses Expenses

(i)Started with cash Rs 3,00,000 3,00,000 + 0 + 0 = 0 + 0 + 3,00,000

New equation 3,00,000 + 0 + 0 = 0 + 0 + 3,00,000

(ii)Paid rent in advance Rs 9,000 (9,000) + 0 + 9,000 = 0 + 0 + 0

New equation 2,91,000 + 0 + 9,000 = 0 + 0 + 3,00,000

(iii) Purchased goods for cash Rs 1,50,000

(1,50,000) + 2,10,000 + 0 = 60,000 + 0 + 0
and credit Rs 6,000

23 / 37
 New Equation 1,41,000 + 2,10,000 + 9,000 = 60,000 + 0 + 3,00,000

(iv) Sold goods for cashg Rs 2,40,000

2,40,000 + (1,20,000) + 0 = 0 + 0 + 1,20,000
costing Rs 1,20,000

New equation 3,81,000 + 90,000 + 9,000 = 60,000 + 0 + 4,20,000

(v) Paid salary in cash Rs 13,500 and

(13,500) + 0 + 0 = 0 + 3,000 + (16,500)
salary outstanding Rs 3,000

New equation 3,67,500 + 90,000 + 9,000 = 60,000 + 3,000 + 4,03,500

(vi) Bought motor cycle for personal use

(90,000) + 0 + 0 = 0 + 0 + (90,000)
Rs 90,000
Final equation 2,77,500 + 90,000 + 90,000 = 60,000 + 3,000 + 3,13,500
60. Accounting Equation:

ES
S.No Particulars Assets = Liabilities + Capital

Cash +Stock +Debtors +Furniture = Creditors + Capital

Started business with Capital 3,60,000 +0 +0 +0 = 0 + 3,60,000

SS
1 Timber Purchased (1,20,000) +1,20,000 +0 +0 = 0 + 0

New Equation 2,40,000 +1,20,000 +0 +0 = 0 + 3,60,000

3
wages paid to carpenters

New Equation

Furniture sold for ₹ 1,50,000 Costing ₹ 1,20,000

LA
(90,000)

1,50,000
+0

1,50,000 +1,20,000

+0
+0

+0

+0
+0

+0

+0
=

=
0

0
+ (90,000)

+ 2,70,000

+ 1,50,000
in Cash
SC
New Equation 3,00,000 +1,20,000 +0 +0 = 0 + 4,20,000

Furniture sold on credit for ₹ 30,000 Costing ₹

4 0 +0 +30,000 +0 = 0 + 30,000
27,000
I

New Equation 3,00,000 +1,20,000 +30,000 +0 = 0 + 4,50,000

YS

Amount received from debtors ₹ 29,700 &

5 29,700 +0 (30,000) +0 = 0 + (300)
discount allowed ₹ 300

New Equation 3,29,700 +1,20,000 +0 +0 = 0 + 4,49,700

AL

6 Timber purchased on Credit 0 +18,000 +0 +0 = 18,000 + 0

New Equation 3,29,700 +1,38,000 +0 +0 = 18,000 + 4,49,700

7 Furniture purchased (15,000) 0 +0 +15,000 = 0 + 0

AN

New Equation 3,14,700 +1,38,000 +0 +15,000 = 18,000 + 4,49,700

Amount paid to creditors ₹ 17,850 in full

8 (17,850) 0 +0 0 = (18,000) + 150
settlement

New Equation 2,96,850 +1,38,000 +0 +15,000 = 0 + 4,49,850

Amount withdrawn by Varun & Tarun (6,000 +

9 (9,000) +0 +0 +0 = 0 + (9,000)
3,000)

New Equation 2,87,850 +1,38,000 +0 +15,000 = 0 + 4,40,850

61. ACCOUNTING EQUATION
No. Transaction Assets (₹) = Liabilities (₹) + Capital (₹)

1. Mohan started the business with Cash ₹ 50,000 50,000 = 0 + 50,000

2. Purchases goods on credit for ₹ 4,000 4,000 = 4,000 + 0

New Equation 54,000 = 4,000 + 50,000

24 / 37
 3. Purchases goods for cash ₹ 1,000 -1,000 = 0 + 0

+1,000 = 0 + 0

New Equation 54,000 = 4,000 + 50,000

4. Purchases furniture for ₹ 500 -500 = 0 + 0

+500 = 0 + 0

New Equation 54,000 = 4,000 + 50,000

5. Paid Rent ₹ 200 -200 = 0 - 200

New Equation 53,800 = 4,000 + 49,800

6. Withdrew for personal use ₹ 700 -700 = 0 - 700

New Equation 53,100 = 4,000 + 49,100

ES
7. Received interest ₹ 100 100 = 0 + 100

New Equation 53,200 = 4,000 + 49,200

8. Sold goods on credit for ₹ 700 costing ₹ 500 +700 = 0 + 0

SS
-500 = 0 + 200

New Equation 53,400 = 4,000 + 49,400

9.

10.
Paid to creditors ₹ 400

New Equation

Paid for salaries ₹ 200

LA -400

53,000

-200
=

=
-400

3,600

0
+

-
49,400
0

200
SC
New Equation 52,800 = 3,600 + 49,200
62. Accounting equation
Transaction Assets = Liabilities + Capital

Cash + Stock + Debtors + Furniture = Creditors + Capital

I
YS

(i) Business started with cash 1,75,000 + 0 + 0 + 0 = 0 + 1,75,000

(ii) Purchased goods from Rahul 0 + 50,000 + 0 + 0 = 50,000 + 0

New equation 1,75,000 + 50,000 + 0 + 0 = 50,000 + 1,75,000

AL

(iii) Sales goods on credit to Mahi(costing ₹ 17,500) 0 - 17,500 + 20,000 + 0 = 0 + 2,500

New Equation 1,75,000 + 32,500 + 20,000 + 0 = 50,000 + 1,77,500

(iv) Purchased furniture for office use (10,000) + 0 + 0 + 10,000 = 0 + 0

AN

New equation 1,65,000 + 32,500 + 20,000 + 10,000 = 50,000 + 1,77,500

(v) Cash paid to Rahul in full settlement (48,500) + 0 0 + 0 = (50,000) + 1,500

New equation 1,16,500 + 32,500 + 20,000 + 10,000 = 0 + 1,79,000

(vi) Cash received from Mahi 20,000 + 0 (20,000) + 0 = 0 + 0

New equation 1,36,500 + 32,500 Nil + 10,000 = 0 + 1,79,000

(vii) Rent paid (1,000) + 0 0 + 0 = 0 + (1,000)

New equation 1,35,500 + 32,500 Nil + 10,000 = 0 + 1,78,000

(vii) Cash withdrew for personal use (3,000) + 0 0 + 0 = 0 + (3,000)

Final equation 1,32,500 + 32,500 Nil + 10,000 = 0 + 1,75,000

63. The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet. The equation is as follows:
Assets = Liabilities + Shareholder’s Equity
This equation sets the foundation of double-entry accounting and highlights the structure of the balance sheet. Double-entry

25 / 37
accounting is a system where every transaction affects both sides of the accounting equation. For every change to an asset account,
there must be an equal change to a related liability or shareholder’s equity account. The balance sheet is broken down into three major
sections and its various underlying items: Assets, Liabilities, and Shareholder’s Equity.
Accounting equation
Assets = Liabilities + Capital
Transaction Outstanding Unaccrued
Cash + Stock + Building + Debtors = Creditors + + + Capital
Expenses Income

(i) Uditi Started

business with 5,00,000 + 1,00,000 + 0 + 0 = 0 + 0 + 0 + 6,00,000
cash

New equation 5,00,000 + 1,00,000 0 + 0 = 0 + 0 + 0 + 6,00,000

(ii) Purchased
(2,00,000) + 0 + 2,00,000 + 0 = 0 + 0 + 0 + 0

ES
building for cash

New equation 3,00,000 + 1,00,000 + 2,00,000 + 0 = 0 + 0 + 0 + 6,00,000

(iii) Purchased

SS
goods from 0 + 50,000 0 + 0 = 50,000 + 0 + 0 + 0
Himani

New Equation 3,00,000 + 1,50,000 + 2,00,000 + 0 = 50,000 + 0 + 0 + 6,00,000

(iv) Sold goods

to Ashu(cost ₹
25,000)
0 + (25,000) + 0 LA
+ 36,000 = 0 + 0 + 0 + 11,000
SC
New equation 3,00,000 + 1,25,000 + 2,00,000 + 36,000 = 50,000 + 0 + 0 + 6,11,000

(v) Paid
insurance (3,000) + 0 + 0 + 0 = 0 + 0 + 0 + (3,000)
Premium
I

New equation 2,97,000 + 1,25,000 + 2,00,000 + 36,000 = 50,000 + 0 + 0 + 6,08,000

YS

(vi) Rent
0 + 0 + 0 + 0 = 0 + 5,000 + 0 + (5,000)
Outstanding

New equation 2,97,000 + 1,25,000 + 2,00,000 + 36,000 = 50,000 + 5,000 + 0 + 6,03,000

AL

(vii)
Depreciation on 0 + 0 + (8,000) + 0 = 0 + 0 + 0 + (8,000)
Building
AN

New equation 2,97,000 + 1,25,000 + 1,92,000 + 36,000 = 50,000 + 5,000 + 0 + 6,03,000

(viii) Cash
withdrawn for (20,000) + 0 + 0 + 0 = 0 + 0 + 0 + (20,000)
personal use

New equation 2,77,000 + 1,25,000 + 1,92,000 + 36,000 = 50,000 + 5,000 + 0 + 5,75,000

(ix) Rent
received in 5,000 + 0 + 0 + 0 = 0 + 0 + 5,000 + 0
advance

New equation 2,82,000 + 1,25,000 + 1,92,000 + 36,000 = 50,000 + 5,000 + 5,000 + 5,75,000

(x) Cash paid to

Himani on (20,000) + 0 + 0 + 0 = (20,000) + 0 + 0 + 0
account

New equation 2,62,000 + 1,25,000 + 1,92,000 + 36,000 = 30,000 + 5,000 + 5,000 + 5,75,000

26 / 37
 (xi) Cash 30,000 + 0 + 0 + (30,000) = 0 + 0 + 0 + 0
received from
Ashu

Final equation 2,92,000 + 1,25,000 1,92,000 + 6,000 = 30,000 + 5,000 + 5,000 + 5,75,000

Nature of Effect on
S.No. Transactions Accounts Involved Debit ₹ Credit ₹
64. Account Account

Sahdev started business with Cash ₹5,00,000 Cash, Capital Asset Increase 5,00,000
i.
Capital Increase 5,00,000

Purchased goods for Cash ₹20,000 Purchases, Cash Expense Increase 20,000
ii.
Asset Decrease 20,000

Purchased goods from Raghubir on credit for

Purchases, Raghubir Expense Increase 25,000

ES
iii. ₹25,000

Liability Increase 25,000

Purchased furniture from Fancy Furniture House Furniture, Fancy

Asset Increase 1,50,000

SS
iv. for ₹1,50,000 on credit Furniture House

Liability Increase 1,50,000

Sold goods for cash ₹30,000 Cash, Sales Asset Increase 30,000
v.

vi.
Sold goods to Yuvraj on credit ₹50,000
LA
Yuvraj, Sales
Revenue

Asset
Increase

Increase 50,000
30,000

Revenue Increase 50,000

SC
Cash paid to Raghubir ₹20,000 Raghubir, Cash Liability Decrease 20,000
vii.
Asset Decrease 20,000

Cash received from Yuvraj ₹15,000 Cash, Yuvraj Asset Increase 15,000
I

viii.
Asset Decrease 15,000
YS

Paid rent ₹10,000 Rent, Cash Expense Increase 10,000

ix.
Asset Decrease 10,000
AL

All expenses will lead to a decrease in capital and incomes will lead to an increase in capital. Purchase and sales deal with the stock of
the business.
65. Accounting Equation
=
S.No. Transaction Assets + Capital
AN

Liabilities

+ + =
Cash Stock + Capital
Furniture+ Debtors Creditors

+
(a) Business started with cash ₹ 1,25,000 1,25,000 +0 +0 +0 =0
1,25,000

(-)
(b) Purchased goods for cash ₹ 50,000 + 50,000 +0 +0 =0 +0
50,000

+
New equation 75,000 + 50,000 +0 +0 =0
(c) 1,25,000
Purchase furniture from R.K. furniture ₹ 10,000 0 +0 + 10,000 +0 = 10,000 +0

(d) +
New Equation 75,000 + 50,000 + 10,000 +0 = 10,000
1,25,000

Sold goods to Priya traders (costing ₹ 7,000 for ₹ 0 (-) 7,000 +0 + 9,000 =0 + 2,000

27 / 37
 9,000

+
New Equation 75,000 + 43,000 + 10,000 + 9,000 = 10,000
(e) 1,27,000
Paid Cartage ₹ 100 (-) 100 +0 +0 +0 =0 (-) 100

+
New Equation 74,900 + 43,000 + 10,000 + 9,000 = 10,000
1,26,900
(f)
Cash paid to R.K. furniture in full settlement ₹
(-) 9,700 +0 +0 +0 = (-) 10,000 + 300
9,700

+
New Equation 65,200 + 43,000 + 10,000 + 9,000 =0
1,27,200
(g)
(+) (-)
Cash sales (costing ₹ 10,000) for ₹ 12,000 +0 +0 =0 + 2,000
12,000 10,000

ES
+
New Equation 77,200 + 33,000 + 10,000 + 9,000 =0
(h) 1,29,200

Rent Received ₹ 4,000 4,000 +0 +0 +0 =0 + 4,000

SS
+
New Equation 81,200 + 33,000 + 10,000 + 9,000 =0
(i) 1,33,200
Cash withdrew for personal use ₹ 3,000

Final Equation LA
(-) 3,000

78,200
+0

+ 33,000
+0

+ 10,000
+0

+ 9,000
=0

=0
(-) 3,000

+
1,30,200
66. Accounting Equation
SC
=
Assets + Capital
Liabilities
S.No. Transaction
+ + + =
Cash
Stock Typewriter Debtors Creditors
I
YS

+ +
(i) Started business with cash
1,00,000 1,00,000

+
(ii) Purchased goods for cash - 60,000
AL

60,000

+ +
New equation 40,000
60,000 1,00,000
(iii) 1
rd of the goods sold at a profit of 20% on cost. Half + - + 4,000
AN

3
+12,000
payment received in cash 12,000 20,000 (Profit)

+ + +
New equation 52,000
(iv) 40,000 12,000 1,04,000

Purchased typewriter for office use - 15,000 + 15,000

+ + +
New equation 37,000 + 15,000
40,000 12,000 1,04,000
(v)
+
Purchased goods on credit from X +25,000
25,000

+ + +
New equation 37,000 + 15,000 25,000
(vi) 65,000 12,000 1,04,000

Paid to X - 15,000 - 15,000

(vii) + + +
New equation 22,000 + 15,000 10,000
65,000 12,000 1,04,000

28 / 37
 Paid salary - 3,000 - 3,000
(Expense)

+ + +
New equation 19,000 + 15,000 10,000
(viii) 65,000 12,000 1,01,000

Received commission + 500 + 500

+ + +
New equation 19,500 + 15,000 10,000
65,000 12,000 1,01,500
(ix)
+ - + 10,000
Sold goods (costing ₹50,000) for cash
60,000 50,000 (Profit)

+ + +
79,500 + 15,000 10,000
15,000 12,000 1,11,500
Calculation of Selling Price

ES
Cost of Goods Sold = 60,000 × 1

3
= 20,000
Add: Profit 20% of ₹ 20,000 = 4,000
Sales = 24,000
Cash Sales (50%) = 12,000

SS
Credit Sales = 12,000
67. Accounting Equation: Assets = Liabilities + Capital
Assets (Rs)
No.

(i)
(ii)
Transaction

Ram started with Cash Rs 50,000

Purchase goods on credit for Rs 4,000
LA
Cash+Stock+Furniture

50,000+0+0
0+ 4,000+0
=0
= Liabilities (Rs)

= +4,000
+ Capital (Rs)

+ 50,000
+0
SC
New equation 50,000+4,000+0 = 4,000 + 50,000

(iii) Purchase goods for cash Rs 1,000 - 1,000+1,000+0 =0 +0

New equation 49,000+5,000+0 = 4,000 + 50,000

I

(iv) Purchase furniture for cash for Rs 500 - 500+0+500 =0 +0

YS

New equation 48,500+5,000+500 = 4,000 + 50,000

(v) Withdraw cash for private use Rs 700 -700+0+0 =0 (-) 700

New equation 47,800+5,000+500 = 4,000 + 49,300

AL

(vi) Paid for rent Rs 200 - 200+0+0 =0 (-) 200

New equation 47,600+5,000+500 = 4,000 49,100

(vii) Received interest Rs 100 (+) 100+0+0 =0 (+) 100

AN

New equation 47,700+5,000+500 = 4,000 49,200

(viii) Sold goods costing Rs 500 for Rs 700 on credit +700- 500+0 =0 (+) 200

New equation 48,400+4,500+500 = 4,000 49,400

(ix) Paid to creditors Rs 400 -400+0+0 = (-) 400 +0

New equation 48,000+4,500+500 = 3,600 49,400

(x) Paid for salaries Rs 200 (-) 200+0+0 =0 (-) 200

New equation 47,800+4,500+500 = 3,600 + 49,200

68. Cash Account
Dr. Cr.

Particulars Amount (₹) Particulars Amount (₹)

Record increase in Cash on this side- Record decrease in Cash on this side-

29 / 37
 (i) To Sold goods for cash 60,000 (iv) By Purchased goods for cash 10,000

(v) To Cash received from Harsh 15,000 (vi) By Cash paid to Sham 28,000

Total 75,000 Total 38,000

By Balance (b/f) 37,000

TOTAL 75,000 TOTAL 75,000

Debtors Account
Dr. Cr.

Particulars Amount (₹) Particulars Amount (₹)

Record increase in Debtors on this side- Record decrease in Debtors on this side-

(ii) To Sold goods on credit 20,000 (v) By Cash received from debtor 15,000

Total 20,000 Total 15,000

ES
By Balance (b/f) 5,000

TOTAL 20,000 TOTAL 20,000

SS
Creditors Account
Dr. Cr.

Particulars Amount (₹) Particulars Amount (₹)

Record decrease in Creditors on this side-

(vi) To Cash paid to creditor 28,000

LARecord increase in Creditors on this side-

(iii) By Purchased goods on credit 36,000

Total 28,000 Total 36,000

SC
To Balance (b/f) 8,000

TOTAL 36,000 TOTAL 36,000

Creditor account is a liability so an increase in liability is recorded on the credit side and vice versa. Similarly, cash and debtors
I

account is an asset so an increase in the asset is recorded in the debit side and decrease in the asset on the credit side.
YS

S.
Transactions Assets = Liabilities + Capital
69. No.
Cash Stock Furniture Computer Creditors* Outstanding Capital
+ + + = + +
AL

(₹) (₹) (₹) (₹) (₹) Expenses (₹) (₹)

Commenced business with

1. 50,000 + 0 + 0 + 0 = 0 + 0 + 50,000
cash ₹ 50,000
AN

Purchased goods for cash ₹

2. -20,000 + 50,000 + 0 + 0 = 30,000 + 0 + 0
20,000 and credit ₹ 30,000

New Equation 30,000 + 50,000 + 0 + 0 = 30,000 + 0 + 50,000

Sold goods for cash ₹

3. 40,000 - 30,000 + 0 + 0 = 0 + 0 + 10,000
40,000 costing ₹ 30,000

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 Outstanding 0 + 0 + 0 + 0 = 0 + 1,000 - 1,000

New Equation 64,500 + 20,000 + 0 + 0 = 30,000 + 1,100 + 53,400

6. Bought furniture for ₹ 5,000 0 + 0 + 5,000 + 0 = 5,000 + 0 + 0

30 / 37
 on credit

New Equation 64,500 + 20,000 + 5,000 + 0 = 35,000 + 1,100 + 53,400

Bought refrigerator for

7 -5,000 + 0 + 0 + 0 = 0 + 0 - 5,000
personal use ₹ 5,000

New Equation 59,500 + 20,000 + 5,000 + 0 = 35,000 + 1,100 + 48,400

Purchased computer for

8. -20,000 + 0 + 0 + 20,000 = 0 + 0 + 0
cash ₹ 20,000

New Equation 39,500 + 20,000 + 5,000 + 20,000 = 35,000 + 1,100 + 48,400

Cash withdrawn for

9. -10,000 + 0 + 0 + 0 = 0 + 0 - 10,000
personal use

New Equation 29,500 + 20,000 + 5,000 + 20,000 = 35,000 + 1,100 + 38,400

ES
10. Interest on drawings 0 + 0 + 0 + 0 = 0 + 0 + 500

- 500

Interest on Capital - 1,000

SS
+ 1,000

New Equation 29,500 + 20,000 + 5,000 + 20,000 = 35,000 + 1,100 + 38,400

*Including creditors for furniture ₹ 5,000.

Liabilities
LA
BALANCE SHEET OF ANKIT
As at ________
₹ Assets ₹
SC
Creditors
35,000 Cash in Hand 29,500
(including vendor for furniture ₹ 5,000)

Stock 20,000
I

Expenses Outstanding 1,100 Furniture 5,000

YS

Capital 38,400 Computer 20,000

74,500 74,500
70. The accounting equation is considered to be the foundation of the double-entry accounting system. The accounting equation shows
AL

on a company's balance sheet whereby the total of all the company's assets equals to the sum of the company's liabilities and
shareholders' equity.
Based on this double-entry system, the accounting equation ensures that the balance sheet remains “balanced,” and each entry made
on the debit side should have a corresponding entry (or coverage) on the credit side.
AN

The formula by which an Accounting Equation is solved is Assets = Liabilities + Owner's Capital, where A liability is defined as a
company's legal financial debts or obligations that arise during the course of business operations. Liabilities are settled over time
through the transfer of economic benefits including money, goods or services.
And this account shows the how much of the company assets are owned by the owners instead of creditors. Typically, the owner's
capital account is only used for sole proprietorship.
So the above question is solved as follows:-
Accounting equation
Transaction Assets = Liabilities + Capital

Prepaid Outstanding
Cash + Stock + Building + Debtors + = Creditors + + Capital
Expenses Expenses

(a) Manoj started

business with Cash, 2,30,000 + 1,00,000 + 2,00,000 + 0 + 0 = 0 + 0 + 5,30,000
Goods and Building

New equation 2,30,000 + 1,00,000 + 2,00,000 + 0 + 0 = 0 + 0 + 5,30,000

31 / 37
(b) He purchased (50,000) + 50,000 + 0 + 0 + 0 = 0 + 0 + 0
goods for cash

New equation 1,80,000 + 1,50,000 + 2,00,000 + 0 + 0 = 0 + 0 + 5,30,000

(c) He sold goods

35,000 + (20,000) + 0 + 0 + 0 = 0 + 0 + 15,000
(costing ₹ 20,000)

New Equation 2,15,000 + 1,30,000 + 2,00,000 + 0 + 0 = 0 + 0 + 5,45,000

(d) He purchased
0 + 55,000 + 0 + 0 + 0 = 55,000 + 0 + 0
goods from Rahul

New equation 2,15,000 + 1,85,000 + 2,00,000 + 0 + 0 = 55,000 + 0 + 5,45,000

(e) He sold goods to

Varun (costing ₹ 0 + (52,000) + 0 + 60,000 + 0 = 0 + 0 + 8,000
52,000)

ES
New equation 2,15,000 + 1,33,000 + 2,00,000 + 60,000 + 0 = 55,000 + 0 + 5,53,000

(f) He paid cash to

Rahul in full (53,000) + 0 + 0 + 0 + 0 = (55,000) + 0 + 2,000

SS
settlement

New equation 1,62,000 + 1,33,000 + 2,00,000 + 60,000 + 0 = 0 + 0 + 5,55,00

(g) Salary paid by

him

New equation
(20,000) + 0 + 0 + 0
LA
1,42,000 + 1,33,000 + 2,00,000 + 60,000
+ 0

+ 0
= 0

= 0
+ 0

+ 0
+ (20,000)

+ 5,35,000

(h) Received cash

SC
from Varun in full 59,000 + 0 + 0 + (60,000) + 0 = 0 + 0 + (1,000)
settlement

New equation 2,01,000 + 1,33,000 + 2,00,000 + 0 + 0 = 0 + 0 + 5,34,000

I

(i) Rent Outstanding 0 + 0 + 0 + 0 + 0 = 0 + 3,000 + (3,000)

YS

New equation 2,01,000 + 1,33,000 + 2,00,000 + 0 + 0 = 0 + 3,000 + 5,31,000

(j) Prepaid
(2,000) + 0 + 0 + 0 + 2,000 = 0 + 0 + 0
insurance
AL

New equation 1,99,000 + 1,33,000 + 2,00,000 + 0 + 2,000 = 0 + 3,000 + 5,31,000

(k)Commission
13,000 + 0 + 0 + 0 + 0 = 0 + 0 + 13,000
received by him
AN

New equation 2,12,000 + 1,33,000 + 2,00,000 + 0 + 2,000 = 0 + 3,000 + 5,44,000

(l) Amount
withdrawn by him (20,000) + 0 + 0 + 0 + 0 = 0 + 0 + (20,000)
for personal use

New equation 1,92,000 + 1,33,000 + 2,00,000 + 0 + 2,000 = 0 + 0 + 5,24,000

(m) Depreciation
0 + 0 + (10,000) + 0 + 0 = 0 + 0 + (10,000)
charged on building

New equation 1,92,000 + 1,33,000 + 1,90,000 + 0 + 2,000 = 0 + 0 + 5,14,000

(n) Fresh capital

50,000 + 0 + 0 + 0 + 0 = 0 + 0 + 50,000
invested

New equation 2,42,000 + 1,33,000 + 1,90,000 + 0 + 2,000 = 0 + 3,000 + 5,64,000

(o) Purchased goods

0 + 10,000 + 0 + 0 + 0 = 6,000 + 0 + 0
for Rakhi

32 / 37
 Final equation 2,42,000 + 1,43,000 + 1,90,000 + 0 + 2,000 = 10,000 + 3,000 + 5,64,000
71. Accounting Equation
S.No. Transaction Assets = Liabilities + Capital

Cash + Typewriter + Stock + Debtors = Creditors

i Started business with cash +1,20,000 +1,20,000

ii. Purchased a typewriter -8,000 + 8,000

New equation 1,12,000 8,000 1,20,000

iii. Purchased goods on cash -50,000 +50,000

New equation 62,000 8,000 50,000 1,20,000

iv. Purchased goods on credit +40,000 +40,000

New equation 62,000 8,000 90,000 40,000 1,20,000

ES
Goods costing
v. -60,000 +80,000 + 20,000 (profit)
₹ 60,000 sold for ₹ 80,000 on credit

SS
New equation 62,000 8,000 30,000 80,000 40,000 1,40,000

vi. Paid for rent and salary (1,500+2,000) -3,500 -3,500 (Expenses)

New equation 58,500 8,000 30,000 80,000 40,000 1,36,500

vii. Commission Received

New equation
+800

59,300
LA
8,000 30,000 80,000 40,000
+800 (Income)

1,37,300

viii. Cash withdrawal for private use -5,000 -5,000 (withdrawal)

SC
New equation 54,300 8,000 30,000 80,000 40,000 1,32,300
Shrivastav's Balance Sheet
Liabilities Amount Assets Amount
I

Creditor 40,000 Cash 54,300

YS

Capital 1,32,300 Typewriter 8,000

Stock 30,000
AL

Debtor 80,000

TOTAL 1,72,300 TOTAL 1,72,300

All incomes are added in capital balance and expenses are reduced from capital balance.
72. Accounting Equation
AN

=
Assets + Capital
Liabilities
S.No. Transaction
+ =
Cash + Stock
Debtors Creditors

+
i. Raghav started business with Cash ₹ 1,50,000 + 1,50,000
1,50,000

+
ii. Bought goods for cash ₹ 80,000 and on credit for ₹ 40,000 - 80,000 + 40,000
1,20,000

+
New equation 70,000 40,000 + 1,50,000
1,20,000
iii.
Goods costing ₹ 75,000 sold at a profit of 33 %. Half the payment +
1
+ + 25,000
3
- 75,000
received in cash 50,000 50,000 (Profit)

iv. New equation 1,20,000 + + 40,000 + 1,75,000

33 / 37
 45,000 50,000

+ + 2,000
Goods costing ₹ 10,000 sold for ₹ 12,000 on credit - 10,000
12,000 (Profit)

+ +
New equation 1,20,000 40,000 + 1,77,000
35,000 62,000
v.
- 6,000
Rent and salaries paid (2,000 + 4,000) - 6,000
(Expense)

+ +
New equation 1,14,000 40,000 + 1,71,000
35,000 62,000
vi.
+ - 1,500
Goods costing ₹ 20,000 sold for ₹ 18,500 cash - 20,000
18,500 (Loss)

+ +

ES
1,32,500 40,000 + 1,69,500
15,000 62,000
Calculating of Selling Price
Cost of Goods sold = 75,000

SS
Add: Profit 33 % of ₹ 75,000 = 25,000
1

Selling Price = 1,00,000

Less: Cash Received (50%) = 50,000
Credit Sales = 50,000

Creditors
Liabilities

40,000
Amount (₹) LA
Balance Sheet of Raghav

Cash
Assets

1,32,500
Amount (₹)
SC
Capital 1,69,500 Stock 15,000

Debtors 62,000

2,09,500 2,09,500
I

73. The accounting equation is considered to be the foundation of the double-entry accounting system. The total of all the assets of a
YS

business should be equal to the total of all its liabilities in the balance sheet. Based on this double-entry system, the accounting
equation ensures that the balance sheet remains “balanced,” and each entry made on the debit side should have a corresponding entry
(or coverage) on the credit side.
Accounting equation
AL

Transaction Assets = Liabilities + Capital

Cash + Machinery + Stock = Outstanding Expenses + Capital

(i) Started business with cash 1,20,000 + 0 + 0 = 0 + 1,20,000

AN

New equation 1,20,000 + 0 + 0 = 0 + 1,20,000

(ii) Purchased goods for cash (10,000) + 10,000 + 0 = 0 + 0

New equation 1,10,000 + 10,000 + 0 = 0 + 1,20,000

(iii) Rent received 5,000 + 0 + 0 = 0 + 5,000

New Equation 1,15,000 + 10,000 + 0 = 0 + 1,25,000

(iv) Salary Outstanding 0 + 0 + 0 = 2,000 + (2,000)

New equation 1,15,000 + 10,000 + 0 = 2,000 + 1,23,000

(v) Prepaid insurance (1,000) + 0 + 1,000 = 0 + 0

New equation 1,14,000 + 10,000 + 1,000 = 0 + 0

(vi) Received Interest 700 + 0 + 0 = 0 + 700

New equation 1,14,700 + 10,000 + 1,000 = 2,000 + 1,23,700

34 / 37
 (vii) Sold goods for cash(costing ₹ 5,000) 7,000 + (5,000) + 0 = 0 + 2,000

New equation 1,21,700 + 5,000 + 1,000 = 2,000 + 1,25,700

(viii) Goods destroyed by fire 0 + (500) + 0 = 0 + (500)

Final equation 1,21,700 + 4,500 + 1,000 = 2,000 + 1,25,200

74. The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities,
and owner's equity of a person or business. It is the foundation for the double entry book keeping system. The accounting equation
offers us a simple way to understand how these three amounts relate to each other. The accounting equation is:
Assets=Liabilities+Capital
Sl.no Particulars Assets = Liabilities + Capital

Cash Furniture Building Car = Loan + Capital

1. Started business with cash 30,000 0 0 0 = 0 + 30,000

ES
2. Purchased furniture for cash (15,000) 15000 0 0 = 0 + 0

New Equation 15,000 15,000 0 0 = 0 + 30,000

Purchased building for Rs.30,000 paid 10,000 in cash &

3 (10,000) 0 30,000 0 = 20,000 + 0

SS
balance through loan

New Equation 5,000 15,000 30,000 0 = 20,000 + 30,000

4 Furniture sold costing Rs 2,000 for Rs. 3,000 3,000 (2,000) 0 0 = 0 + 1000

5
New Equation

Purchased old car

LA 8,000

(5,600)
13,000

0
30,000

0
0

5,600 =
= 20,000

0
+ 31,000

+ 0

New Equation 2,400 13,000 30,000 5,600 = 20,000 + 31,000

SC
6 Received rent 7,200 0 0 0 = 0 + 7,200

New Equation 9,600 13,000 30,000 5,600 = 20,000 + 38,200

7 Paid Rs 1,000 for loan & 600 as interest (1,600) 0 0 0 = (1,000) + (600)
I

New Equation 8,000 13,000 30,000 5,600 = 19,000 + 37,600

YS

8 Paid for household expenses (600) 0 0 0 = 0 + (600)

New Equation 7,400 13,000 30,000 5,600 = 19,000 + 37,000

AL

9 Receive dividend on securities 400 0 0 0 = 0 + 400

New Equation 7,800 13,000 30,000 5,600 = 19,000 + 37,400

75. Transaction (i) It affects Cash and Inventory on the assets side and Capital on the other hand. There is increase in cash by ₹ 8, 00,000
AN

and Inventory of goods by ₹ 50,000 on assets side of the equation. Capital is increased by ₹ 8, 50,000.
₹

Assets = Liabilities + Capital

Cash + Inventory(Stock)

8,00,000 + 50,000 = 8,50,000

Total 8,50,000 = 8,50,000

Transaction (ii) It affects Cash and Plant and Machinery on the assets side and liabilities on the other side of the equation. There is an
increase in plant and machinery by ₹ 3, 00,000 and decrease in cash by ₹ 15,000. Liability to pay to the supplier of plant and
machinery increases by ₹ 2,85,000.
₹

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery

8,00,000 + 50,000 = 8,50,000

35 / 37
(15,000) 3,00,000 = 2,85,000

7,85,000 + 50,000 + 3,00,000 = 2,85,000 + 8,50,000

Total 11,35,000 = 11,35,000

Transaction (iii) It affects assets side only. The composition of the asset side changes. Cash decreases by ₹ 6,00,000 and by the same
amount bank increases.
₹

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank

7,85,000 + 5,0000 + 3,00,000 = 2,85,000 + 8,50,000

(6,00,000) + 6,00,000 =

1,85,000 + 50,000 + 3,00,000 + 6,00,000 = 2,85,000 + 8,50,000

ES
Total 11,35,000 = 11,35,000
Transaction (iv) It affects assets side only. The composition of the asset side changes. Furniture increases by ₹ 1,00,000 and by the
same amount bank decreases.

SS
₹

Assets = Liabilities + Capital

Cash

1,85,000
+ Inventory

+ 50,000
+ Plant and Machinery

+ 3,00,000 LA
+ Bank

+ 6,00,000

- (1,00,000)
+ Furniture

= 2,85,000 + 8,50,000
SC
1,85,000 + 50,000 + 3,00,000 + 5,00,000 + 1,00,000 = 2,85,000 + 8,50,000

Total 11,35,000 = 11,35,000

Transaction (v) It affects Cash and Inventory on the assets side and liability on the other side. There is decrease in cash by ₹ 80,000
and increase of inventory of goods by ₹ 1,15,000 on the assts side of the equation. Liabilities increases by ₹ 35,000.
I

₹
YS

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank + Furniture

AL

1,85,000 + 50,000 + 3,00,000 + 5,00,000 + 1,00,000 = 2,85,000 + 8,50,000

(80,000) + 1,15,000 = 35,000

1,05,000 + 1,65,000 + 3,00,000 + 5,00,000 + 1,00,000 = 3,20,000 + 8,50,000

AN

Total 11,70,000 = 11,70,000

Transaction (vi) It affects Cash and Inventory on the assets side and capital on the other side. There is an increase in cash by ₹ 60,000
and decrease in inventory of goods by ₹ 45,000 on the assets side of the equation. Capital increases by ₹ 15,000.
₹

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank + Furniture

1,05,000 + 1,65,000 + 3,00,000 + 5,00,000 + 1,00,000 = 3,20,000 + 8,50,000

60,000 - (45,000) + 15,000

1,65,000 + 1,20,000 + 3,00,000 + 5,00,000 + 1,00,000 = 3,20,000 + 8,65,000

Total 11,85,000 = 11,85,000

Transaction (vii) It affects Debtors and Inventory on the assets side and capital on the other side. There is increase in debtors by ₹ 1,
25,000 and decrease in Inventory of goods by ₹ 80,000 on the assets side of the equation. Capital increases by Rs.45, 000.
₹

36 / 37
Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank + Furniture + Debtors

1,65,000 + 1,20,000 + 3,00,000 + 5,00,000 + 1,00,000 = 3,20,000 + 8,65,000

- (80,000) + 1,25,000 = + 45,000

1,65,000 + 40,000 + 3,00,000 + 5,00,000 + 1,00,000 + 1,25,000 = 3,20,000 + 9,10,000

Total 12,30,000 = 12,30,000

Transaction (viii) It affects Bank on the assets side on one side and liability on the other side. There is decrease in bank by ₹ 35,000 on
the assets side and liability also decreases by ₹ 35,000.
₹

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank + Furniture + Debtors

ES
1,65,000 + 40,000 + 3,00,000 + 5,00,000 + 1,00,000 + 1,25,000 = 3,20,000 + 9,10,000

(80,000) (35,000) = (35,000)

SS
1,65,000 + 40,000 + 3,00,000 + 4,65,000 + 1,00,000 + 1,25,000 = 2,85,000 + 9,10,000

Total 11,95,000 = 11,95,000

Transaction (ix) It affects assets side only. The composition of the assets side changes. Bank increases by ₹ 75,000 and by the same
amount Debtors decreases.

Assets
LA = Liabilities
₹

+ Capital
SC
Cash + Inventory + Plant and Machinery + Bank + Furniture + Debtors

1,65,000 + 40,000 + 3,00,000 + 4,65,000 + 1,00,000 + 1,25,000 = 2,85,000 + 9,10,000

+ 75,000 - (75,000)
I

1,65,000 + 40,000 + 3,00,000 + 5,40,000 + 1,00,000 + 50,000 = 2,85,000 + 9,10,000

YS

Total 11,95,000 = 11,95,000

Transaction (x) It affects Cash on the asset side and Capital on the other hand. There is decrease in Cash by ₹ 25,000 on the assets side
whereas capital decreases by ₹ 25,000.
AL

Assets = Liabilities + Capital

Cash + Inventory + Plant and Machinery + Bank + Furniture + Debtors

AN

1,65,000 + 40,000 + 3,00,000 + 5,40,000 + 1,00,000 + 50,000 = 2,85,000 + 9,10,000

(25,000) - (25,000)

1,40,000 + 40,000 + 3,00,000 + 5,40,000 + 1,00,000 + 50,000 = 2,85,000 + 8,85,000

Total 11,70,000 = 11,70,000

37 / 37