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Question 1.

Use Accounting Equation to show the effect of following transactions on assets, liabilities and capital and also show the final Balance Sheet:

(a) Started business with cash 70,000
(b) Purchased goods on credit 18,000
(c) Purchased machinery 20,000
(d) Payment made to creditors in full settlement 17,500
(e) Depreciation on machinery 2,000


Assets = Rs. 68,500 and Capital = Rs. 68,500

Question. 2


Prove that the Accounting Equation is satisfied in all the following transactions of Suresh:

(a) Commenced business with cash Rs. 60,000.

(b) Paid rent in advance Rs. 500.

(c) Purchased goods for cash Rs. 30,000 and credit Rs. 20,000.

(d) Sold goods for cash Rs. 30,000, costing Rs. 20,000.

(e) Paid salary Rs. 500 and salary outstanding Rs. 100.

(f) Bought motor-cyc1e for personal use Rs. 5,000.    

Assets = Rs. 84,500; Liabilities =-Rs. 20,100; Capital = Rs. 64,400

Question 3


Anil had the following transactions:

(a) Commenced business with on cash Rs. 50,000.

(b) Purchased goods for cash Rs. 20,000 and on credit Rs. 30,000.

(c) Sold goods for cash Rs. 40,000 costing Rs. 30,000.

(d) Rent paid Rs. 500 and Rent outstanding Rs. 100.

(e)Bought furniture Rs. 5,000 on credit.

(f) Bought refrigerator for personal use Rs. 5,000.

(g) Purchased building for cash Rs. 20,000.     ­

Use Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital and also show his final Balance Sheet.


Assets = Rs. 89,500; Liabilities = Rs. 35,100; Capital = Rs. 54,400

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