Chapter:-

Introduction:At

Accounting Equation

any point of time, the resources of a business entity must be

equal to the claims of the persons who have financed these resources.
The resources of a business unit,as we all know, is provided by its
owners and outsiders; the claims of the owners/proprietors are known as CAPITAL
while the claims of the outsiders ar called LIABILITIES.
In other words, the total assets of a business entity are equal to its
capital and liabilities.This fact can be expressed in the form of the following
equation:

Assets=Capital + Liabilities
Any business event or transaction taking place in the business affects this
equation in one way or the other ,but ultimate total of Asset side will always be
equal to total of Capital and Liabilities.
Q.No.
Reference

Problem

Q.1

Q2

Show the Accounting Equation on the basis of the following

transactions and prepare a Balance Sheet on the basis of the last
equation.

Transaction 1: Manoj started business with Rs.50,000 as

capital.
Transaction 2: Manoj purchased furniture for cash Rs.5,000.
Transaction 3: He purchased goods for cash Rs.30,000.
Transaction 4: He purchased goods on credit for Rs.20,000.
Transaction 5: Goods costing Rs.25,000 sold on credit for
Rs.35,000.
Transaction 6: Rent paid Rs.3,000.
Show the Accounting Equation on the basis of the following
transactions and prepare a Balance Sheet on the basis of the
last equation.

1. Mahesh commenced business with cash 1,00,000

2. Purchased goods for cash 70,000
3. Purchased goods on credit 80,000
4. Purchased furniture for cash 3,000
5.Paid rent 2,000
6.Sold goods for cash costing Rs.45,000 at 60,000
7. Paid to creditors 20,000
8.Withdrew cash for private use 10,000
9.Paid salaries 5,000
10. Sold goods on credit (cost price Rs.60,000) Rs.80,000
1

Q.3

Q.4

Prepare an Accounting Equation from the following

transactions in the books of Mr. X for January, 2015 :1 Invested Capital in the rm Rs. 20,000
2 Purchased goods on credit from Das & Co. for Rs. 2,000
4 Bought plant for cash Rs. 8,000
8 Purchased goods for cash Rs. 4,000
12 Sold goods for cash (cost Rs. 4,000 + Prot Rs. 2,000)
Rs. 6,000.
18 Paid to Das & Co. in cash Rs. 1,000
22 Received from B. Banerjee Rs. 300
25 Paid salary Rs. 6,000
30 Received interest Rs. 5,000
31 Paid wages Rs. 3,000
Prepare the Accounting Equation on the basis of the
following :
1.Started business with cash Rs.70,000.
2.Credit Purchases of Goods Rs.18,000.
3.Payments made to creditors in full settlement Rs.17,500.

4.Purchase of Machinery for Cash Rs.20,000.

Q.5 Mr.Rakesh started business as on 01.04.2014 with a
capital of Rs.1,50,000.During the year ,the following
transactions took place:---Rs.
1.Furniture purchased for cash
20,000
2.Purchased goods from Mahesh on credit
25,000

Q.6

3.Sold goods(costing Rs.10,000) to Mohan for cash 14,000

4.Additional Capital Introduced
20,000
5.Commission Received in Advance
02,000
6.Paid to creditor [Mahesh] Rs.22,500 in full settlement.
7.Sold goods [costing Rs.15,000] for Rs.18,000 out of which
Rs.5,000 received in cash.
8.Depreciation on Furniture provided @10%.
From the following information ,Calculate the Total Assets of
the business:Capital Rs.4,00,000 ;Creditors Rs.3,00,000;Revenue earned
during the period Rs.7,50,000;Expenses incurred during the
period Rs.2,00,000 and value of unsold stock Rs.2,00,000.
2

Q.7

Create an Accounting Equation on the basis of the following

transactions and show the resulting Balance Sheet:-- [Rs.]
1.Manu started business with Cash
5,00,000
2.Purchased a building from Sohan. Paid by
10,00,000
raising a loan from SBI
3.Paid interest on Loan Rs.20,000 and Installment of
Rs.2,00,000.
4.Purchased goods from Sohan on Credit
1,00,000
5.Goods returned to Sohan costing
20,000
6.Sold goods costing Rs.40,000 for Rs.50,000 on credit to
Ram.
7.Took goods of Rs.10,000 from business for personal use.
8.Accrued Interest
5,000
9.Commission Received in Advance
20,000
10.Cash Received From Ram
10,000

Q.8

Mr.X commenced his cloth business on 01.04.2014 with a

capital of Rs.30,000.On 31st March,2015 his assets were
Rs.50,000 and liabilities were Rs.10,000.
Find out his Closing Capital and Profits Earned during the year.

Q.9

X started a business on 1st April,2012 with a capital of

Rs.50,000 and a Loan of Rs.25,000 borrowed from Y.
During 2012-13,he had introduced additional capital of
Rs.25,000 and had withdrawn Rs.15,000 for personal
use.On 31st March,2013 his assets were Rs.1,50,000.
Find out his capital as on 31.03.2013 and profit made or
loss incurred during 2012-13.

Q.10 On 31st March ,2013 ,the total assets and external liabilities
were Rs.1,00,000 and Rs.3,000 respectively.
During the year ,the proprietor had introduced additional
capital of Rs.10,000 and had withdrawn Rs.6,000 for
personal use.He made a profit of Rs.10,000 during the year .
Calculate the Capital as on 01.04.2012.