Accounting Equation Exercises for PGDM (Sem – I) ‐ Meena Goyal 1

Accounting Equation

Exercises:

Q1) Show the effect of the following transactions on the accounting equation of the firm of Mr. Nayan.

a) Started business with cash of Rs. 100,000

b) Bought furniture worth Rs. 20,000
c) Bought goods for cash Rs. 25,000
d) Bought goods on credit from Mr. Mayank Rs. 15,000
e) Sold goods for cash Rs. 30,000
f) Sold goods on credit to Mr. Jay Rs. 8,000
g) Paid cash to Mr. Mayank of Rs. 10,000
h) Received cash from Mr. Jay of Rs. 8000
i) Paid cash into Bank Rs. 10,000
j) Withdrawn for personal use Rs. 5,000
k) Incurred expenses for salary Rs. 20,000
l) Paid sales tax of Rs. 30,000
m) Bought machinery of Rs. 7,000
n) Taken a bank loan of Rs. 20,000 for working capital requirements
o) Paid Cash Rs. 4000 to Mr. Mayank in full settlement
p) Sold goods worth Rs. 1000 for Rs. 1500 cash

Q2) Show the effect of the following transactions on the financial status of Mr. Kamal

a. Mr. Kamal invested Rs. 2,00,000 cash, furniture Rs. 30,000 and motor vehicle of Rs. 50,000 into the business.
b. Bank lent him Rs. 82,000 in cash for working capital requirements.
c. Bought goods worth Rs. 25,000 for cash.
d. Bought furniture for cash Rs. 10,000.
e. Deposited Rs. 40,000 in bank.
f. Sold goods on credit Rs. 12,000.
i Withdrew Rs. 30,000 cash from the bank account for personal use
j. Sold goods on credit to Mr. Jacob for Rs. 10,000 on credit
k. Mr. Jacob paid Rs. 9,000 in full and final settlement
l. Purchased goods for credit from Mr. John for Rs. 20,000

Q3) Prepare accounting equation from the following Transactions:

1. Manan started business with cash Rs. 4,00,000

2. Purchased goods for cash Rs. 90,000
3. Sold goods [costing Rs.40,000] for Rs. 65,000
4. Purchased goods from Monika Rs. 70,000
5. Salary paid Rs. 7,000
6. Commission received Rs. 5,000
7. Paid Cash to Monika in full settlement Rs. 69,000
8. Goods sold to Rahul {Costing Rs.30,000} for Rs. 35,000

Q4) Prepare accounting equation from the following transactions:

a) Started business with cash Rs. 50,000, stock Rs. 100,000 and furniture Rs. 20,000
b) Deposited Rs. 5000 in bank account
c) Bought machinery for Rs. 10,000 and spend Rs. 200 on installation
 Accounting Equation Exercises for PGDM (Sem – I) ‐ Meena Goyal 2

d) Paid salaries of Rs. 4000

e) Made cash sales of Rs. 30,000
f) Sold goods on credit to Mr. Y worth Rs. 3500
g) Received Rs. 3400 from Mr. Y in full settlement
h) Purchased goods for cash Rs. 2000
i) Purchased goods on credit from Mr. Z for Rs. 6000
j) Paid Rs. 5700 to Mr. Z in full settlement
k) Paid commission to sales people Rs. 2000
l) Withdrawn Rs. 500 for personal use
m) Withdrawn goods worth Rs. 1000 for personal use
n) Taken a loan from bank Rs. 4000 for financing working capital needs
o) Entered into a contract with PQR Ltd. to supply goods in future
p) Sold goods on credit to Mr. Ashok for Rs. 10,000
q) Mr. Ashok became insolvent and only 40 paise per rupee were recovered

Q5) Fill in the blanks:

1) Accounting equation satisfies the _____ concept of accounting

2) Assets = ________ + Liabilities
3) Liabilities = _______ - Capital
4) Accounting equation serves as a basis for preparing __________

Q6) Tick the category to which each of the Account belongs:

Name of account Asset Liability Capital Revenue Expense

1 Wages
2 Building
3 Cash
4 Bank
5 Bank overdraft
6 Commission earned
7 Discount allowed
8 Discount received
9 Interest received
10 Interest paid
11 Supplier
12 Customer
13 Machinery
14 Owner
15 Drawings
16 Rent Paid