Practical Questions



Accounting Equation

Rule: Assets= Capital + Liabilities

Practical Questions

           1.    Started business with cash and bank balance Rs. 1,00,000 and Rs. 50,000  respectively.

           2.    Goods costing Rs. 10,000 sold for Rs. 12,000 on credit.

           3.    Goods purchased on credit Rs. 5,000.

           4.    Received from debtor Rs. 11,800 in full settlement.

           5.    Paid to creditor Rs. 4,700 in full settlement.

           6.    Loan taken from Everest bank limited Rs. 20,000.

           7.    Rent paid rs. 12,000 including pre-paid Rs. 2,000.

           8.    Commission received Rs. 6000 including advance Rs. 1,000.

           9.     Furniture costing rs. 1,500 sold for rs. 1,200 on credit.

10.    Machinery costing rs. 5,000 destroyed by fire and Insurance Company admitted claim rs. 3,000.

11.    Interest on loan paid rs. 1,800 and still payable rs. 200.

12.   Donation paid rs. 1,000.

13. Rent received rs. 2,000 and still receivable rs. 200.

Accounting Equation                          5 marks

SN

Transaction

Asset

Capital

Liabilities

1

Started business with cash and bank balance

1,00,000 cash

50,000 bank balance

1,50,000

0

Starting Equation

1,50,000

=

1,50,000

+

0

2

Goods sold on credit with profit

12,000 debtor

(10,000) goods

2000 (profit)

0

New Equation

1,52,000

=

1,52,000

+

0

3

Goods purchased on credit

5000 Goods

5000 (creditor)

New Equation

1,57,000

=

1,52,000

+

1,57,000

4.

Received from debtor in full settlement

11,800 cash

(12,000) debtor

-200 (discount allowed)

5,000

New equation

1,56,800

=

1,51,800

+

5,000

5.

Paid to creditor in full settlement

(4,700) cash

300 (discount received)

0

New Equation

1,52,100

=

1,52,100

+

0

6

Loan taken from everest bank limited

20,000 cash

0

20,000

New Equation

1,72,100

=

1,52,100

+

20,000

7

Rent paid including prepaid

(10,000) cash

(2,000) prepaid rent

(12,000) expenses

0

New Equation

1,60,100

=

1,40,100

+

20,000

8

Commission received including advance

6,000 cash

5,000 (income)

1,000

New Equation

1,66,100

=

1,45,100

+

21,000

9

Furniture sold on loss

1200 cash

(1500) furniture

(300) loss

0

New Equation

1,65,800

=

1,44,800

+

21,000

10

Machinery destroyed by fire and insurance co. admitted claim partially

3,000 (insurance co.)

(5,000) machinery

(2,000) loss

0

New Equation

1,63,800

=

1,42,800

+

21,000

11

Interest on load paid and still payable

(1800) cash

(2000) interest

200

New Equation

1,62,000

=

1,40,800

21,200

12

Donation Paid

(1000) cash

(1000) expenses

0

New Equation

1,61,000

=

1,39,800

+

21,200

13

Rent received and still receivable

2,000 cash

200 receivable

2,200 (income)

0

Final Equation

1,63,200

=

1,42,000

+

21,200

Therefore, Assets= 1,63,200 , Capital=1,42,000 and Liabilities= 21,200.