# Recording Of Transactions – I – Accounting Equation Solutions

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Analysis of Transactions – Accounting Equation – Numerical Questions
1. Prepare the accounting equation on the basis of the following data.

1. Harsha started business with cash ₹ 2,00,000
2. Purchased goods from Naman for cash ₹ 40,000
3. Sold goods to Bhanu costing ₹ 10,000/- for ₹ 12,000
4. Bought furniture on credit ₹ 7,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Debtors Furniture Total
1. Harsha started business with cash ₹ 2,00,000
2,00,000   2,00,000
2,00,000 2,00,000 = 2,00,000 2,00,000
2. Purchased goods from Naman for cash ₹ 40,000
(40,000) 40,000
1,60,000 40,000 2,00,000 = 2,00,000 2,00,000
3. Sold goods to Bhanu costing ₹ 10,000/- ₹ 12,000
(10,000) 12,000 2,000
1,60,000 30,000 12,000 2,02,000 = 2,02,000 2,02,000
4. Bought furniture on credit ₹ 7,000
7,000 7,000
1,60,000 30,000 12,000 7,000 2,09,000 = 7,000 2,02,000 2,09,000
Total 2,09,000 =   2,09,000

Thus we’ve Assets = Cash ₹ 1,60,000 + Goods ₹ 30,000 + Debtors ₹ 12,000 + Furniture ₹ 7,000 = ₹ 2,09,000

Liabilities = Creditors ₹ 7,000

Capital = ₹ 2,02,000

Assets ₹ 2,09,000 = Liabilities ₹ 7,000 + Capital ₹ 2,02,000

2. Prepare accounting equation from the following:

1. Kunal started business with cash ₹ 2,50,000
2. He purchased furniture for cash ₹ 35,000
3. He paid commission ₹ 2,000
4. He purchased goods on credit ₹ 40,000
5. He sold goods (Costing ₹ 20,000) for cash ₹ 26,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Furniture Total
1. Kunal started business with cash ₹ 2,50,000
2,50,000   2,50,000 =   2,50,000 2,50,000
2,50,000 2,50,000 = 2,50,000 2,50,000
2. He purchased furniture for cash ₹ 35,000
(35,000)   35,000
2,15,000 35,000 2,50,000 = 2,50,000 2,50,000
3. He paid commission ₹ 2,000/-
(2,000)   (2,000)
2,13,000 35,000 2,48,000 = 2,48,000 2,48,000
4. He purchases goods on credit ₹ 40,000
40,000 40,000
2,13,000 40,000 35,000 2,88,000 = 40,000 2,48,000 2,88,000
4. He sold goods (Costing ₹ 20,000) for cash ₹ 26,000
26,000 (20,000)   6,000
2,39,000 20,000 35,000 2,94,000 = 40,000 2,54,000 2,94,000
Total 2,94,000 =   2,94,000

Thus we’ve Assets = Cash ₹ 2,39,000 + Goods ₹ 20,000 + Furniture ₹ 35,000 = ₹ 2,94,000

Liabilities = Creditors ₹ 40,000

Capital = ₹ 2,54,000

Assets ₹ 2,94,000 = Liabilities ₹ 40,000 + Capital ₹ 2,54,000

3. Mohit has the following transactions, prepare the accounting equation:

1. Business started with cash ₹ 1,75,000
2. Purchased goods from Rohit ₹ 50,000
3. Sold goods on credit to Manish (Costing ₹ 17,500)₹ 20,000
4. Purchased furniture for office use ₹ 10,000
5. Cash paid to Rohit in full settlement ₹ 48,500
6. Cash received from Manish ₹ 20,000
7. Rent Paid ₹ 1,000
8. Cash withdrew for personal use ₹ 3,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Debtors Furniture Total
1. Mohit started business with cash ₹ 1,75,000
1,75,000   1,75,000
1,75,000 1,75,000 = 1,75,000 1,75,000
2. Purchased goods from Rohit for ₹ 50,000
50,000   50,000
1,75,000 50,000 2,25,000 = 50,000 1,75,000 2,25,000
3. Sold goods on credit to Manish (Costing ₹ 17,500) for ₹ 20,000
(17,500) 20,000   2,500
1,75,000 32,500 20,000 2,27,500 50,000 1,77,500 2,27,500
4. Purchased furniture for office use ₹ 10,000
(10,000)   10,000
1,65,000 32,500 20,000 10,000 2,27,500 = 50,000 1,77,500 2,27,500
5. Cash paid to Rohit in Full settlement ₹ 48,500
(48,500)   (50,000) 1500
1,16,500 32,500 20,000 10,000 1,79,000 = 1,79,000 1,79,000
6. Cash received from Manish ₹ 20,000
20,000   (20,000)
1,36,500 32,500 10,000 1,79,000 = 1,79,000 1,79,000
7. Rent Paid ₹ 1,000
(1,000)   (1,000)
1,35,500 32,500 10,000 1,78,000 = 1,78,000 1,78,000
8. Cash withdrawn for personal use ₹ 3,000
(3,000)   (3,000)
1,32,500 32,500 10,000 1,75,000 = 1,75,000 1,75,000
Total 1,75,000 =   1,75,000

Thus we’ve Assets = Cash ₹ 1,32,500 + Goods ₹ 32,500 + Furniture ₹ 10,000 = ₹ 1,75,000

Liabilities = 0

Capital = ₹ 1,75,000

Assets ₹ 1,75,000 = Liabilities ₹ 0 + Capital ₹ 1,75,000

4. Rohit has the following transactions:

1. Commenced business with cash ₹ 1,50,000
2. Purchased machinery on credit ₹ 40,000
3. Purchased goods for cash ₹ 20,000
4. Purchased car for personal use ₹ 80,000
5. Paid to creditors in full settlement ₹ 38,000
6. Sold goods for cash costing ₹ 5,000 ₹ 4,500
7. Paid Rent ₹ 1,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Machinery Total
a. Rohit commenced business with cash ₹ 1,50,000
1,50,000   1,50,000
1,50,000 1,50,000 = 1,50,000 1,50,000
b. Purchased machinery on credit ₹ 40,000
40,000   40,000
1,50,000 40,000 1,90,000 = 40,000 1,50,000 1,90,000
c. Purchsaed goods for cash ₹ 20,000
(20,000) 20,000
1,30,000 20,000 40,000 1,90,000 = 40,000 1,50,000 1,90,000
d. Purchased car for personal use ₹ 80,000
(80,000)   (80,000)
50,000 20,000 40,000 1,10,000 = 40,000 70,000 1,10,000
e. Paid to creditors in full settlement ₹ 38,000
(38,000)   (40,000) 2000
12,000 20,000 40,000 72,000 = 72,000 72,000
f. Sold goods costing ₹ 5,000 for ₹ 4,500
4,500 (5,000)   (500)
16,500 15,000 40,000 71,500 = 71,500 71,500
g. Paid Rent ₹ 1,000
(1,000)   (1,000)
15,500 15,000 40,000 70,500 = 70,500 70,500
2,000   2,000
17,500 15,000 40,000 72,500 = 2,000 70,500 72,500
Total 72,500 =   72,500

Thus we’ve Assets = Cash ₹ 17,500 + Goods ₹ 15,000 + Machinery ₹ 40,000 = ₹ 72,500

Liabilities = ₹ 2,000

Capital = ₹ 70,500

Assets ₹ 72,500 = Liabilities ₹ 2000 + Capital ₹ 70,500

5. Use accounting equation to show the effect of the following transactions of M/s Royal Traders:

1. Started business with cash ₹ 1,20,000
2. Purchased goods for cash ₹ 10,000
4. Salary outstanding ₹ 2,000
5. Prepaid insurance ₹ 1,000
7. Sold goods for cash (Costing ₹ 5,000) for ₹ 7,000
8. Goods destroyed by fire ₹ 500
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Insurance Total
a. Started business with cash ₹ 1,20,000
1,20,000   1,20,000
1,20,000 1,20,000 = 1,20,000 1,20,000
b. Purchased goods for cash ₹ 10,000
(10,000) 10,000
1,10,000 10,000 1,20,000 = 1,20,000 1,20,000
5,000   5,000
1,15,000 10,000 1,25,000 = 1,25,000 1,25,000
d. Salary outstanding ₹ 2,000
2,000 (2,000)
1,15,000 10,000 1,25,000 = 2,000 1,23,000 1,25,000
e. Prepaid Insurance ₹ 1,000
(1,000)   1,000
1,14,000 10,000 1,000 1,25,000 = 2,000 1,23,000 1,25,000
700   700
1,14,700 10,000 1,000 1,25,700 = 2,000 1,23,700 1,25,700
g. Sold goods for cash (Costing ₹ 5,000) ₹ 7,000
7,000 (5,000)   2,000
1,21,700 5,000 1,000 1,27,700 = 2,000 1,25,700 1,27,700
h. Goods destroyed by fire ₹ 500
(500)   (500)
1,21,700 4,500 1,000 1,27,200 = 2,000 1,25,200 1,27,200
Total 1,27,200 =   1,27,200

Thus we’ve Assets = Cash ₹ 1,21,700 + Goods ₹ 4,500 + Insurance ₹ 1,000 = ₹ 1,27,200

Liabilities = ₹ 2,000

Capital = ₹ 1,25,200

Assets ₹ 1,27,200 = Liabilities ₹ 2000 + Capital ₹ 1,25,200

6. Show the accounting equation on the basis of the following transaction:

1. Cash ₹ 5,00,000
2. Goods ₹ 1,00,000
2. Purchased building for cash ₹ 2,00,000
3. Purchased goods from Himani ₹ 50,000
4. Sold goods to Ashu (Cost ₹ 25,000) ₹ 36,000
5. Paid insurance premium ₹ 3,000
6. Rent outstanding ₹ 5,000
7. Depreciation on building ₹ 8,000
8. Cash withdrawn for personal use ₹ 20,000
10. Cash paid to Himani on account ₹ 20,000
11. Cash received from Ashu ₹ 30,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Building Debtors Total Creditors Outstanding Rent Advance Rent Received

1. Cash ₹ 5,00,000
2. Goods ₹ 1,00,000
5,00,000 1,00,000
5,00,000 1,00,000 6,00,000 = 6,00,000 6,00,000
b. Purchased building for cash ₹ 2,00,000
(2,00,000)   2,00,000
3,00,000 1,00,000 2,00,000 6,00,000 = 6,00,000 6,00,000
c. Purchased goods from Himani ₹ 50,000
50,000   50,000
3,00,000 1,50,000 2,00,000 6,50,000 = 50,000 6,00,000 6,50,000
d. Sold goods to Ashu (Cost ₹ 25,000) for ₹ 36,000
(25,000) 36,000   11,000
3,00,000 1,25,000 2,00,000 36,000 6,61,000 = 50,000 6,11,000 6,61,000
(3,000)   (3,000)
2,97,000 1,25,000 2,00,000 36,000 6,58,000 = 50,000 6,58,000
f. Rent outstanding ₹ 5000
5000   (5000)
2,97,000 1,25,000 2,00,000 36,000 6,58,000 = 50,000 5,000 6,03,000 6,58,000
g. Depreciation on building ₹ 8,000
(8,000)   (8,000)
2,97,000 1,25,000 1,92,000 36,000 6,50,000 = 50,000 5,000 5,95,000 6,50,000
h. Cash withdrawn for personal use ₹ 20,000
(20,000)   (20,000)
2,77,000 1,25,000 1,92,000 36,000 6,30,000 = 50,000 5,000 5,75,000 6,30,000
5,000   5,000
2,82,000 1,25,000 1,92,000 36,000 6,35,000 = 50,000 5,000 5,000 5,75,000 6,35,000
j. Cash paid to Himani on account ₹ 20,000
(20,000)   (20,000)
2,62,000 1,25,000 1,92,000 36,000 6,15,000 = 30,000 5,000 5,000 5,75,000 6,15,000
j. Cash received from Ashu ₹ 30,000
30,000   (30,000)
2,92,000 1,25,000 1,92,000 6,000 6,15,000 = 30,000 5,000 5,000 5,75,000 6,15,000
Total 6,15,000 =   6,15,000

Thus we’ve Assets = Cash ₹ 2,92,000 + Goods ₹ 1,25,000 + Building ₹ 1,92,000 + Debtors ₹ 6,000 = ₹ 6,15,000

Liabilities = Creditors ₹ 30,000 + Outstanding Rent ₹ 5,000 + Advance Rent Received ₹ 5,000 = ₹ 40,000

Capital = ₹ 5,75,000

Assets ₹ 6,15,000 = Liabilities ₹ 40,000 + Capital ₹ 5,75,000

7. Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation

1. Started business with cash ₹ 1,20,000
3. Invested in shares ₹ 50,000
5. Purchased goods on credit from Ragani ₹ 35,000
6. Paid cash for house hold Expenses ₹ 7,000
7. Sold goods for cash (costing ₹ 10,000) ₹ 14,000
8. Cash paid to Ragani ₹ 35,000
9. Deposited into bank ₹ 20,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Shares Bank Total
a. Started business with cash ₹ 1,20,000
1,20,000   1,20,000
1,20,000 1,20,000 = 1,20,000 1,20,000
10,000   10,000
1,30,000 1,30,000 = 1,30,000 1,30,000
c. Invested in shares ₹ 50,000
(50,000)   50,000
80,000 50,000 1,30,000 = 1,30,000 1,30,000
5,000   5,000
85,000 50,000 1,35,000 = 1,35,000 1,35,000
e. Purchased goods on credit from Ragani ₹ 35,000
35,000   35,000
85,000 35,000 50,000 1,70,000 = 35,000 1,35,000 1,70,000
f. Paid cash for household expenses ₹ 7,000
(7,000)   (7,000)
78,000 35,000 50,000 1,63,000 = 35,000 1,28,000 1,63,000
g. Sold goods for cash (Costing ₹ 10,000) for ₹ 14,000
14,000 (10,000)   4,000
92,000 25,000 50,000 1,67,000 = 35,000 1,32,000 1,67,000
h. Cash paid to Ragani ₹ 35,000
(35,000)   (35,000)
57,000 25,000 50,000 1,32,000 = 1,32,000 1,32,000
i. Deposited into bank ₹ 20,000
(20,000)   20,000
37,000 25,000 50,000 20,000 1,32,000 = 1,32,000 1,32,000
Total 1,32,000 =   1,32,200

Thus we’ve Assets = Cash ₹ 37,000 + Goods ₹ 25,000 + Shares ₹ 50,000 + Bank ₹ 20,000 = ₹ 1,32,000

Liabilities = ₹ 0

Capital = ₹ 1,32,000

Assets ₹ 1,32,000 = Liabilities ₹ 0 + Capital ₹ 1,32,000

8. Show the effect of the following transactions on the accounting equation:

1. Cash ₹ 2,30,000
2. Goods ₹ 1,00,000
3. Building ₹ 2,00,000
2. He purchased goods for cash ₹ 50,000
3. He sold goods (Costing ₹ 20,000) ₹ 35,000
4. He purchased goods from Rahul ₹ 55,000
5. He sold goods to Varun (Costing ₹ 52,000) ₹ 60,000
6. He paid cash to Rahul in full settlement ₹ 53,000
7. Salary paid by him ₹ 20,000
8. Received cash from Varun in full settlement ₹ 59,000
9. Rent outstanding ₹ 3,000
10. Prepaid Insurance ₹ 2,000
11. Commission received by him ₹ 13,000
12. Amount withdrawn by him for personal use ₹ 20,000
13. Depreciation charge on building ₹ 10,000
14. Fresh capital invested ₹ 50,000
15. Purchased goods from Rakhi ₹ 10,000
Please note that the 15th transaction i.e. Purchased goods from Rakhi is given as ₹ 6,000 in the text book. However, if we consider this value, the total of the assets/liability is not matching with the answer provided in the text book. So, we’ve considered it as ₹ 10,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Building Debtors Prepaid Insurance Total Creditors Outstanding Rent

1. Cash ₹ 2,30,000
2. Goods ₹ 1,00,000
3. Building ₹ 2,00,000
2,30,000 1,00,000 2,00,000   5,30,000
2,30,000 1,00,000 2,00,000 5,30,000 = 5,30,000 5,30,000
b. Purchased goods for cash ₹ 50,000
(50,000) 50,000
1,80,000 1,50,000 2,00,000 5,30,000 = 5,30,000 5,30,000
c. Sold goods (Costing ₹ 20,000) for ₹ 35,000
(20,000)   35,000   15,000
1,80,000 1,30,000 2,00,000 35,000 5,45,000 = 5,45,000 5,45,000
d. Purchased goods from Rahul ₹ 55,000
55,000   55,000
1,80,000 1,85,000 200,000 35,000 6,00,000 = 55,000 5,45,000 6,00,000
e. Sold goods to Varun (Costing ₹ 52,000) ₹ 60,000
(52,000) 60,000   8,000
1,80,000 1,33,000 2,00,000 95,000 6,08,000 = 55,000 5,53,000 6,08,000
f. Paid cash to Rahul in full settlement ₹ 53,000
(53000)   (55,000)   2,000
1,27,000 1,33,000 2,00,000 95,000 5,55,000 = 5,55,000 5,55,000
g. Salary paid by him ₹ 20,000
(20,000)   (20,000)
1,07,000 1,33,000 2,00,000 95,000 5,35,000 = 5,35,000 5,35,000
h. Received cash from Varun in full settlement ₹ 59,000
59,000   (60,000)   (1,000)
1,66,000 1,33,000 2,00,000 35,000 5,34,000 = 5,34,000 5,34,000
i. Rent outstanding ₹ 3,000
3,000 (3,000)
1,66,000 1,33,000 2,00,000 35,000 5,34,000 = 3,000 5,31,000 5,34,000
j. Prepaid Insurance ₹ 2,000
(2000)   2,000
1,64,000 1,33,000 2,00,000 35,000 2,000 5,34,000 = 3,000 5,31,000 5,34,000
k. Commission received by him ₹ 13,000
13,000   13,000
1,77,000 1,33,000 2,00,000 35,000 2,000 5,47,000 = 3,000 5,44,000 5,47,000
l. Amount withdrawn by him for personal use ₹ 20,000
(20,000)   (20,000)
1,57,000 1,33,000 2,00,000 35,000 2,000 5,27,000 = 3,000 5,24,000 5,27,000
m. Depreciation charge on building ₹ 10,000
(10,000)   (10,000)
1,57,000 1,33,000 1,90,000 35,000 2,000 5,17,000 = 3,000 5,14,000 5,17,000
n. Fresh capital invested ₹ 50,000
50,000   50,000
2,07,000 1,33,000 1,90,000 35,000 2,000 5,67,000 = 3,000 5,64,000 5,67,000
o. Purchased goods from Rakhi ₹ 10,000
10,000   10,000
2,07,000 1,43,000 1,90,000 35,000 2,000 5,77,000 = 10,000 3,000 5,64,000 5,77,000
Total 5,77,000 =   5,77,000

Thus we’ve Assets = Cash ₹ 2,07,000 + Goods ₹ 1,43,000 + Building ₹ 1,90,000 + Debtros ₹ 35,000 + Prepaid Insurance ₹ 2,000 = ₹ 5,77,000

Liabilities = Creditors ₹ 10,000 + Outstanding Rent ₹ 3,000 = ₹ 13,000

Capital = ₹ 5,64,000

Assets ₹ 5,77,000 = Liabilities ₹ 13,000 + Capital ₹ 5,64,000

9. Transactions of M/s Vipin Traders are given below.
Show the effects on Assets, Liabilities and Capital with the help of accounting Equation.

1. Business started with cash ₹ 1,25,000
2. Purchased goods for cash ₹ 50,000
3. Purchase furniture from R.K. Furniture ₹ 10,000
4. Sold goods to Parul Traders (Costing ₹ 7,000 vide bill no.5674) ₹ 9,000
5. Paid cartage ₹ 100
6. Cash Paid to R.K. furniture in full settlement ₹ 9,700
7. Cash sales (costing ₹ 10,000) ₹ 12,000
9. Cash withdrew for personal use ₹ 3,000
(Figures in rupees)
Transaction
No.
Assets = Liabilities Capital Total
Cash Stock of Goods Debtors Furniture Total
a. Business started with cash ₹ 1,25,000
1,25,000   1,25,000
1,25,000 1,25,000 = 1,25,000 1,25,000
b. Purchased goods for cash ₹ 50,000
(50,000) 50,000
75,000 50,000 1,25,000 = 1,25,000 1,25,000
c. Purchased furniture from R.K. furniture for ₹ 10,000
10,000   10,000
75,000 50,000 10,000 1,35,000 = 10,000 1,25,000 1,35,000
d. Sold goods to Parul Traders (Costing ₹ 7,000 vide bill no.5674) ₹ 9,000
(7,000) 9,000   2,000
75,000 43,000 9,000 10,000 1,37,000 = 10,000 1,27,000 1,37,000
e. Paid cartage ₹ 100
(100)   (100)
74,900 43,000 9,000 10,000 1,36,900 = 10,000 1,26,900 1,36,900
f. Cash Paid to R.K. furniture in full settlement ₹ 9,700
(9,700)   (10,000) 300
65,200 43,000 9,000 10,000 1,27,200 = 1,27,200 1,27,200
g. Cash sales (costing ₹ 10,000) ₹ 12,000
12,000 (10,000)   2,000
77,200 33,000 9,000 10,000 1,29,200 = 1,29,200 1,29,200
4,000   4,000
81,200 33,000 9,000 10,000 1,33,200 = 1,33,200 1,33,200
i. Cash withdrew for personal use ₹ 3,000
(3,000)   (3,000)
78,200 33,000 9,000 10,000 1,30,200 = 1,30,200 1,30,200
Total 1,30,200 =   1,30,200

Thus we’ve Assets = Cash ₹ 78,200 + Goods ₹ 33,000 + Debtors ₹ 9,000 + Furniture ₹ 10,000 = ₹ 1,30,200

Liabilities = ₹ 0

Capital = ₹ 1,30,200

Assets ₹ 1,30,200 = Liabilities ₹ 0 + Capital ₹ 1,30,200

10. Bobby opened a consulting firm and completed these transactions during November, 2014

1. Invested ₹ 4,00,000 cash and office equipment with ₹ 1,50,000 in a business called Bobbie Consulting.
2. Purchased land and a small office building. The land was worth ₹ 1,50,000 and the building worth ₹ 3,50,000. The purchase price was paid with ₹ 2,00,000 cash and a long term note payable for ₹ 8,00,000
3. Purchased office supplies on credit for ₹ 12,000
4. Bobbie transferred title of motor car to the business. The motor car was worth ₹ 90,000.
5. Purchased for ₹ 30,000 additional office equipment on credit.
6. Paid ₹ 7,500 salary to the office manager.
7. Provided services to a client and collected ₹ 30,000
8. Paid ₹ 4,000 for the month’s utilities.
9. Paid supplier created in transaction c.
10. Purchase new office equipment by paying ₹ 93,000 cash and trading in old equipment with a recorded cost of ₹ 7,000
11. Completed services of a client for ₹ 26,000. This amount is to be paid within 30 days.
12. Received ₹ 19,000 payment from the client created in transaction k.
13. Bobby withdrew ₹ 20,000 from the business.

Analyse the above stated transactions and open the following T-accounts:
Cash, client, office supplies, motor car, building, land, long term payables, capital, withdrawals, salary, expense and utilities expense.
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1. Invested ₹ 4,00,000 cash and office equipment with ₹ 1,50,000 in a business called Bobbie Consulting.
Analysis of this transaction: In this transaction there is cash inflow increasing the cash at hand and also there is addition of office equipment. This transaction increases the capital. As the increase in the assets is debited and the increase in the capital is credited, these transactions will be recorded with a debit to the cash and office equipment and a credit to the capital.

Dr Cash Account Cr
4,00,000
Dr Office Equipment Account Cr
1,50,000
Dr Capital Account Cr
4,00,000
1,50,000
2. Purchased land and a small office building. The land was worth ₹ 1,50,000 and the building worth ₹ 3,50,000. The purchase price was paid with ₹ 2,00,000 cash and a long term note payable for ₹ 8,00,000
Analysis of Transaction: The land purchased is an asset. An increase in the asset has to be debited.

Dr Land Account Cr
1,50,000

Similarly the purchase of building incresases the asset and hence should be debited.

Dr Building Account Cr
3,50,000

For purchasing the above two assets, another asset i.e. cash is spent and hence decreased. And a decrease in the asset should be credited.

Dr Cash Account Cr
4,00,000 2,00,000

At the same time there is a long term note payable for ₹ 8,00,000. This is a liability. An increase in the liability should be credited.

Dr Long term payable Account Cr
8,00,000
3. Purchased office supplies on credit for ₹ 12,000
Analysis of transaction: Purchase of office supplies is an expense and hence an increasse in the expenses should be debited.

Dr Office Supplies Account Cr
12,000

For purchasing the office supplies, a liability is created and hence the accounts payable will be increased and an increased liability should be credited.

Dr Accounts payable Cr
12,000
4. Bobbie transferred title of motor car to the business. The motor car was worth ₹ 90,000.
Analysis of the transaction: Motor car will be an asset and hence an increase in the asset should be debited.

Dr Motor car account Cr
90,000

Transferring the title of the motor car will increase the capital. An increase in the capital should be credited.

Dr Capital Account Cr
4,00,000
1,50,000
90,000
5. Purchased for ₹ 30,000 additional office equipment on credit.
Analysis of the transaction: Office equipment is an asset and hence an increase in the asset will be debited.

Dr Office Equipment Account Cr
1,50,000
30,000

This office equipment is purchased on credit and hence the liability of the accounts payable account will be increased. An increase in the liability should be credited.

Dr Accounts payable Cr
12,000
30,000
6. Paid ₹ 7,500 salary to the office manager.
Analysis of the transaction: Salary is an expense and hence an increase in the expense should be debited.

Dr Salary Account Cr
7,500

Payment of salary will reduce the cash. A decrease in the cash asset should be credited.

Dr Cash Account Cr
4,00,000 2,00,000
7,500
7. Provided services to a client and collected ₹ 30,000
Analysis of the transaction: Providing services for cash should be debited to the cash account.

Dr Cash Account Cr
4,00,000
30,000
2,00,000
7,500

This should be credited to the capital account.

Dr Capital Account Cr
4,00,000
1,50,000
90,000
30,000
8. Paid ₹ 4,000 for the month’s utilities.
Analysis of the transaction: Monthly utilities is an expense and hence an increase in the expense should be debited.

Dr Expenses Account Cr
4,000

On the otherhand the payment of the expenses will reduce the cash. And hence a decrease in the cash asset should be credited.

Dr Cash Account Cr
4,00,000
30,000
2,00,000
7,500
4,000
9. Paid supplier created in transaction c.
Analysis of the transaction: There is a decrease in the liability and hence it should be debited.

Dr Accounts payable Cr
12,000 12,000
30,000

As this liability is paid out through cash, it’ll reduce the cash asset. A decrease in the cash asset shoud be credited.

Dr Cash Account Cr
4,00,000
30,000
2,00,000
7,500
4,000
12,000
10. Purchase new office equipment by paying ₹ 93,000 cash and trading in old equipment with a recorded cost of ₹ 7,000
Analysis of the transaction: Buying the new office equipment will increase the assets and hence should be debited.

Dr Office Equipment Account Cr
1,50,000
30,000
93,000

However, for buying this office equipment, the old equipment of ₹ 7,000 is traded out. Thus there is a decrease in the asset and hence it should be credited.

Dr Office Equipment Account Cr
1,50,000
30,000
93,000
7,000

Also, the rest of the amount is i.e 93,000 – 7,000 = 86,000 is paid out in case. Thus there is a decrease in the cash asset and hence it should be credited.

Dr Cash Account Cr
4,00,000
30,000
2,00,000
7,500
4,000
12,000
86,000
11. Completed services of a client for ₹ 26,000. This amount is to be paid within 30 days.
Analysis of the transaction: Completion of services has created revenue.

Dr Accounts Receivable Cr
26,000

As this is a sale, the sales account should be credited.

Dr Sales Account Cr
26,000
12. Received ₹ 19,000 payment from the client created in transaction k.
Analysis of the transaction: There is revenue and hence should be credited.

Dr Accounts Receivable Cr
26,000 19,000

This is bringing in cash and hence the cash acccount should be debited.

Dr Cash Account Cr
4,00,000
30,000
19,000
2,00,000
7,500
4,000
12,000
86,000
13. Bobby withdrew ₹ 20,000 from the business.
Analysis of the transaction: There is withdrawal and hence the drawings account i.e.expenses should be debited.

Dr Drawings Account Cr
20,000

The drawings will reduce the cash and hence the cash asset should be credited.

Dr Cash Account Cr
4,00,000
30,000
19,000
2,00,000
7,500
4,000
12,000
86,000
20,000

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