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# Accounting Equation Examples

### Example # 1:

Prepare Accounting Equation on the basis of following transactions?

1. Arush Khan and Company started business with cash Rs. 100,000.
2. She purchased Furniture for cash Rs. 2,000.
3. Purchases Machinery on credit from Umer Abbasi Rs.10,000.
4. Cash withdraw by owner Rs. 20,000.
5. Cash Sales of Rs. 6,000.
6. Credit sales to Ayesha Iqbal Rs.2,000.
7. Paid rent Rs. 2,500 and wages Rs. 1,500.

### Solution:

 S.No Assets Equities Cash Furniture Machinery A/C Receivables A/C Payable O.E 1 100,000 100,000 Bal 100,000 100,000 2 (2000) 2,000 Bal 98,000 2,000 100,000 3 10,000 10,000 Bal 98,000 2,000 10,000 10,000 100,000 4 (20,000) (20,000) Bal 78,000 2,000 10,000 10,000 80,000 5 6,000 6,000 Bal 84,000 2,000 10,000 10,000 86,000 6 2,000 2,000 Bal 84,000 2,000 10,000 2,000 10,000 88,000 7 (4,000) (4,000) Bal 80,000 2,000 10,000 2,000 10,000 84,000 Total Rs. 94,000 Rs. 94,000

### Example # 2:

On 1st January, 2016 the balances of Muhammad Danish & Bros. are as follows?

Assets

Cash …………………………. 25,000

Debtor ……………………….. 17,000

Inventory…..………………… 22,000

Building ………………………70,000

Rs. 134,000

Equities

Creditor ……………… 40,000

Capital …………………. 94,000

Rs. 134,000

Transaction during the January was:

January

1)  Purchase inventory for cash Rs. 3,600.

5)  Sold inventory for cash Rs. 12,000 costing Rs. 10,500.

7)  Cash paid to creditor Rs. 25,000.

9)  Sold inventory for cash Rs. 5,000 and on credit Rs. 3,000 costing Rs. 6,000.

11) Inventory returned by a cash customer Rs. 2,000 costing Rs. 1,900.

15) Cash received from debtors Rs. 14,000.

18) Cash paid for furniture purchased for owner domestic use Rs. 1,000.

20) Paid salaries Rs. 1,400.

### Solution:

 S. No Assets Equities Cash Debtor Inventory Building Creditor Capital Bal 25,000 17,000 22,000 70,000 40,000 94,000 1 (3,600) 3,600 Bal 21,400 17,000 25,600 70,000 40,000 94,000 5 12,000 (10,500) 1,500 Bal 33,400 17,000 15,100 70,000 40,000 95,500 7 (25,000) (25,000) Bal 8,400 17,000 15,100 70,000 15,000 95,500 9 5,000 3,000 (6,000) 2,000 Bal 13,400 20,000 9,100 70,000 15,000 97,500 11 (2,000) 1,900 (100) Bal 11,400 20,000 11,000 70,000 15,000 97,400 15 14,000 (14,000) Bal 25,400 6,000 11,000 70,000 15,000 97,400 18 (1,000) (1,000) Bal 24,400 6,000 11,000 70,000 15,000 96,400 20 (1,400) (1,400) Bal 23,000 6,000 11,000 70,000 15,000 95,000 Total Rs. 110,000 Rs. 110,000

## References

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

Sehgal, A., & Sehgal, D. (n.d.). Advanced Accountancy (Vol. I & II). New Delhi: Taxmann Publication Pvt. Ltd.

Shukla, M. C., Grewal, T. S., & Gupta, S. C. (2008). Advanced Accountancy (Vol. I & II). New Delhi: S Chand & Co.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken: John Wiley & Sons, Inc.

Williams, M., & Bettner, H. (1999). Accounting (The basic for business decisions). (11th, Ed.) USA: Irwin McGraw- Hill.

## Related Topics

Accounting Equation Format

Accounting Equation MCQs

## Related Courses

Principles of Accounting

Cost Accounting

Principles of Finance