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

 

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