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.NoAssetsEquities
CashFurnitureMachineryA/C ReceivablesA/C PayableO.E
1100,000100,000
Bal100,000100,000
2(2000)2,000
Bal98,0002,000100,000
310,00010,000
Bal98,0002,00010,00010,000100,000
4(20,000)(20,000)
Bal78,0002,00010,00010,00080,000
56,0006,000
Bal84,0002,00010,00010,00086,000
62,0002,000
Bal84,0002,00010,0002,00010,00088,000
7(4,000)(4,000)
Bal80,0002,00010,0002,00010,00084,000
TotalRs. 94,000Rs. 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

AssetsEquities
CashDebtorInventoryBuildingCreditorCapital
Bal25,00017,00022,00070,00040,00094,000
1(3,600)3,600
Bal21,40017,00025,60070,00040,00094,000
512,000(10,500)1,500
Bal33,40017,00015,10070,00040,00095,500
7(25,000)(25,000)
Bal8,40017,00015,10070,00015,00095,500
95,0003,000(6,000)2,000
Bal13,40020,0009,10070,00015,00097,500
11(2,000)1,900(100)
Bal11,40020,00011,00070,00015,00097,400
1514,000(14,000)
Bal25,4006,00011,00070,00015,00097,400
18(1,000)(1,000)
Bal24,4006,00011,00070,00015,00096,400
20(1,400)(1,400)
Bal23,0006,00011,00070,00015,00095,000
 Total Rs. 110,000 Rs. 110,000

 

>> Solved Accounting Equation Problems and Solutions.

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.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *