Accounting Equation Examples
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Example # 1:
Prepare Accounting Equation on the basis of following transactions?
- Arush Khan and Company started business with cash Rs. 100,000.
- She purchased Furniture for cash Rs. 2,000.
- Purchases Machinery on credit from Umer Abbasi Rs.10,000.
- Cash withdraw by owner Rs. 20,000.
- Cash Sales of Rs. 6,000.
- Credit sales to Ayesha Iqbal Rs.2,000.
- Paid rent Rs. 2,500 and wages Rs. 1,500.
Solution:
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:
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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.
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Particular. Amount (K)
Land and Building. 200000.00
Plant and Machinery. 100000.00
Bank. 25000.00
Cash. 10000.00
Inventory. 15000.00
Share Capital. 200000.00
10% Debentures. 100000.00
Accounts Payable. 25000.00
Accured Expenses. 15000.00
Tax Payable. 10000.00