Analysis of Transactions
Show the accounting equation on the basis of the following transaction:
| Transaction | ₹ | |
|---|---|---|
| (a) (i) | Udit started business with: Cash | 5,00,000 |
| (a) (ii) | Goods | 1,00,000 |
| (b) | Purchased building for cash | 2,00,000 |
| (c) | Purchased goods from Himani | 50,000 |
| (d) | Sold goods to Ashu (Cost ₹25,000) | 36,000 |
| (e) | Paid insurance premium | 3,000 |
| (f) | Rent outstanding | 5,000 |
| (g) | Depreciation on building | 8,000 |
| (h) | Cash withdrawn for personal use | 20,000 |
| (i) | Rent received in advance | 5,000 |
| (j) | Cash paid to himani on account | 20,000 |
| (k) | Cash received from Ashu | 30,000 |
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Start your 14-day free trial to unlock the full solution →Udit's transactions leave Assets ₹6,15,000 = Liabilities ₹40,000 (Creditors 30,000 + Outstanding rent 5,000 + Rent received in advance 5,000) + Capital ₹5,75,000.
Treatment. (a) Cash + Goods brought in = Capital ₹6,00,000. (d) credit sale to Ashu: Debtors ↑ by price ₹36,000, Goods ↓ by cost ₹25,000, profit ₹11,000 → Capital. (f) rent outstanding is a liability; (g) depreciation reduces Building and Capital; (h) drawings reduce Cash and Capital; (i) rent received in advance is a liability (unearned income). (j)/(k) settle part of Himani and Ashu.
Accounting Equation
| # | Transaction | Cash (₹) | Goods (₹) | Building (₹) | Debtors (₹) | Total Assets (₹) | = | Creditors (₹) | + | O/s Rent (₹) | + | Rent Adv. (₹) | + | Capital (₹) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (a) | Cash 5,00,000 + Goods 1,00,000 | 5,00,000 | 1,00,000 | — | — | 6,00,000 | = | — | + | — | + | — | + | 6,00,000 |
| (b) | Building for cash | 3,00,000 | 1,00,000 | 2,00,000 | — | 6,00,000 | = | — | + | — | + | — | + | 6,00,000 |
| (c) | Goods from Himani (credit) | 3,00,000 | 1,50,000 | 2,00,000 | — | 6,50,000 | = | 50,000 | + | — | + | — | + | 6,00,000 |
| (d) | Sold to Ashu (cost 25,000) ₹36,000 | 3,00,000 | 1,25,000 | 2,00,000 | 36,000 | 6,61,000 | = | 50,000 | + | — | + | — | + | 6,11,000 |
| (e) | Insurance premium ₹3,000 | 2,97,000 | 1,25,000 | 2,00,000 | 36,000 | 6,58,000 | = | 50,000 | + | — | + | — | + | 6,08,000 |
| (f) | Rent outstanding ₹5,000 | 2,97,000 | 1,25,000 | 2,00,000 | 36,000 | 6,58,000 | = | 50,000 | + | 5,000 | + | — | + | 6,03,000 |
| (g) | Depreciation on building ₹8,000 | 2,97,000 | 1,25,000 | 1,92,000 | 36,000 | 6,50,000 | = | 50,000 | + | 5,000 | + | — | + | 5,95,000 |
| (h) | Drawings ₹20,000 | 2,77,000 | 1,25,000 | 1,92,000 | 36,000 | 6,30,000 | = | 50,000 | + | 5,000 | + | — | + | 5,75,000 |
| (i) | Rent recd in advance ₹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 |
| (j) | Paid Himani on a/c ₹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 |
| (k) | Cash from Ashu ₹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 |
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