Question 23 of 26
Q.Show the effect of following business transactions on the accounting equation.
(i) Anbu started business with cash ₹ 20,000, goods ₹ 12,000 and machine ₹ 8,000.
(ii) Purchased goods from Ramani on credit ₹ 7,000.
(iii) Wages outstanding ₹ 400.
Puducherry TnboardTamil Nadu HSC First Year (DGE) Commerce Board 2025Subjective· 3mImportance★★★★★
88% · 23/26 Questions
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Start your 14-day free trial to unlock the full solution →Building the equation step by step gives final Assets ₹47,000 = Creditors ₹7,000 + Outstanding wages ₹400 + Capital ₹39,600.
- Anbu started business with cash ₹20,000, goods ₹12,000 and machine ₹8,000 Capital introduced = 20,000 + 12,000 + 8,000 = ₹40,000 (assets brought in = owner's capital).
- Purchased goods from Ramani on credit ₹7,000 Stock (goods) increases by ₹7,000; creditors (liability) increase by ₹7,000.
- Wages outstanding ₹400 Outstanding wages is a liability (+₹400); wages are an expense that reduces capital (−₹400). Accounting Equation (Assets = Liabilities + Capital)
| Transaction | Cash ₹ | Stock ₹ | Machine ₹ | = | Creditors ₹ | O/s Wages ₹ | Capital ₹ |
|---|---|---|---|---|---|---|---|
| (i) Started business | 20,000 | 12,000 | 8,000 | = | 0 | 0 | 40,000 |
| (ii) Credit purchase | 20,000 | 19,000 | 8,000 | = | 7,000 | 0 | 40,000 |
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