Analysis of Transactions
Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation:
| Transaction | ₹ | |
|---|---|---|
| (a) | Started business with cash | 1,20,000 |
| (b) | Rent received | 10,000 |
| (c) | Invested in shares | 50,000 |
| (d) | Received dividend | 5,000 |
| (e) | Purchase goods on credit from Ragani | 35,000 |
| (f) | Paid cash for house hold Expenses | 7,000 |
| (g) | Sold goods for cash (costing ₹10,000) | 14,000 |
| (h) | Cash paid to Ragani | 35,000 |
| (i) | Deposited into bank | 20,000 |
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Start your 14-day free trial to unlock the full solution →These transactions leave Assets ₹1,32,000 (Cash 37,000 + Shares 50,000 + Goods 25,000 + Bank 20,000) = Capital ₹1,32,000, with the creditor Ragani fully paid.
Treatment. (b) rent and (d) dividend received are incomes → Cash ↑, Capital ↑. (c) investing in shares swaps Cash for the asset Shares. (e) credit purchase raises Goods and Creditors ₹35,000. (f) household expenses are drawings (personal) → Cash ↓, Capital ↓. (g) cash sale above cost → profit to Capital. (h) Ragani paid, creditor cleared. (i) cash deposited into bank — asset swap.
Accounting Equation
| # | Transaction | Cash (₹) | Shares (₹) | Goods (₹) | Bank (₹) | Total Assets (₹) | = | Creditors (₹) | + | Capital (₹) |
|---|---|---|---|---|---|---|---|---|---|---|
| (a) | Started with cash | 1,20,000 | — | — | — | 1,20,000 | = | — | + | 1,20,000 |
| (b) | Rent received ₹10,000 | 1,30,000 | — | — | — | 1,30,000 | = | — | + | 1,30,000 |
| (c) | Invested in shares ₹50,000 | 80,000 | 50,000 | — | — | 1,30,000 | = | — | + | 1,30,000 |
| (d) | Dividend received ₹5,000 | 85,000 | 50,000 | — | — | 1,35,000 | = | — | + | 1,35,000 |
| (e) | Goods on credit (Ragani) ₹35,000 | 85,000 | 50,000 | 35,000 | — | 1,70,000 | = | 35,000 | + | 1,35,000 |
| (f) | Household expenses ₹7,000 | 78,000 | 50,000 | 35,000 | — | 1,63,000 | = | 35,000 | + | 1,28,000 |
| (g) | Sold goods (cost 10,000) ₹14,000 | 92,000 | 50,000 | 25,000 | — | 1,67,000 | = | 35,000 | + | 1,32,000 |
| (h) | Paid Ragani ₹35,000 | 57,000 | 50,000 | 25,000 | — | 1,32,000 | = | — | + | 1,32,000 |
| (i) | Deposited into bank ₹20,000 | 37,000 | 50,000 | 25,000 | 20,000 | 1,32,000 | = | — | + | 1,32,000 |
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