Use accounting equation to show the effect of the following transactions of M/s Royal Traders: (a) Started business with cash ₹ 1,20,000 (b) Purchased goods for cash ₹ 10,000 (c) Rent received - Accountancy

admin ديسمبر 24, 2021
Use accounting equation to show the effect of the following transactions of M/s Royal Traders:

(a)Started business with cash₹ 1,20,000
(b)Purchased goods for cash₹ 10,000
(c)Rent received₹ 5,000
(d)Salary outstanding₹ 2,000
(e)Prepaid Insurance₹ 1,000
(f)Received interest₹ 700
(g)Sold goods for cash (Costing ₹ 5,000)₹ 7,000
(h)Goods destroyed by fire₹ 500






S.NoExplanationAssetAssetAssetLiabilitiesCapital
  Cash+Stock+Prepaid Expenses=Outstanding Expenses  
(a)Increase in cash1,20,000        
 Increase in capital        1,20,000
  1,20,000    =NIL+1,20,000
(b)Increase in stock  10,000      
 Increase in cash(10,000)    = + 
  1,10,000+10,000  =NIL+1,20,000
(c)Increase in cash5,000        
 Increase in capital (Profit)        5,000
  1,15,000+10,000  =NIL+1,25,000
(d)Increase in outstanding expenses     =2,000  
 Decrease in capital (Expenses)        (2,000)
  1,15,000+10,000  =2,000+1,23,000
(e)Increase in prepaid  expenses    1,000    
 Decrease in cash(1,000)        
  1,14,000+10,000+1,000=2,000+1,23,000
(f)Increase in cash700        
 Increase in capital (Profit)        700
  1,14,700+10,000+1,000=2,000+1,23,700
(g)Increase in cash7,000        
 Decrease in stock  (5,000)      
 Increase in capital (Profit)        2,000
  1,21,700+5,000+1,000=2,000+1,25,700
(h)Decrease in stock  (500)      



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