October 1 Started the business with RM10,000 cash. (i) Commenced business with cash ₹ 60,000. Show it in accounting equation form - the answers to estudyassistant.com (R = Rands, South African currency) A: The above is a typical example of a sale on credit. Commenced business with cash ₹500000; Purchased goods ₹25000; Paid salary ₹10000; Sold goods costing ₹20000 at a profit of 25% on the cost When a company records a business transaction, it is not entered into an accounting equation, per se. Overview of Accounts Receivable. Analyze the following transactions under the Accounting Equation Approach. The goods were delivered together with an invoice for R25,000. Since 10,000 worth of goods have been sold on credit, The value of Goods/Stock decreases from 15,000 to 5,000. ₹ ₹ (ii) Purchased goods for cash 30,000 and on credit from Karan 20,000. Solution: Question 7. Show that the accounting equation is satisfied after taking into consideration each of the following transactions in the books of Mr. N . Accounting Equation for a Sole Proprietorship: Transactions 1-2. Accounting Equation Examples. Question 7. 3. On 1 st August 2019, when the goods were sold on credit to the buyer of the goods, then the account receivable account will be debited with the corresponding credit to the Sales account. Now that company has a new delivery vehicle, Assets increase by the same amount, keeping the equation in balance. 3.Sold goods on Credit to J.Mali for R5880 ( cost price R3920)? Below are the transactions of Warisan Trading for the month of October 2020. 26,000: Answer. 13 Banked in cash RM1,000. Even though this is a relatively straightforward transaction, a sale on credit, there are actually two possibilities for the journal entries we record. The effect is that Liabilities will increase by R55,000. 10,000 in cash (iii) Paid wages Rs. Solution: Cost of goods sold (COGS) = Beginning inventory + Purchases – Closing inventory = $600,000 + $1,200,000 – $500,000 = $1,300,000 Company A offers credit terms 5/10, net 30. 500 (iv) Withdrew in cash for private use … Example 3 - Purchased goods from a supplier on credit. Q.12 Prove that the Accounting Equation is satisfied in all the following transactions of Sameer Goel: (i) Started business with cash ₹ 10,000. Assume Company A sold $10,000 worth of goods to Michael. Delete Rearranging the Accounting Equation. The income statement includes the accounts which directly refer to a company’s income or expense like Cost of Goods Sold, Tax expenses, and Interest Payable expenses. sold goods costing $1000 on credit at 25% profit. Prove that the Accounting Equation is satisfied in all the following transactions of Sameer Goel: (i) Started business with cash ₹ 10,000. Sold goods to Raman for ₹ 15,000 of which ₹ 5,000 was received at once; Answer: Question 6. (ii) Paid rent in Advance ₹ 300. (iii) Sold goods for cash costing ₹ 10,000 and on credit costing ₹ 15,000 both at a profit of 20%. As we know that each transaction has a Dual aspect. Required: Compute cost of goods sold for the year 2016 assuming the company uses a periodic inventory system. The accounting equation can also be rearranged into the following form: Shareholder’s Equity = Assets – Liabilities. Answer: 2 question Sold goods costing $1000 on credit at 25% profit. (iii) Sold goods for cash costing Rs 10,000 and on credit costing Rs 15,000 both at a profit of 20%. Merely placing an order for goods is not a recordable transaction because no exchange has taken place. If it is a Cash Sale Cash/Bank A/c (Under Current Asset) Dr To Sale A/c 3. In transaction #5 we paid him 3,000 of the 5,000 so he had a balance of 2,000 that we owed him (credit balance). Mr Ram, a sole proprietor has the following transactions in his books of accounts for the year 2019. (ii) Purchased goods for cash Rs 20,000 and on credit Rs 30,000. (c) Bought goods for cash ₹ 30,000 and on credit ₹ 20,000. Use accounting equation to show the effect of following transactions on assets, liabilities and capital: a)Started business with cash Rs 70,000 b)Purchased goods on credit Rs 18,000 c)Purchased machinery Rs 20,000 d)Payment made to creditors in full settlement Rs 17,500. e)Depreciation on machinery Rs 2,000 please explain this sum. 4 Purchased Canon printer RM400 by cheque for office use. When a seller offers credit terms of net 30 days, the net amount for the sales transaction is due 30 days after the sales invoice date.. To illustrate the meaning of net, assume that Gem Merchandise Co. sells $1,000 of goods to a customer.Upon receiving the goods the customer finds that $100 of the goods are not acceptable. (ii) He purchased furniture for ₹ 2,000. Accounting interpretation of the transaction . (iv) Sold goods for … The cost price of these goods was R21000 2.Cash received for service rendered according to cash register roll, R8250. Create an accounting equation on the basis of the following transactions: (5 Marks) Started business with cash ₹ 80,000 and goods ₹ 75,000; Sold goods to Shanmugam on credit for ₹ 50,000; Received cash from Shanmugam in full settlement ₹ 49,000 (iv) He purchase goods on credit ₹ 3,000. Assets = Liabilities + Capital. (ii) Purchased goods for cash ₹ 20,000 and on credit ₹ 30,000. assets, liabilities, and capital (or "equity"). Sold goods to R. Botha on credit of R242,39. Mohit has the following transactions, prepare the accounting equation: Business started with cash ₹ 1,75,000; Purchased goods from Rohit ₹ 50,000; Sold goods on credit to Manish (Costing ₹ 17,500)₹ 20,000; Purchased furniture for office use ₹ 10,000; Cash paid to Rohit in full settlement ₹ 48,500; Cash received from Manish ₹ 20,000 However, if the customer pays within 10 days, a 2% discount will be applied. He purchases goods on credit: Rs. 8,000 for Rs. We present nine transactions to illustrate how a company's accounting equation stays in balance. In this form, it is easier to highlight the … (iii) Purchased goods for cash ₹ 30,000 and credit ₹ 20,000. He then sold some goods on credit to M/s Bharat & Co., for 10,000. Sold Goods on credit to M/s Bharat & Co., for 10,000. When goods or services are sold to a customer, and the customer is allowed to pay at a later date, this is known as selling on credit, and creates a liability for the customer to pay the seller. Solution: Question 8. Q.15 Prepare an Accounting Equation from the following: (i) Started business with cash 50,000 and goods 30,000. Manohar is a creditor from transaction #2 - we bought the goods on credit for 5,000. Let us understand the accounting equation with the help of an example. (iv) Sold goods for cash ₹ 8,000 costing ₹ 4,000. (iii) He paid rent of ₹ 200. Thus, each debit has an equal credit. Because of the two-fold effect of transactions, the equation always stays in balance. In other words, this is the amount of money the company spent on labor, materials, and overhead to manufacture or purchase products that were sold to customers during the year. Prepare an Accounting Equation from the following: (i) Started business with cash ₹ 1,00,000. Solution: | EduRev Commerce Question is disucussed on EduRev Study Group by 142 Commerce Students. An accounting transaction is a business activity or event that causes a measurable change in the accounting equation. (ii) Purchased goods for cash ₹ 20,000 and on credit ₹ 30,000. (b) Paid rent ₹ 4,000 including ₹ 1,000 as advance. The Accounting Equation. Credit Terms with Discounts. 1.If it is a Credit Sale Hari A/c (under Sundry Debtor) Dr To Sales A/c (Direct Income) 2. The accounting equation shows the relationship between these items. (v) He sold goods (cost price ₹ 2,000) for ₹ 5,000 on cash. Jan 1 Invested Capital of 20,000 Indonesian Rupiah. 20,000 form Mahesh on credit (ii) Sold goods to Suresh costing Rs. Final Thoughts It is understood that the double-entry book-entry accounting system is followed globally and adheres to the rules of debit and credit … Started business with capital 1,00,000 ; Bought furniture 25,000 ; Bought goods for cash 20,000 ; Bought goods from Ram on Credit 5,000 ; Sold goods for cash for 15,000 ; Sold goods to Shyam on credit 8,000 Class Exercises – Accounting Equation 2 Question 1 Warisan Trading is a stationary store and owned by Ameena. Cost of goods sold, often abbreviated COGS, is a managerial calculation that measures the direct costs incurred in producing products that were sold during a period. Prepare an Accounting Equation from the following: (i) Started business with cash ₹ 1,00,000. Issued invoice 001. Also prepare a Balance Sheet. (iii) Purchased goods for cash ₹ 5,000 and credit ₹ 2,000. This is true at any time and applies to each transaction. Purchased goods on credit: 4,000 (iv) Sold goods on cash (cost ₹ 500) for: 700 (v) Received rent: 200 (vi) Purchased goods for cash: 1,000 (vii) Withdrew for personal use: 700 (viii) Paid to … ₹ (v) Rent outstanding 2,000. These goods will be sold to customers at a profit. Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital. What will be the effect of the following on the accounting equation-(i) Purchased goods for Rs. 40,000 (e) He sold goods (Costing Rs.20,000) for cash: Rs. In #12 he is giving us a discount of 100 off the 2,000 and we pay him the rest (1,900). (Delhi 2010) A nswer 7: The following table is showing the accounting equation. This means that the amount is due in 30 days (net 30). Jan 2 Purchased goods on credit from Das & Co. for 2,000 Indonesian Rupiah. 12 Sold goods on credit to Halim RM500. Solved Example on Accounting Equation. An exchange of cash for merchandise is a transaction. Prove that the Accounting Equation is satisfied in all the following transactions of Suresh. ₹ ₹ (iii) Goods costing 40,000 were sold for 55,000. Show it in accounting equation form ) Outline two ways VKW might be affected by increased import controls. (iii) Purchased goods for cash ₹ 5,000 and credit ₹ 2,000. (ii) Paid rent in advance ₹ 300. 1.A credit note for R35700 issued to a debtor. The accounting equation is a mathematical expression that shows the relationship among the different elements of accounting, i.e. The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business. Ques 35: Prove that accounting equation is satisfied in all the following cases: (a) Commenced business with cash ₹ 50,000. ₹ ₹ (iv) Withdrew cash for personal use 10,000. (iv) He purchase goods on credit ₹ 3,000. (iv) Sold goods for cash ₹ 8,000 costing ₹ 4,000. Dec 22,2020 - Prepare Accounting Equation. (d) Sold the goods bought on credit for ₹ 25,000. 3. For example, the credit terms for credit sales may be 2/10, net 30. (v) He sold goods (cost price ₹ 2,000) for ₹ 5,000 on cash. (ii) Paid rent in advance ₹ 500. Prepare an Accounting Equation and Balance Sheet on the following basis: (i) Ajeet started business ₹ 20,000. 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