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Accounting Equation LECTURE

Assets (cash, land, building, furniture, goods, debtors) = Liabilities (amounts owed) + Capital (owner's equity) The owner made various purchases and sales that affected the business's assets, liabilities, and capital. Debts were taken on to acquire fixed assets and pay expenses, and were later paid off. Profits increased the capital. In the end, assets totaled Rs. 98,000 and equaled the sum of liabilities and capital, also Rs. 98,000.

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87 views4 pages

Accounting Equation LECTURE

Assets (cash, land, building, furniture, goods, debtors) = Liabilities (amounts owed) + Capital (owner's equity) The owner made various purchases and sales that affected the business's assets, liabilities, and capital. Debts were taken on to acquire fixed assets and pay expenses, and were later paid off. Profits increased the capital. In the end, assets totaled Rs. 98,000 and equaled the sum of liabilities and capital, also Rs. 98,000.

Uploaded by

goharmahmood203
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Business Transaction

1. Owner made investment of Rs. 100,000 cash into business.


2. Purchase land for Rs. 20,000 in cash.
3. Purchase building for Rs. 15,000 on credit from Ali.
4. Purchase furniture for Rs. 10000 from Mr. Bilal of which Rs. 3000 paid in cash.
5. Purchase goods for Rs. 25,000 on cash.
6. Sold goods to customers for Rs. 15,000 in cash. Cost of the goods were Rs. 12,000.
7. Sold goods to Mr. Sheikh for Rs. 5,000 on credit. Cost of the goods were Rs. 4,000.
8. Paid office assistant salary Rs. 3,000 in cash.
9. Received Rs. 3,000 cash from Mr. Sheikh to whom sales were made on credit.
10. Payment of Rs. 10,000 made to Mr. Ali from whom building purchased on credit.
11. Owner withdraw Rs. 15,000 cash from business for his/her personal use.

Required: Prepare accounting equation from the above business transactions.

ASSETS = LIABILITIES + CAPITAL

Cash + Land + Building + Furniture+ Goods+ Debtors ALi +Bilal Malik

(sheikh)

1 100,000 = 100,000

2 (20000)+20000

Bal. 80,000+20000 = 100,000

3 +15,000 +15,000

Bal. 80,000 +20,000 +15,000 = 15,000 + 100,000

4 (3000) +10,000 +7000

Bal. 77,000+20,000+ 15,000 + 10,000 + =15,000 +7000 + 100,000

5 (25000) +25,000

Bal. 52,000 +20,000+ 15,000+ 10,000+ 25,000 = 15,000 +7000 + 100,000

6 +15000 (12,000) = +3000

Bal. 67,000+ 20,000+ 15,000 + 10,000 + 13,000 = 15,000 + 7,000 + 10,3000

7 (4,000) + 5,000 1,000


Bal. 67,000+ 20,000 +15,000 +10,000 +9,000 +5000 =15,000 +7000 + 10,4000

8 (3,000) (3,000)

Bal. 64,000 + 20,000 +15,000 + 10,000 + 9,000 + 5,000 = 15,000 + 7,000 + 10,1000

9 + 3,000 (3,000) 0

Bal. 67,000 + 20,000 + 15,000 + 10,000 + 9,000 + 2,000 = 15,000 + 7,000 + 10,1000

10 (10,000) (10,000) 0

Bal. 57,000 + 20,000 + 15,000 + 10,000 + 9,000 + 2,000 = 5,000 + 7,000 + 10,1000

11 (15,000) (15,000)

Bal. 42,000 + 20,000 + 15,000 + 10,000 + 9,000 + 2,000 = 5,000 + 7,000 + 86,000

Rs. 98,000 = Rs. 98,000


Business Transaction

Business Transaction ANALYSIS: ( + -) Assets Liabilities capital

1. Owner Mr. Malik made investment of Rs. 100,000 cash into business.
(Capital + Rs. 100,000 Cash + Rs.100,000 ASSETS)

2. Purchase land for Rs. 20,000 in cash.


( Land + 20,000 Assets Cash -20000 Assets)

3. Purchase building for Rs. 15,000 on credit from Ali.

(Building + 15,000 Assets Liabilities Mr. Ali +15000)

4. Purchase furniture for Rs. 10000 from Mr. Bilal of which Rs. 3000 paid in cash.

(furniture +10,000 assets Cash -3000 Assets Mr.Bilal Liabilities +7000)

5. Purchase goods for Rs. 25,000 on cash.

Goods + 25,000 Assets Cash -25,000 Assets

6. Sold goods to customers for Rs. 15,000 in cash. Cost of the goods were Rs. 12,000.

(Cash +15,000 Assets) Goods – 12,000 Assets Profit + 3000 Capital

7. Sold goods to Mr. Sheikh for Rs. 5,000 on credit. Cost of the goods were Rs. 4,000.

(Debtors(Sheikh) +5,000 Assets Goods -4,000 Assets Profit + 1,000 Capital

8. Paid office assistant salary Rs. 3,000 in cash.

Cash -3,000 Assets Expenses -3,000 Capital

9. Received Rs. 3,000 cash from Mr. Sheikh to whom sales were made on credit.

Cash + 3,000 Assets Debtors (sheikh) -3,000 Assets


10. Payment of Rs. 10,000 made to Mr. Ali from whom purchases were made on credit.

Cash – 10,000 Assets Liabilties Creditors Ali -10,000

11. Owner withdraw Rs. 15,000 cash from business for his/her personal use.

Cash -15,000 Assets Capital – 15,000

Required: Prepare accounting equation from the above business transactions.

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