ACCOUNTING EQUATION

1. Analyze each one of the following transactions into accounting equations and give the
summary action that results after all the transactions.
a. Rama commences business with Rs. 3,000 in cash, Rs. 2,000 inventory and Rs. 2,000
in furniture.
b. He opens a current account with Bank of India and deposits Rs. 2,500
c. Purchases goods worth Rs. 5,000 on credit.
d. Sells goods costing Rs. 2,000 for Rs. 2,500 on credit
e. Makes a payment of Rs. 500 by way of office expenses.
f. Pays Rs. 2,000 to the trade creditors.
g. Appoints a cashier who pays Rs. 5,000 as earnest deposit
h. Fixed deposit is opened for Rs. 5,000 with Bank of India
i. Received Rs. 500 from trade debtors.
j. Paid interest expenses Rs. 800.
2. Analyze the effects of these transactions on the accounting equation.
a. Suresh began business with Rs. 50,000 in cash.
b. Took a loan of Rs. 20,000 from Manish.
c. Purchases for cash two computers each costing Rs. 29,000.
d. Purchased supplies of floppy disks and stationery for Rs. 6,000 on credit.
e. Received Rs. 12,000 in cash for software sales.
f. Paid creditors for suppliers Rs. 2,000
g. Paid salaries to employees Rs. 4,000 and office rent Rs. 1,200
h. Sold software on credit Rs. 8,000
i. Withdrew Rs. 3,500 in cash for personal use.
3. Show the accounting equation on the basis of the following transactions:
a. Y started business with cash Rs. 90,000
b. Purchased goods or credit Rs. 50,000
c. Purchased furniture for cash Rs. 10,000
d. Sold goods costing Rs. 20,000 for Rs. 40,000
e. Sold goods costing Rs. 20,000 on credit for Rs. 42,000
f. Bought goods worth Rs. 20,000 (Rs. 15,000 paid in cash and balance in credit)
g. Drawn for personal use Rs. 5,000
h. Paid for rent Rs. 1,000
i. Paid for salaries Rs. 3,000
j. Paid to creditors Rs. 40,000
k. Received from debtors Rs. 12,000
4. Show the accounting equation on the basis of the following transactions:
a. Amit commenced business with Rs. 30,000
b. Purchased goods on credit Rs. 10,000
c. Withdrew for private use Rs. 1,500
d. Purchased goods for cash Rs. 2,000
e. Paid wages Rs. 500
f. Paid to creditors RS. 1,000
g. Sold goods on credit Rs. 2,000
h. Sold goods for cash Rs. 2,000 (costing Rs. 1,500)
i. Outstanding salary Rs. 500
j. Paid rent in advance Rs. 1,000
5. Analyse the effects of these transaction on the accounting equation:
a. March 1st Suresh began business with Rs. 1,50,000 cash and Rs. 20,000 bank.
b. March 2nd Took a loan of Rs. 50,000 from Mahesh.
rd
c. March 3 purchased for cash two computers each costing Rs. 50,000 and
goods costing Rs. 25,000 on credit
d. March 4th paid to creditors Rs. 5,000
th
e. March 10 paid salary to employees Rs. 5,000 and office rent Rs. 2,000
f. March 12th sold goods or credit Rs. 10,000
g. March15th withdrew Rs. 5,000 in cash for personal use
th
h. March 18 withdrew from bank Rs. 2,000
i. March 20th purchase goods worth Rs. 50,000
j. March 25th sold goods on cash Rs. 20,000
6. Show the accounting equation on the basis of the following transactions:
a. Mr. Suresh started business with cash Rs. 1,00,000.
b. Purchased goods on credit Rs. 60,000
c. Purchased furniture for cash Rs. 20,000
d. Sold goods costing Rs. 30,000 for Rs. 50,000
e. Sold goods costing Rs. 30,000 on credit for Rs. 52,000.
f. Bought goods worth Rs. 30,000 (Rs. 25,000 paid in cash and balance on credit).
g. Drawn for personal sue Rs. 2,000
h. Paid for rent Rs. 2,000
i. Paid for salary Rs. 4,000
j. Paid to creditors Rs. 40,000
k. Received from debtors Rs. 12,000

7. From the following transaction relating to Mr. Jigar, show the effect on his assets, liabilities
and capital by using accounting equation.
a. Started business with cash Rs. 10,000
b. Purchased goods on credit Rs. 8,000
c. Plant purchased for cash Rs. 2,000
d. Sold goods costing Rs. 1,000 for Rs. 2,000 for cash.
e. Sold goods on credit to Mahendra costing Rs. 800 for Rs. 1,500.
f. Draw for personal use Rs. 500
g. Paid salaries Rs. 300
h. Received from MahendraRs. 700
i. Goods destroyed by fire Rs. 100
8. Show the accounting equation on the basis of the following transactions:
a. Mahesh began business with Rs. 50,000.
b. Took loan of Rs. 30,000 from Suresh
c. Purchased for cash two computers each costing Rs. 25,000
d. Paid salaries to employees Rs. 4,000 and office rent Rs. 2,000.
e. Sold software on credit Rs. 10,000
f. Withdraw Rs. 4,000 in cash for personal use.
g. Received Rs. 15,000 in cash for software sales.
h. Purchased furniture for cash Rs. 40,000
i. Paid interest on loan Rs. 500
j. Received from debtors Rs. 10,000.
9. Analyze the effect of the above transactions on the assets, liabilities and capital of Manohar.
a. Manohar deposited Rs. 30,000 in the company’s bank a/c in exchange for 3000
shares of Rs. 10 each in the share capital.
b. Purchased supplies of photographic materials for Rs. 9,000 on credit.
c. Purchased photographic equipments for cash Rs. 12,000
d. Received Rs. 15,000 in fees for photographic services rendered.
e. Paid creditors for supplies Rs. 5,000
f. Billed customers Rs. 19,999 for photographic services rendered.
g. Paid office rent Rs. 2,500 and electricity charges Rs. 1,200.

10. Given below are some transactions of Shri. Das. Use accounting equation to show their
effect on his assets, liabilities and capital.
a. Started business with cash Rs. 60,000
b. Purchased furniture for cash Rs. 3,000
c. Purchased goods on credit from Ramesh Rs. 6,000
d. Withdraw for personal use Rs. 1,000
e. Sold goods costing Rs. 3,000 for Rs. 4,000
f. Received commission Rs. 500.
g. Paid Ramesh in part payment Rs. 2,000
CLASSIFICATION OF ACCOUNTS
1. Classify the following accounts into a) personal account, b) real account and c) nominal
account.
Bad debts account Bad Debts recovery account
Bangalore Corporation A/c Bank account
Bank overdraft A/c Bills Payable A/c
Bills Receivable A/c Book Debts A/c
Buildings A/c Capital A/c
Carriage A/c Cash A/c
Charity A/c Commission received in Advance A/s
Depreciation A/c Delhi Sports club’s A/c
Discount A/c Drawings A/c
Furniture A/c Goodwill A/c
Interest A/c International trader’s A/c
Investment A/c Loan A/c
Loose tools A/c Loss of Goods by Fire A/c
Motor Vans A/c Mysore Store’s A/c
National College A/c National Trading Co., Ltd., A/c
Outstanding Wages A/c Postage A/c
Prepaid insurance A/c Purchases A/c
Purchases returns A/c Rent A/c
Repair’s Machinery A/c Salaries A/c
Sales A/c Sales return A/c
Stationery A/c Stock A/c
Trade Mark A/c Wages A/c

2. From the following transactions listed, indicate the name of account, nature of account and
state whether they are to be debited or credited.
a. Sam started business with cash.
b. Withdraw from bank
c. Goods purchased for cash from Kishor
d. Sold goods for cash to Soma.
e. Paid carriage on machinery purchased.
f. Returned goods to Kishor.
g. Made repairs to machinery.
h. Returned goods from soma.
i. Deposited cash in the bank.
j. Cash sales.
k. Received a bank draft from Mysore stores.
l. Paid commission
m. Paid salary to Naveen
n. Received interest on Government securities
o. Withdrew from bank for personal use.