Business Transaction, Accounting Equcation (PROBLEMS)

Following transaction were completed during the month of December. 2005

Dec. 02         Sold merchandise for cash Rs. 10,000, whose original cost was Rs. 8,000.

Dec. 03         Purchased merchandise for cash Rs. 12,000, subject to 10% trade discount.

Dec. 05         Sold merchandise on credit to Rs. 15,000 at 10% profit.

Dec. 09         Received cash against Accounts receivable Rs. 30,000.

Dec. 12         Paid cash against Accounts payable Rs. 25,000.

Dec. 15         Paid advertising expenses Rs. 12,000.

Dec. 19         Returned merchandise by customers Rs. 2,000 costing Rs. 1,800.

Dec. 25         Purchased office chair for cash Rs. 300.

Dec. 30         Paid shop Rent Rs. 2,000.

Dec. 31         Cash sales Rs. 15,000, costing Rs. 10,000.


i)          Show the effects of above transactions on Accounting Equation.

ii)        Prepare a new Balance Sheet at the end of December 2005.

Answer:          3,64,300.

8.        Give the effect of the following transactions of a trader incurred
during the month of May 2006 by means of Accounting Equation:-

(a)              Ali started business by introducing capital Rs. 25,000.

(b)             Purchased building for Rs. 10,000.

(c)             Purchased furniture for Rs. 14,000 on Account from Qureshi Furniture Store.

(d)             Earned Rs. 139,000 receiving the amount in cash.

(e)              Following expenses were paid during the month:- Wages Rs. 1,125; Utilities Rs. 250; Trader Expenses Rs. 130. Ali withdrew from the business Rs. 1,200 in cash for his personal use.

Answer:          Rs. 175,295.

9.        Salman started business with Rs. 50,000. His transactions for the

month are given below:-


July 1 Purchased merchandise for cash Rs. 10,000

8 Purchased furniture for cash Rs. 8,000.

  • 12 Merchandise costing Rs. 8,000 were sold for Rs. 10,000 on Account.
  • 15 Purchased merchandise for cash Rs. 14,000.
  • 22 Merchandise costing Rs. 6,000 were sold for Rs. 8,000 on credit.
  • 27 Payment received against Accounts receivable Rs. 10,000.
  • 31 Rent of the shop for the month was paid Rs. 500.

Required:         Show the effect of the above transaction on the Accounting Equation..

Answer:           Rs. 53,500.

10.              Mr. Kamal’s Plumbing Shop has the following assets and Equities
April 1, 2006.

Cash                            3,300                      Owner’s equity               12,000

Accounts Receivable      1,900                      Accounts Payable

Tools                           8,150

During next few days, following transactions took place:

(a)                Paid Rent Rs. 400.

(b)                Bought supplies for Rs. 100.

(c)                Paid for supplies previously bought on credit Rs. 500.

(d)                Bought tools on credit Rs. 350 and for cash Rs. 200.

(e)                Received for service rendered Rs. 900. Services rendered on account Rs. 210.

(g)                Received from customers (A/c Receivable) Rs. 650.

(h)                Paid for oil and gas used Rs. 150.

(i)                  Paid sundry expenses Rs. 180.

(1)        Paid Rs. 200 for rent of the house of the owner.

Required:               Show the effects of above transactions on accounting
equation beginning from balances given.

Answer:                 Rs. 15,080/-

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