This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
a) Step 1: Prepare the accounting equation. The accounting equation is Assets = Liabilities + Owner's Equity. We will track the changes in each component for every transaction. |l|l|l|l| Transaction No. & Assets & = Liabilities & + Owner's Equity \\ Initial Balance & Rs. 0 & Rs. 0 & Rs. 0 \\ i. Mr. Tariq started business with cash Rs.90000/= & Cash: +90,000 & & Capital: +90,000 \\ Balance & Cash: 90,000 & Rs. 0 & Capital: 90,000 \\ ii. Purchased furniture for cash Rs.10000/= & Cash: -10,000 & & \\ & Furniture: +10,000 & & \\ Balance & Cash: 80,000 & Rs. 0 & Capital: 90,000 \\ & Furniture: 10,000 & & \\ iii. Paid office rent Rs.4000/= & Cash: -4,000 & & Rent Expense: -4,000 \\ Balance & Cash: 76,000 & Rs. 0 & Capital: 86,000 \\ & Furniture: 10,000 & & \\ iv. Goods purchased for cash Rs.9000/= & Cash: -9,000 & & \\ & Inventory: +9,000 & & \\ Balance & Cash: 67,000 & Rs. 0 & Capital: 86,000 \\ & Furniture: 10,000 & & \\ & Inventory: 9,000 & & \\ v. Cash received and goods sold Rs.15000/= & Cash: +15,000 & & Sales Revenue: +15,000 \\ Final Balance & Cash: 82,000 & Rs. 0 & Capital: 101,000 \\ & Furniture: 10,000 & & \\ & Inventory: 9,000 & & \\ Final Accounting Equation: Assets: Cash: Rs. 82,000 Furniture: Rs. 10,000 Inventory: Rs. 9,000 Total Assets = Rs. 82,000 + Rs. 10,000 + Rs. 9,000 = Rs. 101,000 Liabilities: Rs. 0 Owner's Equity: Capital: Rs. 101,000 The accounting equation holds: Assets (Rs. 101,000) = Liabilities (Rs. 0) + Owner's Equity (Rs. 101,000). b) Step 1: Prepare Journal entries for the given transactions. i. Mr. Muhammad Asif started business with cash Rs.75000/= Cash A/c Dr. Rs. 75,000 To Capital A/c Cr. Rs. 75,000 (Being business started with cash) ii. Goods sold for cash Rs.9000/= Cash A/c Dr. Rs. 9,000 To Sales A/c Cr. Rs. 9,000 (Being goods sold for cash) iii. Goods purchased for cash Rs.7000/= Purchases A/c Dr. Rs. 7,000 To Cash A/c Cr. Rs. 7,000 (Being goods purchased for cash) iv. Cash received from Mr.Akram Rs.900/= (v) Discount allowed Rs.100/= Cash A/c Dr. Rs. 900 Discount Allowed A/c Dr. Rs. 100 To Mr. Akram A/c Cr. Rs. 1,000 (Being cash received from Mr. Akram after allowing discount) Step 2: Prepare the Cash Account. Cash Account |l|l|l|l| Debit & Amount (Rs.) & Credit & Amount (Rs.) \\ To Capital A/c & 75,000 & By Purchases A/c & 7,000 \\ To Sales A/c & 9,000 & By Balance c/d & 77,900 \\ To Mr. Akram A/c & 900 & & \\ Total & 84,900 & Total & 84,900 \\ The final balance of the Cash Account is a debit balance of Rs. 77,900.