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Prepare the accounting equation for the following transactions: Mr. Tariq started business with cash Rs.90000/= , Purchased furniture for cash Rs.10000/= , Paid office rent Rs.4000/= , Goods purchased

Accounting

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Answer

b

Rs. 77,900\textbf{Rs. 77,900}

Step-by-step solution

3 steps

Part a· 1 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.

    Transaction No.Assets= Liabilities+ Owner’s EquityInitial BalanceRs. 0Rs. 0Rs. 0i. Mr. Tariq started business with cash Rs.90000/= Cash: +90,000Capital: +90,000BalanceCash: 90,000Rs. 0Capital: 90,000ii. Purchased furniture for cash Rs.10000/= Cash: −10,000Furniture: +10,000BalanceCash: 80,000Rs. 0Capital: 90,000Furniture: 10,000iii. Paid office rent Rs.4000/= Cash: −4,000Rent Expense: −4,000BalanceCash: 76,000Rs. 0Capital: 86,000Furniture: 10,000iv. Goods purchased for cash Rs.9000/= Cash: −9,000Inventory: +9,000BalanceCash: 67,000Rs. 0Capital: 86,000Furniture: 10,000Inventory: 9,000v. Cash received and goods sold Rs.15000/= Cash: +15,000Sales Revenue: +15,000Final BalanceCash: 82,000Rs. 0Capital: 101,000Furniture: 10,000Inventory: 9,000\begin{array}{|l|l|l|l|} \hline \textbf{Transaction No.} & \textbf{Assets} & \textbf{= Liabilities} & \textbf{+ Owner's Equity} \\ \hline \text{Initial Balance} & \text{Rs. } 0 & \text{Rs. } 0 & \text{Rs. } 0 \\ \hline \text{i. Mr. Tariq started business with cash Rs.90000/= } & \text{Cash: } +90,000 & & \text{Capital: } +90,000 \\ \text{Balance} & \text{Cash: } 90,000 & \text{Rs. } 0 & \text{Capital: } 90,000 \\ \hline \text{ii. Purchased furniture for cash Rs.10000/= } & \text{Cash: } -10,000 & & \\ & \text{Furniture: } +10,000 & & \\ \text{Balance} & \text{Cash: } 80,000 & \text{Rs. } 0 & \text{Capital: } 90,000 \\ & \text{Furniture: } 10,000 & & \\ \hline \text{iii. Paid office rent Rs.4000/= } & \text{Cash: } -4,000 & & \text{Rent Expense: } -4,000 \\ \text{Balance} & \text{Cash: } 76,000 & \text{Rs. } 0 & \text{Capital: } 86,000 \\ & \text{Furniture: } 10,000 & & \\ \hline \text{iv. Goods purchased for cash Rs.9000/= } & \text{Cash: } -9,000 & & \\ & \text{Inventory: } +9,000 & & \\ \text{Balance} & \text{Cash: } 67,000 & \text{Rs. } 0 & \text{Capital: } 86,000 \\ & \text{Furniture: } 10,000 & & \\ & \text{Inventory: } 9,000 & & \\ \hline \text{v. Cash received and goods sold Rs.15000/= } & \text{Cash: } +15,000 & & \text{Sales Revenue: } +15,000 \\ \text{Final Balance} & \textbf{Cash: } \mathbf{82,000} & \textbf{Rs. } \mathbf{0} & \textbf{Capital: } \mathbf{101,000} \\ & \textbf{Furniture: } \mathbf{10,000} & & \\ & \textbf{Inventory: } \mathbf{9,000} & & \\ \hline \end{array}

    Final Accounting Equation:
    Assets (Cash Rs. 82,000 + Furniture Rs. 10,000 + Inventory Rs. 9,000) = Rs. 101,000
    Liabilities = Rs. 0
    Owner's Equity (Capital) = Rs. 101,000
    The equation holds: Assets = Liabilities + Owner's Equity (Rs. 101,000 = Rs. 0 + Rs. 101,000).

Part b

Rs. 77,900\textbf{Rs. 77,900}

  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)

  2. Prepare the Cash Account.

    Cash Account\textbf{Cash Account} DebitAmount (Rs.)CreditAmount (Rs.)To Capital A/c75,000By Purchases A/c7,000To Sales A/c9,000By Balance c/d77,900To Mr. Akram A/c900Total84,900Total84,900\begin{array}{|l|l|l|l|} \hline \textbf{Debit} & \textbf{Amount (Rs.)} & \textbf{Credit} & \textbf{Amount (Rs.)} \\ \hline \text{To Capital A/c} & 75,000 & \text{By Purchases A/c} & 7,000 \\ \text{To Sales A/c} & 9,000 & \text{By Balance c/d} & 77,900 \\ \text{To Mr. Akram A/c} & 900 & & \\ \hline \textbf{Total} & \textbf{84,900} & \textbf{Total} & \textbf{84,900} \\ \hline \end{array}

    The final balance of the Cash Account is a debit balance of Rs. 77,900\boxed{\textbf{Rs. 77,900}}.

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