Accounting Equation



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Accounting Equation
(01) st January Mr.Silva commenced a business by investing Rs, 000.
2
nd
January a motorcar was purchased at Rs. 400,000.
rd January an inventory was purchased for cash at Rs. 200,000.
4
th
January all the inventories purchased were sold at Rs, 000 for cash.
5
th
January an inventory was purchased on credit at Rs. 400,000.
6
th
January half of the inventory purchased on 5
th
January was sold on credit at Rs. 250,000.
7
th
January Rs. 200,000 was paid to creditors.
8
th
January a receipt of Rs. 100,000 from debtors.
9
th
Jan Mr. Silva withdrew Rs. 75,000 for his personal use.
10
th
January Rs. 40,000 was paid for rent.
11
th
January a bank loan was obtained at Rs. 600,000, repayable period is 2 years. You are required to show the above transactions and events in the accounting equation and to prepare the balance sheet as at 11
th
January.
(02) The balance sheet of Mahesh traders, a sole proprietorship, as at st January 2020 is given bellow.
Balance sheet as at 01/01/2020
Equity 55,000 stock 50,000
Bank loan 20,000 cash 25,000 75,000 75,000 The following transactions and events took place during the month of January 2016. Jan. 04
th goods with a cost of Rs, 15,000 were sold for Rs. 30,000 on credit. Jan 08
th goods were purchased for Rs. 10,000 on one month credit. Jan 12
th goods sold for Rs, 000 on 04/01/2020 were returned by the customers. Jan 16
th goods with a cost of Rs. 20,000 were sold for Rs. 35,000 on cash.

Jan 18
th employees salaries for the month of January amounting to Rs were paid. Jan. 25
th
A loan installment of Rs for the month including interest of Rs. 200 was paid.
Jan.31
st goods with a cost of Rs. 4,000 were written off from stock. Required a) Show the effect of these transactions and events on the accounting equation b) Balance sheet of Mahesh traders as at st Jan 2020.
(03) Shantha Company which engages in retail trading had following assets and liabilities as at st Jan
2020. Rs. Building at coat 960,000 Provision for depreciation on building 480,000 Stock 30,000 Trade debtors 100,000 Provision for doubtful debts 10,000 Cash in hand 20,000 Trade creditors 100,000 The following transactions took place during the month of January 2020. I. The owner invested Rs. 200,000 in cash in the business. II. Purchased goods worth of Rs. 45,000 on credit. III. Credit sales were Rs. 360,000. The cost of these goods was rs. 300,000. IV. The owner withdrew Rs. 40,000 cash from the business for personal use. V. Paid Rs. 50,000 as salaries and 30,000 as office expenses. VI. After allowing a discount of As. 20,000 cash received from debtors was Rs. 380,000. VII. Cash paid to creditors Rs. 40,000. VIII. A 10% provision was made for doubtful debts on the debtors balance at the month end. IX.
The building was depreciated at 10% per annum on cost. Required, a) Classify the opening balances and enter the total of them under the balance sheet equation b) Enter the value of each above transactions under the balance sheet equation, and state whether the value increase) or decrease (-) in front of these values. c) Calculate the net profit for the month of January using opening and closing net assets.

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