Commerce Exam > Commerce Questions > Prove the accounting equations from the follo...
Start Learning for Free
Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000?
Most Upvoted Answer
Prove the accounting equations from the following transactions - start...
Introduction
The accounting equation is the foundation of the double-entry accounting system that is used by businesses to record their financial transactions. The equation states that assets equal liabilities plus equity. In this response, we will prove the accounting equation from the given transactions.
Transactions
The given transactions are:
- started business with Rs.50,000
- purchased furniture Rs.25,000
- purchased goods from Alex Rs.20,000
- sold goods from Alex Rs.20,000
- sold goods of Rs.10,000 to Jose at 50% profit
- Depreciation on furniture Rs.2000
Analysis
To prove the accounting equation, we need to analyze each transaction and determine its impact on the equation. The following is the analysis of each transaction:
- Started business with Rs.50,000: This transaction increases the assets of the business by Rs.50,000.
- Purchased furniture Rs.25,000: This transaction decreases the assets of the business by Rs.25,000 and increases the liabilities of the business by Rs.25,000 (assuming the purchase was made on credit).
- Purchased goods from Alex Rs.20,000: This transaction decreases the assets of the business by Rs.20,000 and increases the liabilities of the business by Rs.20,000 (assuming the purchase was made on credit).
- Sold goods from Alex Rs.20,000: This transaction increases the assets of the business by Rs.20,000 and decreases the inventory (an asset) by Rs.20,000.
- Sold goods of Rs.10,000 to Jose at 50% profit: This transaction increases the assets of the business by Rs.15,000 (Rs.10,000 + 50% profit of Rs.10,000) and increases the equity of the business by Rs.5,000 (profit earned).
- Depreciation on furniture Rs.2000: This transaction decreases the assets of the business by Rs.2,000 and decreases the equity of the business by Rs.2,000 (assuming the straight-line method of depreciation is used).
Proving the Accounting Equation
The total assets of the business are calculated as follows:
Starting capital + Furniture + Inventory - Depreciation = Rs.50,000 + Rs.25,000 + Rs.0 - Rs.2,000 = Rs.73,000
The total liabilities and equity of the business are calculated as follows:
Liabilities = Rs.45,000 (Rs.25,000 + Rs.20,000)
Equity = Rs.28,000 (Rs.50,000 - Rs.25,000 + Rs.5,000 - Rs.2,000)
Total liabilities and equity = Rs.73,000 (Rs.45,000 + Rs.28,000)
Therefore, the accounting equation holds true:
Assets (Rs.73,000) = Liabilities (Rs.45,000) + Equity (Rs.28,000)
Conclusion
The accounting equation is a fundamental concept in accounting and is used to ensure that all financial transactions are recorded accurately. By analyzing each transaction, we were able to prove that the accounting equation holds true for the given transactions.
The accounting equation is the foundation of the double-entry accounting system that is used by businesses to record their financial transactions. The equation states that assets equal liabilities plus equity. In this response, we will prove the accounting equation from the given transactions.
Transactions
The given transactions are:
- started business with Rs.50,000
- purchased furniture Rs.25,000
- purchased goods from Alex Rs.20,000
- sold goods from Alex Rs.20,000
- sold goods of Rs.10,000 to Jose at 50% profit
- Depreciation on furniture Rs.2000
Analysis
To prove the accounting equation, we need to analyze each transaction and determine its impact on the equation. The following is the analysis of each transaction:
- Started business with Rs.50,000: This transaction increases the assets of the business by Rs.50,000.
- Purchased furniture Rs.25,000: This transaction decreases the assets of the business by Rs.25,000 and increases the liabilities of the business by Rs.25,000 (assuming the purchase was made on credit).
- Purchased goods from Alex Rs.20,000: This transaction decreases the assets of the business by Rs.20,000 and increases the liabilities of the business by Rs.20,000 (assuming the purchase was made on credit).
- Sold goods from Alex Rs.20,000: This transaction increases the assets of the business by Rs.20,000 and decreases the inventory (an asset) by Rs.20,000.
- Sold goods of Rs.10,000 to Jose at 50% profit: This transaction increases the assets of the business by Rs.15,000 (Rs.10,000 + 50% profit of Rs.10,000) and increases the equity of the business by Rs.5,000 (profit earned).
- Depreciation on furniture Rs.2000: This transaction decreases the assets of the business by Rs.2,000 and decreases the equity of the business by Rs.2,000 (assuming the straight-line method of depreciation is used).
Proving the Accounting Equation
The total assets of the business are calculated as follows:
Starting capital + Furniture + Inventory - Depreciation = Rs.50,000 + Rs.25,000 + Rs.0 - Rs.2,000 = Rs.73,000
The total liabilities and equity of the business are calculated as follows:
Liabilities = Rs.45,000 (Rs.25,000 + Rs.20,000)
Equity = Rs.28,000 (Rs.50,000 - Rs.25,000 + Rs.5,000 - Rs.2,000)
Total liabilities and equity = Rs.73,000 (Rs.45,000 + Rs.28,000)
Therefore, the accounting equation holds true:
Assets (Rs.73,000) = Liabilities (Rs.45,000) + Equity (Rs.28,000)
Conclusion
The accounting equation is a fundamental concept in accounting and is used to ensure that all financial transactions are recorded accurately. By analyzing each transaction, we were able to prove that the accounting equation holds true for the given transactions.
Community Answer
Prove the accounting equations from the following transactions - start...
Attention Commerce Students!
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.
|
Explore Courses for Commerce exam
|
|
Similar Commerce Doubts
Top Courses for CommerceView all
Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000?
Question Description
Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000?.
Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000?.
Solutions for Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? in English & in Hindi are available as part of our courses for Commerce.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? defined & explained in the simplest way possible. Besides giving the explanation of
Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000?, a detailed solution for Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? has been provided alongside types of Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? theory, EduRev gives you an
ample number of questions to practice Prove the accounting equations from the following transactions - started business with Rs.50,000 - purchased furniture Rs.25,000 - purchased goods from Alex Rs.20,000 - sold goods from Alex Rs.20,000 - sold goods of Rs.10,000 to Jose at 50% profit - Depreciation on furniture Rs.2000? tests, examples and also practice Commerce tests.
|
|
Explore Courses for Commerce exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup