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Prepare accounting equation from the following: (1) started business with cash Rs 75000 and goods Rs 25000. (2) Goods costing Rs 20000 sold on credit at a profit of 25%. (3) Received commission in advance Rs 5000?
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Prepare accounting equation from the following: (1) started business w...
Cash + Stock + Debtors =Commission +Capital 75000 +25000 + 0 =0 +1000000 -20000 +25000 =0 +50005000 +0 +0 =5000 +080000 +5000 +25000 =5000 +105000110000 = 110000Here goods are sold at 25000 so only debtors and the profit 5000 is added to capital.Also commission received in advance is a liability.Hope you understand.
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Prepare accounting equation from the following: (1) started business w...
Accounting Equation


The accounting equation is:


Assets = Liabilities + Owner's Equity


Transaction 1


Started business with cash Rs 75000 and goods Rs 25000.



  • Assets: Cash Rs 75000 + Goods Rs 25000 = Rs 100000

  • Liabilities: None

  • Owner's Equity: None



Transaction 2


Goods costing Rs 20000 sold on credit at a profit of 25%.



  • Assets: Cash Rs 75000 + Goods Rs 5000 (25% profit on Rs 20000) = Rs 80000

  • Liabilities: None

  • Owner's Equity: None



Transaction 3


Received commission in advance Rs 5000.



  • Assets: Cash Rs 75000 + Goods Rs 5000 (25% profit on Rs 20000) + Commission in advance Rs 5000 = Rs 85000

  • Liabilities: None

  • Owner's Equity: None



The accounting equation after all the transactions is:



  • Assets: Rs 85000

  • Liabilities: None

  • Owner's Equity: None



As there are no liabilities or owner's equity, the entire asset value of Rs 85000 belongs to the owner.
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Prepare accounting equation from the following: (1) started business with cash Rs 75000 and goods Rs 25000. (2) Goods costing Rs 20000 sold on credit at a profit of 25%. (3) Received commission in advance Rs 5000?
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