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DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsShort Answer QuestionQ.1 Give two basic purposes of the accounting equation.The solution for this question is as follows:The two basic purposes of the accounting equation are.(i) The accounting equation is always equal it ensures the accuracy in the recording of a business transaction.(ii) It helps in preparation of the balance sheet.Q.2 Which of the following equations are correct?I. Assets Capital LiabilitiesII. Assets Capital – LiabilitiesIII. Assets Liabilities – CapitalIV. Capital Assets – LiabilitiesV. Capital Assets LiabilitiesVI. Liabilities Capital AssetsVII. Liabilities Capital – AssetsVIII. Liabilities Assets – CapitalThe solution for this question is as follows:Equations I, IV, VIII are the correct.Q.3 The position of a businessman on 30th June 1994 was as follows –Cash 5,000, Debtor 20,000, Machinery 60,000, Stock 25,000, Capital 75,000. Calculate his liabilities.The solution for this question is as follows:Liabilities Assets- CapitalLiabilities 5,000 20,000 60,000 25,000 – 75,000 1,10,000 – 75,000 35,000

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsQ.4 What entry (debit or credit) would you make to (a) increase in revenue (b)decrease in expense (c) recorddrawing (d) record the fresh capital introduced by owner.The solution for this question is as follows:(a) Increase in revenue: Credit(b) A decrease in expense: Credit(c) Record drawing: Debit in Capital Account(d) Record the fresh capital introduced by the owner: Credit in Capital AccountQ.5 If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or credit? If thetransaction has the effect of decreasing a liability, is the decrease recorded as a debit or credit?The solution for this question is as follows:(i) A decrease in Asset will be recorded on the credit side.(ii) A Decrease in Liability will be recorded on the debit side.Q. 6 Name the transaction that will(i) Decrease the assets and decrease the capital(ii) Increase the assets and increase the liabilities(iii) Increase the assets and decrease another asset(iv) Decrease the assets and decrease the liabilitiesThe solution for this question is as follows:(i) Decrease the assets and decrease the capital – Drawings or expenses(ii) Increase the assets and increase the liabilities – Purchase of an asset on credit(iii) Increase the assets and decrease another asset – Purchase or sale of an asset in cash(iv) Decrease the assets and decrease the liabilities – Payment of a liability

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsQ.7 What will be the effect of the following on the accounting equation(i) Purchased goods for 20,000 form Mahesh on credit(ii) Sold goods to Suresh costing 8,000 for 10,000 in cash(iii) Paid wages 500(iv) Withdrew in cash for private use 2,000(v) Paid to creditors 2,000The solution for this question is as follows:(i) Stock Creditors(ii) Cash – Stock Capital(iii) – Cash – Capital(iv) – Cash – Capital(v) – Cash – CreditorQ.8 If the total asset of a business is 2,00,000 and the net worth (capital) is 1,50,000. Calculate creditors.The solution for this question is as follows:Creditor (Liabilities) Assets – Capital 2,00,000- 1,50,000 50,000Q.9 A business on 1st April 2011 with a capital of 5,00,000. On 31st March 2012, his assets were worth 7,80,000 and liabilities 70,000. Find out his closing capital and profits earned during the year.The solution for this question is as follows:Closing Capital Closing Assets-Closing liabilities 7,80,000 – 70,000 7,10,000Profit Closing Capital – Opening Capital 7,10,000- 5,00,000 2,10,000

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsQ.10 On which side will the increase in the following account be recorded? Also, mention the nature of theaccount.1. Cash 5. Proprietor’s Account2. Machinery 6. Rent Received3. Debtor 7. Salary Paid4. Creditor 8. Interest ReceivedThe solution for this question is as lityProprietor’s AccountCreditCapitalRent ReceivedCreditIncomeSalary PaidDebitExpensesInterest ReceivedCreditIncomeQuestion 11 On which side will the increase in the following account be recorded? Also, mention the nature ofthe account.1. Furniture 5. Salary Outstanding2. Bank 6. Subash- a customer3. Proprietor’s Account4. Salary PaidThe solution for this question is as tCreditAssetAssetProprietor’s AccountDebitCapital A/cSalary PaidCreditExpensesSalary OutstandingDebitLiabilitySubash- a customerCreditAsset

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsVery Short QuestionsQ.1 What is an accounting equation?The solution for this question is as follows:An accounting equation is an accounting formula which indicates that a company’s assets are always equal to thetotal of liabilities and capital.Q.2 Give fundamental accounting equation.The solution for this question is as follows:Assets Liabilities CapitalQ.3 If the capital of a firm is 5,00,000 and outside liabilities are 2,00,000. Evaluate total assets of the company.The solution for this question is as follows:Total Assets 7,00,000Q.4 If total assets of a company are 10,00,000 and capital is 4,00,000. Calculate creditorsThe solution for this question is as follows:Creditors 6,00,000Q. 5 ‘X’ commenced business on April 1st 2013 with a capital of 6,00,000. On 31st March, 2014 his assets wereworth 8,00,000 and liabilities 50,000. Find out his closing capital and profits earned during the year.The solution for this question is as follows:Closing capital 7,50,000, profit 1,50,000Q. 6 What is debit?The solution for this question is as follows:When an amount is entered on the left-hand side of an account, it is a debit and the account is said to be debited.Q.7 What is credit?The solution for this question is as follows:When an amount is entered on the right-hand side of an account, it is a credit and the account is said to becredited.Q.8 Why are the rules of credit and debit same for both capital and liabilities?The solution for this question is as follows:The rules of credit and debit are same for both capital and liabilities because the business entity concept capital isalso treated as liability of a firm.Q.9 Name the side on which increase in capital is recorded.The solution for this question is as follows:Credit side

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsPractical QuestionsQ. 1 Prepare accounting equation from the following. 1.2.Sandeep started business with cashPurchased furniture for cash1,00,0005,0003.Purchased goods for cash20,0004.Purchased goods on credit36,0005.Paid for rent7006.Goods costing 40,000 sold at a profit of 20% for cashThe solution for this question is as follows:Accounting EquationS.NoTransactionCash 1.2.3.Sandeep began his company with cashBought furniture with cashBought goods with cashLiabilities Furniture Stock Creditors1,00,0001,00,000– 5,000 5,00095,0005,000– 20,0001,00,000 20,0005,000Bought goods on creditPaid for rentCapital1,00,00075,0005. 1,00,00075,0004.Assets5,00020,0001,00,000 36,000 036,00099,300

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting Equations6.Goods costing 40,000 sold at a 20%profit for cash–40,000 48,0001,22,3005,00016,000 8,00036,0001,07,300Working Note:Cost of Goods Sold 40,000Add: Profit 20% of Rs 40,000 8,000Hence, Selling Price 48,000Q.2 (A) Show the Accounting Equation on the basis of the following and present a balance sheet on the last newequation balances: 1.2.Manu started business with cashBought furniture for50,0005003.Bought goods on credits4,0004.Sold goods on cash (cost 500) for7005.Rent Received2006.Bought goods for cash1,0007.Withdrew for personal use7008.Paid to creditors4009.Paid for salaries200The solution for this question is as follows:Accounting EquationS. NoTransactionCash 1.Manu began his company withcashAssets Liabilities Furniture Stock CreditorsCapital50,00050,00050,00050,000

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting Equations2.3.Bought furniture– 500 50049,500500Bought goods on credit49,5004.Sold goods on cash (cost 500)for 70050,2005.Received rentBought goods for cashWithdrew for personal usePaid to creditors4,0005003,500( 200 profit)4,0005003,50048,10050,4004,00050,4000 5004,5003,60049,700–2005004,5003,600On Balance Sheet EntryLiabilitiesAmount (Rs)AssetsAmount 500Stock4,50053,10050,2004,000–200Salaries paid50,000( 200 Income)-40048,3009.4,000-70048,7008. 4,000-500-1,00049,4007. 4,000 20050,4006.50050,00053,10049,500

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsQ.2 (B) Prove that the accounting equation is satisfied in all the following transactions of Rajaram. Also prepare abalance sheet.1. Started business with cash 1,20,0002. Purchased a typewriter for cash 8,000 for office use3. Purchased goods for 50,000 on cash4. Purchased goods for 40,000 on credit5.Goods costing 60,00 sold for 80,000on credit6. Paid for rent 1,500 and for salaries 2,0007. Received 800 for commission8. Withdrew for private use 5,000 in cashThe solution for this question is as follows:Accounting EquationS.NoTransactionCash 1.2.3.Started business withcashPurchased atypewriterPurchased goods oncreditTypewriter Stock DebtorsCapital Creditors1,20,0001,20,000– 8,000 8,0001,12,0008,000–50,0008,000Purchased goods oncashGoods costingLiabilities 1,20,00062,0005. 1,20,00062,0004.Assets8,0001,20,000 50,000 4,00050,0004,000 40,00040,00090,00040,000-60,000 80,0001,20,0001,20,000 20,000 (profit)

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting Equations 60,00 sold for 80,000 on credit62,0006.Paid for rentCommissionReceivedCash withdrawal forprivate use80,00040,0008,00030,00080,00040,0001,36,500 40,000–3,500(Expenses) jan’s Balance ebtor80,0001,72,3001,72,300Q.3 Prepare Accounting Equation from the following:(a) Started business with Cash 2,00,000.(b) Purchased goods for Cash 60,000 and on Credit 1,50,000.(c) Sold goods for Cash costing 40,000 at a profit of 20% and on Credit costing 72,000 at a profit of 25%.(d) Paid for Rent 5,000.

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsThe solution for this question is as follows:Accounting EquationS.NoTransactionCash 1.2.3.4.Started business with cashBought product for 60,000 Cashand on 1,50,000 creditSold goods for 40,000 cash at20% profit on 72,000 credit at25% profitRent paidAssets Liabilities Stock Debtors �60,000 2,10,000 1,50,000 1,40,0002,10,0001,50,0002,00,000 48,000–1,12,000 90,000 4,000 26,000(Profit) 1,88,00098,00090,0001,50,0002,26,000– 5,000 1,83,000Working Note:Calculating selling price of product soldCost of goods sold 40,000Add: 20% profit of 40,000 8,000Hence, selling price for goods sold for cash 48,000Cost of goods sold 72,000Add: 20% profit of 72,000 18,000Hence, selling price for goods sold for cash 90,000Total Profit 8,000 18,000 Rs 26,000Total Cost of Goods Sold 40,000 72,000 Rs ,000

DK Goel Solutions for Class 11 Accountancy Chapter 6Accounting EquationsQuestion 4 Prepare accounting equation from the following. 1.2.Kunal started business with cashHe purchased furniture for cash2,50,00035.0003.He paid commission2,0004.He purchased goods on credit40,0005He sold goods (Costing 20,000) for cash26,000The solution for this question is as follows:Accounting EquationS.NoTransactionCash 1.2.3.Kunal started his company withcashPurchased furniture for cashPaid commissionLiabilities Furniture Stock Creditors2,50,0002,50,000–35,000 35,0002,15,00035,000 1,50,0002,50,000–2,000-2,000(Expense)35,000He purchased goods on creditHe sold goods (Costing 20,000)for cashCapital2,50,0002,13,0005. 2,50,0002,13,0004.Assets35,000 40,000 40,00040,00040,000–20,000 26,0002,39,0002,48,00035,00020,0002,48,000 6,000 (Profit)40,0002,54,000