Jaspal has purchased a car for 5,00,000 which he got financed from a Bank to the extent of 4,00,000. How will it be shown in the accounting equation?
Answer
₹ 1,00,000 will be deducted from Asset (Cash/Bank); Asset (Car) will be shown it 5,00,000 and Bank Loan (on the Liabilities side) will be shown at 4,00,000.
Amit has incurred an expense of ₹ 5,000 towards repairs. However, the amount is yet to be paid. How will it be shown in the accounting equation?
Answer
It is an outstanding expense. It will be shown in the accounting equation as deduction from capital and as an Outstanding Expense on the Liabilities side.
''Accounting Equation (A = L + C) always holds good under all circumstances''. Explain with the help of two examples.
Answer
Accounting equation signifies that the asset of a business are always equal to the total of capital and liabilities. A business transaction will result in the change in either of the asset,liabilities or capital of the firm and even after the change the asset will be again equal to the total of capital and liabilities. if a business transaction results in the increase of assets, there will also be a corresponding increase in the amount of either capital or liabilities by the same amount.Ex-
gopal started business with rs 75000 as capital. Ans- Asset = liability + capital Cash = liabilities + capital 75000 = 0 + 75000
A starts a business and invests ₹ $50,000$ on $1^{st}$ April, $2018$. On $31^{st}$ March, $2019$ his assets are ₹ $65,000$ and liabilities are ₹ $6,000$. Find out the amount of capital on $31^{st}$ March, $2019$ and his profit.
Answer
Capital = Assets - Liabilities
= 65,000 - 6,000
= 59,000
Profits = Closing Capital - Opening Capital
= 59,000 - 50,000
= 9,000
A had a capital of ₹ 75,000 on 1st April, 2018. He had also goods amounting to ₹ 15,000 which he had purchased on credit and the payment had not been made. Find out the value of the total assets of the business.
After a period of one month, he came to know that he had suffered a loss of ₹ 1,700. He withdrew ₹ 800 for his personal use. Find out his capital and assets of the business.
Answer
Total Assets = Capital + Creditors for purchase of Goods
= 75,000 + 15,000
= ₹ 90,000
Capital at the end = Capital - Loss - Drawings
= 75,000 - 1,700 - 800
= ₹ 72,500
Assets = Capital at the end + Creditors for purchase of Goods
What is owner's equity? Give an equation for calculating owner's equity. Give two examples at least.
Answer
Owners equity represents the owners investment in the business minus(-) the owners drawn or withdrawals from the business plus(+) the net income since the business began Capital = assets - liabilityEg-
The accounting equation is a mathematical equation which shows that the assets and liabilities of a firm are equal, i.e., Assets = Liabilities + Capital. It is based on Dual Aspect Concept of Accounting.
Capital after Adjustment of revenue and expenses = Capital + Revenue - Expenses= 40,000 + 50,000 - 40,000
= ₹ 50,000
Total = Capital after adjustment +
Assets Creditors
= 50,000 + 25,000
= ₹ 75,000
From the following information find the capital of Vijay: Total Assets 5,00,000; Creditors ₹ 1,00,000; Loan from Bank ₹ 1,50,000.
Answer
Asset = liability + capital
Asset = Creditors + Loan from Bank + capital
5,00,000 = 1,00,000 + 1,50,000 + capital
5,00,000 = 2,50,000 + capital
5,00,000 - 2,50,000 = capital
Capital = 2,50,000
Mohan started a business on $1^{st}$ April, $2018$ with a capital of ₹ $25,000$ and a loan of ₹ $12,500$ borrowed from Shyam. During $2018-19$ he had introduced additional capital of ₹ $12,500$ and had withdrawn ₹ $7,500$ for personal use. On $31^{st}$ March, $2019$ his assets were ₹ $75,000$. Find out his capital as on $31^{st}$ March, $2019$ and profit made or loss incurred during the year $2018-19$.
Answer
Capital on March 31, 2019 = Assets - Loan from Shyam
= 75,000 - 12,500 = ₹ 62,500
Profit (or Loss) during the year 2018-19 = Capital on March 31, 2019 + Drawings - (Additional Capital + Capital on April 01, 2018)
= 62,500 + 7,500 - (12,500 + 25,000)
= 70,000 - 37,500 = ₹ 32,500
A commenced his cloth business on $1^{st}$ April, $2018$ with a capital of ₹ $30,000$. On $31^{st}$ March $2019$, his assets were worth ₹ $50,000$ and liabilities of ₹ $10,000$. Find out his closing capital and profits earned during the year.
Answer
Closing = Assets -
Capital Liabilities
= 50,000 - 10,000
= ₹ 40,000
Profit = Closing Capital - Opening Capital
= 40,000 - 30,000
= ₹ 10,000
On $31^{st}$ March, $2019$, the total assets and external liabilities were ₹ $2,00,000$ and ₹ $6,000$ respectively. During the year, the proprietor had introduced capital of ₹ $20,000$ and withdrawn ₹ $12,000$ for personal use. He made a profit of ₹ $20,000$ during the year. Calculate the capital as on $1^{st}$ April, $2018$.
Answer
Capital as on March 31, 2019 = Total Assets - External Liabilities
= 2,00,000 - 6,000 = ₹ 1,94,000
Capital on April 01, 2018 = Capital on March 31, 2019 - Additional Capital + Drawings - Profit
= 1,94,000 - 20,000 + 12,000 - 20,000 = ₹ 1,66,000