Answer :
Answer:
To prepare the accounting equation, we will follow these transactions step by step and update the equation accordingly. The basic accounting equation is:
\[ \text{Assets} = \text{Liabilities} + \text{Owner's Equity} \]
### Transaction 1: Started the business
- Cash: ₹1,00,000
- Goods (Inventory): ₹50,000
- Loan: ₹15,000
Initial accounting equation:
\[ \text{Assets (Cash + Inventory)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,00,000 + ₹50,000)} = \text{₹15,000} + \text{(₹1,35,000)} \]
\[ \text{₹1,50,000} = \text{₹15,000} + \text{₹1,35,000} \]
### Transaction 2: Goods sold
- Cost of goods sold: ₹24,000
- Selling price (at a profit of 33 1/3%): ₹32,000
- 3/4th payment received in cash: ₹24,000 (3/4 of ₹32,000)
- 1/4th payment as accounts receivable: ₹8,000 (1/4 of ₹32,000)
Update inventory and cash:
\[ \text{Inventory: ₹50,000 - ₹24,000 = ₹26,000} \]
\[ \text{Cash: ₹1,00,000 + ₹24,000 = ₹1,24,000} \]
\[ \text{Accounts Receivable: ₹8,000} \]
\[ \text{Profit (added to owner's equity): ₹32,000 - ₹24,000 = ₹8,000} \]
Updated equation:
\[ \text{Assets (Cash + Inventory + Accounts Receivable)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,24,000 + ₹26,000 + ₹8,000)} = \text{₹15,000} + \text{(₹1,43,000 + ₹8,000)} \]
\[ \text{₹1,58,000} = \text{₹15,000} + \text{₹1,51,000} \]
### Transaction 3: Paid rent in advance
- Prepaid Rent: ₹6,000
- Cash: ₹1,24,000 - ₹6,000 = ₹1,18,000
Updated equation:
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,18,000 + ₹26,000 + ₹8,000 + ₹6,000)} = \text{₹15,000} + \text{₹1,51,000} \]
\[ \text{₹1,58,000} = \text{₹15,000} + \text{₹1,51,000} \]
### Transaction 4: Goods withdrawn for personal use
- Goods withdrawn: ₹10,000 (reduce inventory and owner's equity)
Updated equation:
\[ \text{Inventory: ₹26,000 - ₹10,000 = ₹16,000} \]
\[ \text{Owner's Equity: ₹1,51,000 - ₹10,000 = ₹1,41,000} \]
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,18,000 + ₹16,000 + ₹8,000 + ₹6,000)} = \text{₹15,000} + \text{₹1,41,000} \]
\[ \text{₹1,48,000} = \text{₹15,000} + \text{₹1,41,000} \]
### Transaction 5: Interest on drawings
- Interest on drawings: ₹55 (reduce owner's equity)
Updated equation:
\[ \text{Owner's Equity: ₹1,41,000 - ₹55 = ₹1,40,945} \]
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,18,000 + ₹16,000 + ₹8,000 + ₹6,000)} = \text{₹15,000} + \text{₹1,40,945} \]
\[ \text{₹1,48,000} = \text{₹15,000} + \text{₹1,40,945} \]
### Transaction 6: Goods given as charity
- Goods given as charity: ₹1,000 (reduce inventory and owner's equity)
Updated equation:
\[ \text{Inventory: ₹16,000 - ₹1,000 = ₹15,000} \]
\[ \text{Owner's Equity: ₹1,40,945 - ₹1,000 = ₹1,39,945} \]
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,18,000 + ₹15,000 + ₹8,000 + ₹6,000)} = \text{₹15,000} + \text{₹1,39,945} \]
\[ \text{₹1,47,000} = \text{₹15,000} + \text{₹1,39,945} \]
### Transaction 7: Loss of Cash by theft
- Loss of cash: ₹1,000 (reduce cash)
Updated equation:
\[ \text{Cash: ₹1,18,000 - ₹1,000 = ₹1,17,000} \]
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,17,000 + ₹15,000 + ₹8,000 + ₹6,000)} = \text{₹15,000} + \text{₹1,39,945} \]
\[ \text{₹1,46,000} = \text{₹15,000} + \text{₹1,39,945} \]
### Transaction 8: Loan repayment with interest
- Loan repayment: ₹15,000
- Interest: ₹150
- Total cash paid: ₹15,150
Updated equation:
\[ \text{Cash: ₹1,17,000 - ₹15,150 = ₹1,01,850} \]
\[ \text{Loan: ₹15,000 - ₹15,000 = ₹0} \]
\[ \text{Owner's Equity: ₹1,39,945 - ₹150 = ₹1,39,795} \]
Final accounting equation:
\[ \text{Assets (Cash + Inventory + Accounts Receivable + Prepaid Rent)} = \text{Liabilities (Loan)} + \text{Owner's Equity} \]
\[ \text{(₹1,01,850 + ₹15,000 + ₹8,000 + ₹6,000)} = \text{₹0} + \text{₹1,39,795} \]
\[ \text{₹1,30,850} = \text{₹0} + \text{₹1,30,850} \]