Accounting Equation 2

Accounting Equation 2

Q 1: Plant = 50,000; Goods = 25000; Cash = 20000; borrowings = 35000; Capital = 25000. Show the accounting equation.

Answer: Capital (25,000) + Profit (35,000) + Borrowings (Creditors = 35,000) = Cash (20,000) + Goods (25,000) + Plant (50,000)

Q 2: Capital = 50,000; Assets = 100,000. Equity = 80,000; find liabilities.

Answer: Liability + Equity = Asset. Hence, Liability is 20,000.

Q 3: Started business with cash =50,000; Purchased stock of goods on credit from XY ltd. = 30,000; Sold all stock for 50,000. Find the Equity at the end of the month.

Answer: 70,000

Balance Sheet			IS		CFS
Source of Funds	Opening BS	Closing BS	Income		Receipts
Capital	50000	50000			Opening Cash Balance	50000
Retained Profit	0	20000	Goods Sold	50000	Goods Sold	50000
Creditor XY	30000	30000
Total	80000	100000	Total	50000	Total	100000
Application of Funds			Expense		Payment
Cash in Hand	50000	100000
Goods	30000	0	COGS	30000
Total	80000	100000	Total	30000	Total	0
			Profit	20000	CIH (Cash in Hand)	100000

Q 4: Net-worth = 50,000; Cash =50,000; Total Assets = 200,000; Find the debt.

Answer: Net-Worth = Equity = 50,000; Asset = 200,000. Hence, Debt is 200,000 – 50,000 = 150,000

Q 5: Profit of A ltd for the period = 50,000; Sales =250,000; Salaries for the period = 25,000; Salaries paid = 20,000; Find cost of goods sold assuming there are no other expenses.

Answer: COGS = 175,000

IS
Income
Sales	250000
Total	250000
Expense
Salary	25000
COGS	175000
Total	200000
Profit	50000

Q 6: Net-worth = Negative 50,000; Cash =50,000; Total Assets = 200,000; Find debt.

Answer: Net Worth = Equity = -50,000; Assets = 200,000. Hence Debt is 200,000 – (-50,000) = 250,000.