Accounting Equation

 

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Accounting Equation

MEANING OF AN ACCOUNTING EOUAIION
An Accounting Equation is a mathematical expression which shows that the Assets of a firm are equal to the sum of its liabilities and the capital contributed by the owner.
Assets = Liabilities or Claims of Outsiders + Capital or Owner’s Equity OR
Capital = Assets – Liabilities OR
Liabilities = Assets - Capital
The above relationship is known as the Accounting Equation or the Balance Sheet

An Accounting Equation is based on the 'Dual Aspect Principle', which that every business transaction has two aspects, a debit and a credit of equal amount. In other words, for every debit, there is a credit of equal amount in one or more accounts and vice-versa.

Example: Suppose Harsh starts a business by investing 5,00,000 in cash and takes loan of 1,00,000 from the bank.
Now, the assets (cash) in the business will increase by 6,00,000 (5,00,000 + 1,00,000)
At the same time, it will increase owner's equity or capital by 5,00,000; Claims of outsiders, i.e. liabilities will increase by 1,00,000. Now, this transaction can be expressed as:
Assets (Cash) = Claim of Outsiders (Bank Loan) + Owner's Equity (Capital)
It means, total claims (those of outsiders and of the proprietor) will always equal to the total assets of the firm. Thus, fundamental Accounting Equation will always remain good in all situations.
A transaction may affect:
Either Both Sides of the Equation by the same amount,
Or One Side of the Equation only, by both increasing or decreasing it by equal amounts.

Types of Transactions Affecting Accounting Equation
A business transaction may result in any of the following manner:
01. Increase in one Asset and Decrease in other Asset: Transactions like:
Purchase of goods ill cash: It will increase one asset (Stock) and will decrease another asset (Cash).
Sale of goods on credit: It will increase one asset (Debtors) and will decrease another asset (Stock).
02. Increase in an Asset and simultaneously Increase in a Liability: Transactions like:
Purchase of goods on credit: It will increase Asset (Stock) and will also increase Liability (Creditor).
Loan taken from Bank: It will increase Asset (Cash) and will also increase liability (Loan).
03. Increase in Asset and Increase in Capital or Owner's Equity: Transactions like:
Introduction of Capital - It will increase Asset (Cash or Bank) and will also increase Owner's Equity (Capital). Interest Received - It will increase Asset (Cash or Bank) and will also increase Owner's
Equity (Capital).
04. Decrease in an Asset and simultaneously Decrease in a Liability: Transactions like:
Payment to Creditors - It will decrease Asset (Cash) and will also decrease Liability (Creditors).
Repayment of Loan - It will decrease Asset (Cash) and will also decrease Liability (Loan).
05. Decrease in an Asset and simultaneously Decrease in Capital: Transactions like:
Drawing or Withdrawal of Capital - It will decrease Asset (Cash or Bank) and will also decrease Owner's Equity (Capital). Rent Paid - It will decrease Asset (Cash or Bank) and will also decrease Owner's Equity (Capital).
6. Increase in one Liability and Decrease in other Liability: Transaction like:
Acceptance of Bills Payable: When a Bill of Exchange received from a creditor is accepted, then it will decrease a liability (Creditor) and increases another liability (Bill of Exchange).

Types of Transactions Affecting Accounting Equation: A business transaction may result in any of the following manner:

(a) Increase in an Asset and Decrease in another Asset.
(b) Increase in an Asset and simultaneously Increase in a Liability.
(c) Increase in an Asset and Increase in Capital or Owner's Equity.
(d) Decrease in an Asset and simultaneously Decrease in a Liability.
(e) Decrease in an Asset and simultaneously Decrease in Capital.
(f) Increase in one Liability and Decrease in another liability.

Accounting Equation, dual aspect concept पर आधारित एक ऐसा Analysis tool है जिसमें assets-liability/capital और expenses/losses - revenue/income/gains का equilibrium दिखाया जाता है।

क्योंकि, किसी भी business transaction प्रत्येक डेबिट के लिए समान क्रेडिट होना आवश्यक है।

यदि business use के लिए फर्नीचर खरीदा गया है, तो इस transaction में दो aspect हैं - Cash and Furniture और दोनों हीं assets हैं। इस transaction के परिणाम स्वरूप furniture increase होगा और cash decrease होगा। दोनों प्रभाव assets पर हीं हुआ, liability/capital पर इसका कोई effect नहीं होगा।

यदि हम इस Accounting Equation Analysis Table को ध्यानपूर्वक समझकर Accounting Equation के प्रश्नों को हल करें तो कठिन से कठिन प्रश्नों को आसानी से हल किया जा सकता है।

              Effect of Various Transactions on the Accounting Equation (Accounts Affected)

SR. NO.	TRANSACTIONS	ACCOUNTS AFFECTED
		Assets	Liabities & Capital
01A	50,000 brought in by owner as Capital	Cash (+) by 50,000	Capital (+) 50,000
01B	Started business with cash of 50,000, Furniture of 30,000, Goods of 40,000 and creditors of 10,000	Cash (+) by 50,000 Furniture (+) by 30,000 Stock (+) by 50,000	Capital (+) by 1,20,000 (50,000+30,000+40,000) Creditors (Liabilities) (+) by 10,000.
02A	Cash withdrawn 4,000 for personal use.	Cash (–) by 4,000	Capital (–) 4,000
02B	Purchased refrigerator of 12,000 for personal use.	Cash (–) by 12,000	Capital (–) 12,000
02C	Goods of 1,000 (Sale Price 1,200) used for personal use.	Stock (–) by 1,000	Capital (–) 1,000
03A	Cash purchase of goods 6,000	Cash (–) by 6,000 Stock (+) by 6,000	-----------
03B	Credit purchase of goods 5,000	Stock (+) by 5,000	Creditors (Liabilities) (+) by 5,000.
04A	Cash sale of goods 9,000 at cost	Cash (+) by 9,000 Stock (–) by 9,000	-----------
04B	Credit sale of goods 4,000 at cost	Debtors (+) by 4,000 Stock (–) by 4,000	-----------
04C	Goods costing 4,000 sold at profit of 1,000 in cash	Cash (+) by 5,000 Stock (–) by 4,000	Capital (+) 1,000
04D	Goods costing 7,000 sold at profit of 2,000 on credit	Debtors (+) by 9,000 Stock (–) by 7,000	Capital (+) 2,000
05	Received 8,000 from debtors in full settlement of 8,400 (Discount Allowed)	Cash (+) by 8,000 Debtors (–) by 8,400	Capital (–) 400
06	Paid 12,000 to creditors in full settlement of 12,500 (Discount Received)	Cash (–) by 12,000	Capital (+) 500 Creditors (Liabilities) (–) by 12,500.
07	Furniture purchased of 9,000 in cash	Furniture (+) by 9,000 cash (–) by 9,000	----------
08	Depreciate furniture by 1,000.	Furniture (–) by 1,000	Capital (–) by 1,000
09	Goods of 600 given as charity (Sale Price 800)	Stock (–) by 600	Capital (–) by 600
10	Loss by Fire Goods of 400 lost by fire (Sale Price 450)	Stock (–) by 400	Capital (–) by 400
11	Paid rent (Expense) of 2,000	Cash (–) by 2,000	Capital (–) 2,000
12	Received interest of 3,000(Inc.)	Cash (–) by 2,000	Capital (–) 2,000
13	Salary outstanding of 1 ,000 (O/s Exp.)	----------	O/s Exp. (+) by 1,000 Capital (–) by 1,000
14	Commission accrued of 500 (Accrued Income)	Accrued Income (+) by 500	Capital (+) by 500
15	Insurance paid in advance 300 (Prepaid Expense)	Prepaid Exp. (+) by 300; Cash (–) by 300	----------
16	Commission received in advance 600 (Unearned Income)	Cash (+) by 600	Unearned Income (+) by 600
17	Allow interest on capital of 700 (Non-cash Expense)	----------	Capital (–) by 700 Capital (+) by 700
18	Charge interest on drawings of 400 (Non-cash Income)	----------	Capital (+) by 400 Capital (–) by 400

Q 01.   If total assets of the business are 4,50,000 and outside liabilities are 2,00,000. Calculate         owner's equity.
Ans.     Assets = Owner's Equity + Liabilities 4,50,000 = Owner's Equity + 2,00,000
            Owner's Equity = 2,50,000.
Q 02.   An amount of 1,050 is received from a debtor of 1,200 in final settlement. What will be the effect of this transaction on Accounting Equation?
Ans. This transaction will have following effect on the Accounting Equation:
(a) Debtor will decrease by 1,200.
(b) Cash will increase by 1,050, i.e. amount received.
(c) The difference of 150 (1,200 - 1,050) is loss amount, which will be subtracted from the capital.
Q 03. How will you deal with the following items in Accounting Equation?
(a) Outstanding Salaries. (b) Insurance premium paid in advance.
(c) Rent received in advance. (d) Accrued Interest.
Ans. (a) It will be deducted from the capital. As it is unpaid, it will be added to liabilities.
(b) It will decrease assets (Cash) and increase assets (Prepaid Insurance).
(c) It will increase assets (Cash) and increase liability (Advance Rent).
(c) It will increase assets (Accrued Interest) and increase capital (income).
Q. 04 Give an example for a transaction, which results in:
Decrease in the Assets and decrease in the Liabilities.
Increase in the Assets and increase in the Liabilities.
Decrease in the Assets and decrease in the Capital.
Increase in an Asset and decrease in another Asset.
Increase in the Assets and increase in Capital.
{Ans. (a) Paid Cash to Creditors; (b) Took a Long-term Loan; (c) Paid Salaries to Employees:
(d) Goods sold for Cash; (e) Interest Received in Cash)
(d) Goods sold for Cash; (e) Interest Received in Cash)
Example 01. Show the Accounting Equation on the basis of the following transactions
(a) X started business with cash 75,000.
(b) Purchased goods for cash 15,000 and on credit 20,000.
(c) Purchased furniture for cash 12,000.
(d) Paid Rent 3,000.
(e) Received Commission 2,800.
(f) Withdrew cash for private use 1,200.
(g) Sold goods on credit {cost price 16,000} 20,000.
(h) Paid to Creditors in full settlement 19,200.

Solution:                                              Accounting Equation

Sr. No	Transactions	Assets	Liabilities  +    Capital
		Cash     +  Stock  + Furniture +   Debtors	Creditors   +    Capital
(a)   (b)	Started business with cash. Bought goods for cash & on credit.	75,000 +     0      +       0        +        0   –15,000 + 35,000 +      0         +        0	0       +      75,000     20,000     +          0
(c)	New Equation Bought furniture for cash.	60,000 + 35,000 +      0         +        0 –12,000 +      0     + 12,000     +        0	20,000    +      75,000          0        +        0
(d)	New Equation Paid rent.	48,000 + 35,000 + 12,000     +        0 –  3,000 +     0      +      0         +        0	20,000    +      75,000      0     –     3,000
(e)	New Equation Received commission.	45,000 + 35,000 + 12,000     +        0 +  2,800 +    0       +       0        +        0	20,000     +      72,000     0           +        2,800
(f)	New Equation Withdrew cash for private use	47,800 + 35,000 + 12,000     +        0  –  1,200 +     0      +        0       +        0	20,000     +      74,800      0            –      1,200
(g)	New Equation Sold goods on credit.	46,600 + 35,000 + 12,000     +        0     0      – 16,000 +       0        +   20,000	20,000       +     73,600      0           +       4,000
(h)	New Equation Paid to Creditors in full settlement.	46,600 + 19,000 + 12,000     +   20,000   –19,200 +     0      +       0      +       0	20,000      +     77,600   – 20,000      +        800
	New Equation	27,400 + 19,000 + 12,000     +   20,000	0        +   78,400

Example 02. Show the effect of following transactions on the Accounting Equation:
1. Started business with cash 60,000 and goods 10,000.
2. Bought goods for cash 10,000 and on credit 15,000.
3. Bought furniture for cash 16,000.
4. Paid wages and salaries 6,000.
5. Received commission 3,500.
6. Sold goods on credit (cost price 20,000) 24,000.
7. Paid to creditors in full settlement 14,500.
8. Received from Debtors in full settlement 23,500.
9. Depreciate furniture by 800.

Solution:                                              Accounting Equation

Sr. No	Transactions	Assets	Liabilities + Capital
		Cash  + Stock + Furniture + Debtors	Creditors + Capital
(1)  (2)	Started business with cash and Goods. Bought goods for cash and on credit.	60,000 + 10,000 +     0         +       0  –10,000 + 25,000 +     0          +      0	0       + 70,000      15,000    +       0
(3)	New Equation Bought furniture for cash.	50,000 + 35,000 +     0          +      0 –16,000 +      0     + 16,000     +      0	15,000    + 70,000          0      +       0
(4)	New Equation Paid wages and salaries.	34,000 + 35,000 + 16,000     +      0 –  6,000 +     0      +     0          +      0	15,000   + 70,000    0     –   6,000
(5)	New Equation Received commission.	28,000 + 35,000 + 16,000     +      0 +  3,500 +    0       +     0         +       0	15,000   + 64,000        0        +   3,500
(6)	New Equation Sold goods on credit.	31,500 + 35,000 + 16,000     +      0      0   – 20,000 +      0         + 24,000	15,000   + 67,500         0       +   4,000
(7)	New Equation Paid to Creditors in full settlement.	31,500 + 15,000 + 16,000     +      0  –14,500 +    0     +      0          +      0	15,000   + 71,500  – 15,000   +      500
(8)	New Equation Received from Debtors in full settlement.	17,000 + 15,000 + 16,000    + 24,000  + 23,500 +   0     +      0      – 24,000	0      + 72,000            0      –      500
(9)	New Equation Depreciate furniture.	40,500 + 15,000 + 16,000 +       0         0     +      0     –      800 +       0	0      + 71,500          0      –      800
	Final Equation	40,500 + 15,000 + 15,200 +       0	0      + 70,700

Questions for practice

Q. 01 Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation.
(a) Started business with cash 10,00,000
(b) Rent received 72,000
(c) Invested in shares 50,000
(d) Received dividend 5,000
(e) Purchased goods on credit from Ragini 35,000
(f) Paid cash for household expenses 7,000
(g) Sold goods for cash (costing e 10,000) 14,000
(h) Cash paid to Ragini 35,000
(i) Deposited into bank 20,000
Q. 02 Transactions of M/s Vipin Traders are given below:
Show the effects on Assets, Liabilities and Capital with the help of accounting equation.
(a) Business started with cash 50,000
(b) Purchased goods for cash 10,000
(c) Purchased furniture from R.K. Furniture on Credit 10,000
(d) Sold goods to Parul Traders (Costing 7,000 vide bill no. 5,674) 9,000
(e) Paid cartage 100
(f) Cash Paid to R.K. Furniture in full settlement 9,700
(g) Cash sales (costing 10,000) 12,000
(h) Rent received 4,000
(i) Cash withdrew for personal use 3,000
Q. 03 Prove that Accounting Equation is satisfied in all the following transactions of Sameer Goel :
(a) Started business with Cash 1,00,000
(b) Paid rent in advance 10,000.
(c) Purchased goods for cash 20,000 and Credit 30,000.
(d) Sold goods for Cash (costing 12,000) 15,000
(e) Sold goods to Mohit Traders (Costing 16,000 vide bill no. 5,984) 20,000
(f) Paid salary in cash 4,500 and salary outstanding 1,500
(g) Cash received from Mohit Traders 18,000 and Bad debts written off 2,000
(h) Cash paid 9,700 to creditors and discount received 300.
(i) Bad debts recovered 2,000
Q. 04 Show the Accounting Equation from the following transactions and prepare a Balance Sheet on the basis of last equation:
1. Vikram started a business with cash 50,000 and goods 25,000 and furniture 15,000.
2. Goods sold for cash (Cost price 5,000) 6,500
3. Paid salaries 2,000
4. Outstanding wages 2,000
5. Prepaid insurance 400
6. Rent paid in advance 1,500
7. Rent received 500
8. Interest on drawings 900
9. Depreciation on furniture 1,500
Q. 05 Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
1. Started business with cash 60,000; Stock 15,000 and Machinery 40,000.
2. Purchased goods for cash 10,000.
3. Credit purchase of goods 18,000.
4. Payment made to creditors in full settlement 17,500.
5. Rent received 5,000.
6. Salary outstanding 2,000.
7. Sold goods for cash (Costing 15,000) 18,000.
8. Goods destroyed by fire 500.
9. Depreciation on machinery 2,000.
Q. 06 Following transactions took place during the year:
1. Sunil started business with a capital of 1,00,000.
2. Deposited 60,000 into bank.
3. Purchased goods from Shyam 30,000.
4. Sold goods costing 20,000 for 25,000 to Pardeep out of which 7,000 received in cash.
5. Paid salary 6,000 but salary still unpaid 1,000.
6. Received commission 3,000 including 500 as advance.
7. Sold goods costing 5,000 at a loss of 500 in cash.
8. Received 17,400 from Pardeep in full settlement of his account by cheque.
9. Returned goods to Shyam 2,000.
10. Issued a cheque of 27,200 to Shyam in full settlement of his account.
Use accounting equation to give effect to above transaction.
 
Calculation of Capital and other Variables
Illustration 01.
If the Capital of a business is 1,00,000 and outside liabilities are 60,000. Calculate total assets of the business.
Solution:
Assets = Liabilities + Capital = (60,000 + 1,00,000) = 1,60,000.
Illustration 02.
If total assets of a business are 2,00,000 and net worth (Capital) is 1,50,000. Calculate Creditors.
Solution:
Creditors (Liabilities) = Assets – Capital = 2,00,000 – 1,50,000 = 50,000.
Illustration 03.
A commenced business on 1st April, 2017 with a Capital of 5,00,000. On 3 1st March, 2018, his assets were worth 7,80,000 and liabilities 70,000. Find out his closing capital and profits earned during the year.
Solution:
Closing Assets = Closing Liabilities + Closing Capital
7,80,000          = 70,000 – Closing Capital
Closing Capital = 7,80,000 – 70,000 = 7,10,000.
Profits             = Closing Capital - Opening Capital = 7,10,000 – 5,00,000 = 2,10,000.
Illustration 04.
Mohan started business on 1st April, 2019 with of 7,50,000 and took a loan of 2,00,000 from ‘IDBI’ On 31^st March, 2020 his assets were 15,00,000. Find out his Capital on 31^st March. and profits made or losses incurred during the year 2019-20.
If in the above illustration, the proprietor had introduced additional capital of 1,25,000 and had withdrawn 40,000 personal purposes. find out the profit
solution:
Closing Capital = Closing Assets – Closing Liabilities
                           = 15,00,000 – 2,00,000 = 13,00,000
Profit      =     Closing Capital – Opening Capital
                        = 13,00,000 – 7,50,000 = 5,50,000.
Profit      =     Closing Capital + Drawing – Additional Capital – Opening Capital
                        13,00,000 + 40,000 – 1,25,000 – 7,50,000
                        4,65,000.
Illustration 05. Calculate Total Equity if:
Owner's Equity in the beginning 2,00,000.
Equity of creditors at the end 60,000.
Revenue during the period is 1,20,000.
Expenses during the same period are 70,000.
Solution:
Closing Owner's Equity= Opening Owner's Equity + Revenue - Expenses
            = 2,00,000 + 1,20,000 - 70,000 = 2,50,000
Total Equity = Closing Owner's Equity + Equity of Creditors (Liabilities)
= 2,50,000 + 60,000 = 3,10,000.
Illustration 06. Nishant started business on 1st January, 2018 with a capital of 70,000 and a loan of 25,000. He introduced fresh capital of 12,000 and withdrew 6,000 for his personal use. It made a loss of 4,000 for the year ending 31st December, 2018. Calculate the Capital and Total Assets of Nishant as on 31st December, 2018.
Solution:
Closing Capital = Opening Capital + Additional Capital Loss Drawings
= 70,000 + 12,000      4,000   6,000 = 72,000.
Total Assets = Closing Capital + Liabilities
= 72,000 + 25,000 = 97,000.
Illustration 06. Mukul commenced business on 1^st April, 2019 with a capital of 90,000 and a loan of 30,000. He introduced additional capital of 15,000 and withdrew 7,000 for his personal use. He earned a profit of 18,000 for the year ending 31^st March, 2020. Calculate the Capital and Total Assets of Mukul as on 31st March, 2020
Solution:
Closing Capital = Opening Capital + Additional Capital + Profit - Drawings
= 90,000 + 15,000 + 18,000 - 7,000 = 1,16,000
Total Assets = Closing Capital + Liabilities
                 = 1,16,000 + 30,000 = 1,46,000.
Illustration 07. (a) Mohan started business on 1st January, 2018 with capital of 1,50,000 and a loan of 40,000 taken from Punjab National Bank. On 31^st December, 2018, his assets were  3,00,000. Find out his Capital on 31^st December, 2018 and Profit made or Loss incurred during the year 2018.
(b) If in the above illustration, Mohan had introduced additional capital of 25,000 and had withdrawn 8,000 for personal purposes, find out the Profit or Loss.
Solution:
(a) Total Assets = Closing Capital + Liabilities Or, Closing Capital = Total Assets – Liabilities
= 3,00,000 – 40,000 = 2,60,000.
Closing Capital = Opening Capital + Profit
Or, Profit = Closing Capital – Opening Capital
                        = 2,60,000 – 1,50,000 = 1,10,000.
(b) Closing Capital = Opening Capital + Additional Capital + Profit – Drawings
            Or, Profit = Closing Capital – Opening Capital – Additional Capital + Drawings
            = 2,60,000 – 1,50,000 – 25,000 + 8,000 = 93,000.
Illustration 08. Harshul started business on 1^st January, 2018. Determine his capital as on 31^st December, 2018, if his position as on that date was as follows: He owns Furniture of 10,000; Land and Buildings of 2,00,000; Machinery of 40,000 and Cash in Hand was 2,000. He owes 12,000 to suppliers and has a bank loan of 35,000 taken from Axis Bank.
Solution:
Total Assets = Furniture + Land and Buildings + Machinery + Cash in Hand
Total Assets = 10,000 + 2,00,000 + 40,000 + 2,000 = 2,52,000
Liabilities = Owing to suppliers + Loan from Axis Bank
Liabilities = 12,000 + 35,000 = 47,000.
Capital as on 31.12.18 = Total Assets - Liabilities
= 2,52,000 - 47,000 = 2,05,000
Illustration 09. Abhijeet started a business on 1st April, 2018 with capital 3,00,000. On 31st March, 2019, his total assets amounted to 5,40,000 and liabilities to 1,20,000. Find out the amount by which his capital has increased as on 31st March, 2019.
Solution:
Total Assets = Closing Capital + Liabilities
Or, Closing Capital = Total Assets — Liabilities
            = 5,40,000 – 1,20,000 = 4,20,000.
Increase in Capital = Closing Capital - Opening Capital
            = 4,20,000 – 3,00,000 = 1,20,000.
Closing Capital = Opening Capital + Additional Capital + Profit -Drawings
= 60,000 + 20,000 + 17,000 - 5,000 = 92,000.
Profit / Loss = Closing Capital - Opening Capital - Additional Capital + Drawings
= 1,70,000 – 1,20,000 - 35,000 + 10,000 = 25,000.
Drawings = Opening Capital + Additional Capital + Profit — Closing Capital
= 50,000 + 10,000 + 7,000 - 45,000 = 8,000.
Additional Capital = Closing Capital - Opening Capital - Profit / + Loss + Drawings
= 67,000 - 60,000 - 5,000 + 18,000 = 30,000.
Opening Capital = Closing Capital - Additional Capital - Profit and Loss + Drawings
= 96,000 - 20,000 - 13,000 + 17,000 = 80,000.
Question for practices
Q. 01 If the capital of a business is 1,10,000 and liabilities are of 35,000, calculate the amount of Total Assets. {Ans. 1,45,000}
Q. 02 Raman has following assets and liabilities: Cash 18,000; Bank 35,000; Debtors 14,000; Creditors 23,000; Bank Loan 11,000; Vehicle 45,000 and Furniture 10,000. Determine the amount of capital. {Ans. 88,000}
Q. 03 Mollie started business on 1^st April, 2018 with a capital of 1,20,000. He introduced fresh capital of 12,500 and withdrew 7,000 for his personal use. He made a profit of 15,000 for the year ending 31^st March, 2019. Calculate the capital of Mukesh as on 31^st March, 2019.

{Ans. 1,40,500}
Q. 04   Calculate the Missing Figures in the following cases:

Case	Op. Capital	Fresh Capital	Drawings	Profit / Loss	Cl. Capital
(i)	1,00,000	49,000	?	6,000	1,50,000,
(ii)	50,000	10,000	4,000	- 5,000	?
(iii)	90,000	?	7,000	6,000	1,01,500
(iv)	?	3,250	32,500	7,000	I 97,750
(v)	85,000	32,000	4,500	16,800	?

{Ans. (i) 15,000; (ii) 51,000; (iii) 12,500; (iv) 2,20,000; (v) 1,29,300}

Q. 05   Calculate the Missing Figures in the following cases:

Case	Opening Capital	Fresh Capital	Drawings	Profit / Loss	Closing Capital	Total Assets	Liabilities
(i)	?	50,000	6,000	8,000	?	2,00,000	48,000
(ii)	55,000	?	5,000	-7,000	58,000	75,000	?
(iii)	1,25,000	14,000	?	10,000	1,41,000	?	39,000
(iv)	2,50,000	?	33,500	9,000	?	3,50,000	1,21,000
(v)	1,00,000	15,000	?	13,500	1,20,500	?	30,300

{Ans. (i) 1,00,000, 1,52,000; (ii) 15,000, 17,000; (iii) 78,000, 1,80,000;
(iv) 73,500, 2,29,000; (v) 78,000, 1,50,800}
Formulae used:

Total Assets = Liabilities + Capital (closing)
Closing Capital = Opening Capital + Fresh Capital – Drawings + Profit /– Loss
Q. 06 Sanjeev started business on 1^st April, 2018 with a capital of 60,000 and a loan of 32,000. He
introduced fresh capital of 15,000 and withdrew 8,000 for his personal use. He made a loss of 4,500 for the year ending 31^st March, 2019. Calculate the Capital and Total Assets of Sanjeev as on 31^st March, 2019.
introduced fresh capital of 15,000 and withdrew 8,000 for his personal use. He made a loss of 4,500 for the year ending 31^st March, 2019. Calculate the Capital and Total Assets of Sanjeev as on 31^st March, 2019.
(Ans. 762,500; 794,500}
Q. 07 Ajeet started a business on 1^st April, 2018 with a capital of 3,50,000. During the year, he invested 65,000 as capital and withdrew 45,000 for his personal car. He had goods amounting to 22,000 purchased on credit for which no payment had been made. He also took a loan of 15,000 from ICICI Bank. Calculate the Profit and Loss and Capital as on 31^st March, 2019, if Total Assets of Ajeet as on 31^st March, 2019 were 3,50,000.
{Ans. Loss = 57,000; Capital as on 31^st March, 2019 = 3,13,000}
Q. 08 (a) Tina commenced business on 1^st January, 2018 with a capital of 6,00,000 and a loan of 40,000 borrowed from Citibank. On 31^st December, 2018 his assets were 8,00,000. Calculate
his closing capital and profits earned during the year.
his closing capital and profits earned during the year.
(b) If in the above case, the proprietor had introduced fresh capital of 40,000 and had withdrawn 10,000 for personal purpose, calculate his profits.
{Ans. (a) Closing Capital = 7,60,000; Profit = 1,60,000; (b) Profit = 1,30,000}
Q. 09 Calculate Total Equity if:
Owner’s Equity in the beginning 2,80,000. Creditors at the end 45,000.
Revenue during the period is 5,80,000.
Expenses during the same period are 4,00,000.
{Ans. 5,05,000}
Q. 10 Determine the capital of Pranav as on 31^st March, 2019, if his position as on that date was as follows:
He owns Machinery of 40,000; Building of 1,20,000; Furniture of 15,000 and Cash in Hand was 6,000. He owes 45,000 to creditors and has a bank loan of 18,000 taken from SBI Bank.
He owns Machinery of 40,000; Building of 1,20,000; Furniture of 15,000 and Cash in Hand was 6,000. He owes 45,000 to creditors and has a bank loan of 18,000 taken from SBI Bank.
{Ans. 1,18,000}

 Q. 11 Smriti started a business on 1^st January, 2018 with capital 2,20,000. On 31^st December,2018, her total assets amounted to 4,30,000 and liabilities to 1,17,000. Find out the amount by which her capital has increased as on 31^st December, 2018.
{Ans. 7,93,000}