Riaz Academy
Accounting Equation Problems and Solutions
Problem No.1
Show the
effect of the following transactions on assets, owner’s equity and Liabilities:
effect of the following transactions on assets, owner’s equity and Liabilities:
1. Mr. Sultan invested cash into business
Rs.30000/-
Rs.30000/-
2. Bought Supplies for Cash Rs. 500/-
3. Purchased Furniture on account
Rs.1000/-
Rs.1000/-
4. Paid Salaries Rs.200
5. Earned Rs.2000/- by performing services
to the clients.
to the clients.
6. Paid Rent of Rs.200/-
7. Supplies in hand at the end of the
month Rs.300.
month Rs.300.
Solution:
Sultan and Co.
Statement of Equation
ASSETS =
|
|
Cash
|
Supplies
|
Furniture
|
Creditors
|
Capital
|
|
1.
2.
|
30000
-500
|
+500
|
|
|
30000
|
|
Balance
3.
|
29500
|
500
|
+1000
|
+1000
|
30000
|
|
Balance
4.
|
29500
-200
|
500
|
1000
|
1000
|
30000
-200
|
|
Balance
5.
|
29300
+2000
|
500
|
1000
|
1000
|
29800
+2000
|
|
Balance
6.
|
31300
-300
|
500
|
1000
|
1000
|
31800
-300
|
|
Balance
7.
|
31000
|
500
-200
|
1000
|
1000
|
31500
-200
|
|
Balance
|
31000
|
300
|
1000
|
1000
|
31300
|
Total Assets= 32,300/- Total
Equities= 32,300/-
Equities= 32,300/-
Problem No.2
The
following are the transactions of a business for the month of January 2004:
following are the transactions of a business for the month of January 2004:
Jan. 1. Ali commenced a business by depositing
Rs.17,500
Rs.17,500
into
a bank account.
a bank account.
5.
Purchased a Furniture for cash Rs.12,500.
Purchased a Furniture for cash Rs.12,500.
7.
Purchased a Building for Rs.5,000, paying Rs.1,500 cash
and incurring liability of Rs.3,500.
Purchased a Building for Rs.5,000, paying Rs.1,500 cash
and incurring liability of Rs.3,500.
11. Sold a part of Furniture for Rs.2,500
receivable within three months.
receivable within three months.
15. Purchased office Supplies for Rs.500 on
account.
account.
19. Received Rs.500 as partial collection of
Accounts Receivable.
Accounts Receivable.
25. Paid Rs.750 as Salary.
30. Service revenue due Rs.5,000.
Required: Show
the effect of the transactions on the accounting equation.
the effect of the transactions on the accounting equation.
Solution:
Accounting Equation
As on January 31
|
ASSETS
|
=
|
EQUITES
|
||||||
|
|
Bank
Rs.
|
Furniture
Rs.
|
Building
Rs.
|
A/R
Rs.
|
Office
Supples
Rs.
|
=
|
Owners’s
Equity
Rs.
|
Liabilities
A/P
Rs.
|
|
Jan.1
5
|
+17,500
-12,500
|
+12,500
|
|
|
|
=
|
+17,500
|
|
|
Balance
7
|
+5,000
-1,500
|
+12,500
|
|
|
|
=
|
+17,500
|
+3,500
|
|
Balance
11
|
+3,500
|
+12,500
-2,500
|
+5,000
|
+2,500
|
|
=
|
+17,500
|
+3,500
|
|
Balance
15
|
+3,500
|
10,000
|
+5,000
|
+2,500
|
+500
|
=
=
|
+17,500
|
+3,500
+500
|
|
Balance
19
|
+3,500
+500
|
+10,000
|
+5,000
|
+2,500
-500
|
+500
|
=
|
+17,500
|
+4,000
|
|
Balance
25
|
+4,000
-750
|
+10,000
|
+5,000
|
+2,000
|
+500
|
=
=
|
+17,500
-750
|
+4,000
|
|
Balance
30
|
+3,200
|
+10,000
|
+5,000
|
+2,000
+5,000
|
+500
|
=
=
|
+16,700
+5,000
|
+4,000
|
|
Balance
|
+3,200
|
+10,000
|
+5,000
|
+7,000
|
+500
|
=
|
21,750
|
+4,000
|
|
Total
|
25,750
|
=
|
25,750
|
|||||
Problem No.3
Ijaz and Israr own and operate a
repair shop. At the beginning of the month the shop had following assets:
repair shop. At the beginning of the month the shop had following assets:
Cash Rs.51,560, Account Receivable
Rs.1,950, Repair Supplies Rs.1,850, Tools Rs.11,275, and Truck Rs.12,800. Their
Liabilities and Owner’s Equity was as under:
Rs.1,950, Repair Supplies Rs.1,850, Tools Rs.11,275, and Truck Rs.12,800. Their
Liabilities and Owner’s Equity was as under:
Accounts Payable Rs.16,525, Capital
Rs.63,000
Rs.63,000
During the month following
transactions were completed:
transactions were completed:
a)
Paid one month rent Rs.2,000.
Paid one month rent Rs.2,000.
b)
Purchased repair supplies for cash Rs.500.
Purchased repair supplies for cash Rs.500.
c)
Paid for repairs supplies previously purchased on credit
Rs.2,250.
Paid for repairs supplies previously purchased on credit
Rs.2,250.
d)
Completed repair work and collected Rs.500.
Completed repair work and collected Rs.500.
e)
Completed repair work of Junaid Rs.15,000.
Completed repair work of Junaid Rs.15,000.
f)
Received payment from customer previously billed
RS.3,250.
Received payment from customer previously billed
RS.3,250.
g)
Paid for oil and Gas used during the month Rs.200.
Paid for oil and Gas used during the month Rs.200.
Required:
1.
Arrange the Asset. Liabilities and Owndr’s Equity given
in the beginning in an Accounting Equation.
Arrange the Asset. Liabilities and Owndr’s Equity given
in the beginning in an Accounting Equation.
2.
Show the effect of the above transactions on the
equation.
Show the effect of the above transactions on the
equation.
Solution:
Accounting Equation
|
ASSETS
|
=
|
EQUITES
|
||||||
|
|
Cash
Rs.
|
A/C Receivable
Rs.
|
Repair
Supplies
Rs.
|
Tools
Rs.
|
Truck
Rs.
|
=
|
Owners’s
Equity
Rs.
|
Liabilities
A/P
Rs.
|
|
Balance
a
|
+51,650
-2,000
|
+1,950
|
+1,850
|
+11,275
|
+12,800
|
=
=
|
+63,000
-2,000
|
+16,525
|
|
Balance
b
|
+49,650
-500
|
+1,950
|
+1,850
+500
|
+11,275
|
+12,800
|
=
|
+61,000
|
+16,525
|
|
Balance
c
|
+49,150
-2,250
|
+1,950
|
+2,350
|
+11,275
|
+12,800
|
=
=
|
+61,000
|
+16,525
-2,250
|
|
Balance
d
|
+46,900
-500
|
+1,950
|
+2,350
|
+11,275
|
+12,800
|
=
=
|
+61,000
+500
|
+14,275
|
|
Balance
e
|
+47,400
|
+1,950
+15,000
|
+2,350
|
+11,275
|
+12,800
|
=
=
|
+61,500
+15,000
|
+14,275
|
|
Balance
f
|
+47,400
+3,250
|
+16,950
-3,250
|
+2,350
|
+11,275
|
+12,800
|
=
|
+76,500
|
+14,275
|
|
Balance
g
|
+50,650
-200
|
+13,700
|
+2,350
|
+11,275
|
+12,800
|
=
=
|
+76,500
-200
|
+14,275
|
|
Balance
|
+50,450
|
+13,700
|
+2,350
|
+11,275
|
+12,800
|
=
|
76,300
|
+14,275
|
|
Total
|
90,575
|
=
|
90,575
|
|||||
Problem No.4
Show the effect of the following
transactions on accounting equation:
transactions on accounting equation:
2004
July. 1. Ansar commenced
business with cash Rs.55,000.
business with cash Rs.55,000.
6.
Merchandise purchased for cash Rs.12,000.
Merchandise purchased for cash Rs.12,000.
7.
Sold merchandise to Akhter for Rs.5,600. Cost of these
merchandise is Rs.4,480.
Sold merchandise to Akhter for Rs.5,600. Cost of these
merchandise is Rs.4,480.
9. Purchased
merchandise from Ali Rs.7,500.
merchandise from Ali Rs.7,500.
11. Cash
sales Rs.1,250 (Cost Rs.1,000).
sales Rs.1,250 (Cost Rs.1,000).
15. Returned
merchandise to Ali Rs.150.
merchandise to Ali Rs.150.
18. Credit
purchases from Munib Rs.2,500.
purchases from Munib Rs.2,500.
21. Merchandise returned by Akhter Rs.125
(Costing Rs.100).
(Costing Rs.100).
25. Gave away charity merchandise worth
Rs.100.
Rs.100.
28. Purchased from Danish merchandise worth
Rs.1,800.
Rs.1,800.
30. Proprietor withdrew the merchandise worth
RS.250 for personal use.
RS.250 for personal use.
Solution:
Accounting Equation
|
Assets
|
=
|
EQUITES
|
|
||||
|
|
Cash
Rs.
|
Merchandise
Inventory
Rs.
|
Account
Receivable
Rs.
|
=
|
Capital
Rs.
|
Account
Payable
Rs.
|
|
|
2004
Jul.1
6
|
+55,000
-12,000
|
+12,000
|
|
=
|
+55,000
|
|
|
|
Balance
7
|
+43,000
|
+12,000
-4,480
|
+5,600
|
=
=
|
+55,000
+1,120
|
|
|
|
Balance
9
|
+43,000
|
+7,520
+7,500
|
+5,600
|
=
|
56,120
|
+7,500
|
|
|
Balance
11
|
+43,000
+1,250
|
+15,020
-1,000
|
+5,600
|
=
=
|
+56,120
+250
|
+7,500
|
|
|
Balance
15
|
+44,250
|
+14,020
-150
|
+5,600
|
=
=
|
56,370
|
+7,500
-150
|
|
|
Balance
18
|
+44,250
|
+13,870
+2,500
|
+5,600
|
=
=
|
+56,370
|
+7,350
+2,500
|
|
|
Balance
21
|
+44,250
|
+16,370
+100
|
+5,600
-125
|
=
=
|
+56,370
-25
|
+9,850
|
|
|
Balance
25
|
+44,250
|
+16,470
-100
|
+5,475
|
=
=
|
+56,345
-100
|
+9,850
|
|
|
Balance
28
|
+44,250
|
+16,370
+1,800
|
+5,475
|
=
=
|
+56,245
|
+9,850
+1,800
|
|
|
Balance
30
|
+44,250
|
+18,170
-250
|
+5,475
|
=
=
|
+56,245
-250
|
+11,650
|
|
|
Balance
|
+44,250
|
+17,920
|
+5,475
|
=
|
+55,995
|
+11,650
|
|
|
Total
|
67,645
|
=
|
67,645
|
||||
Problem No.5
Following are the transactions of a Riaz
Corporation for the month of December 2016:
Corporation for the month of December 2016:
1.
Started business with cash Rs.6,600.
Started business with cash Rs.6,600.
2.
Purchased merchandise for cash Rs.1,100.
Purchased merchandise for cash Rs.1,100.
3.
Sold merchandise on account Rs.1,610. Cost of these
merchandise being Rs.100.
Sold merchandise on account Rs.1,610. Cost of these
merchandise being Rs.100.
4.
Purchased merchandise from Sultan for Rs.1,250.
Purchased merchandise from Sultan for Rs.1,250.
5.
Purchased Bicycle for cash Rs.1,900.
Purchased Bicycle for cash Rs.1,900.
6.
Sold merchandise for cash Rs.500 which costs Rs.360.
Sold merchandise for cash Rs.500 which costs Rs.360.
7.
Received cash Rs.520 from Account Receivable.
Received cash Rs.520 from Account Receivable.
8.
Purchased office equipment for cash Rs.100.
Purchased office equipment for cash Rs.100.
9.
Drawings Rs.100.
Drawings Rs.100.
10.
Paid Rent Rs.300.
Paid Rent Rs.300.
Required: Record
the above transaction in columnar form and prove that Assets = Equities
the above transaction in columnar form and prove that Assets = Equities
Solution:
Riaz Corporation
Accounting Equation
As on 31.12.2016
|
ASSETS
|
=
|
EQUITES
|
||||||
|
|
Cash
Rs.
|
Inventory
Rs.
|
A/R
Rs.
|
Bicycle
Rs.
|
Office
Equipment
Rs.
|
=
|
Capital
Rs.
|
A/P
Rs.
|
|
1
2
|
+6,600
-1,100
|
|
|
|
|
=
|
+6,600
|
|
|
Balance
3
|
+5,500
|
+1,100
-1,000
|
+1,610
|
|
|
=
=
|
+6,600
+610
|
|
|
Balance
4
|
+5,500
|
+100
+1,250
|
+1,610
|
|
|
=
|
+7,240
|
+1,250
|
|
Balance
5
|
+5,500
-1,900
|
+1,350
|
+1,610
|
+1,900
|
|
=
|
+7,240
|
+1,250
|
|
Balance
6
|
+3,600
+500
|
+1,350
-360
|
+1,610
|
+1,900
|
|
=
=
|
+7,240
+140
|
+1,250
|
|
Balance
7
|
+4,100
+520
|
+990
|
+1,610
-520
|
+1,900
|
|
=
|
+7,350
|
+1,250
|
|
Balance
8
|
+4,520
-250
|
+990
|
+1,090
|
+1,900
|
+250
|
=
|
+7,350
|
+1,250
|
|
Balance
9
|
+4,370
-100
|
+990
|
+1,090
|
+1,900
|
+250
|
=
=
|
+7,350
-100
|
+1,250
|
|
Balance
10
|
+4,270
-300
|
+990
|
+1,090
|
+1,900
|
+250
|
=
=
|
+7,250
-300
|
+1,250
|
|
Balance
|
+3,970
|
+990
|
+1,090
|
+1,900
|
+250
|
=
|
+6,950
|
+1,250
|
|
Total
|
8,200
|
=
|
8,200
|
|||||
Problem No. 6 Following are the transactions of Pakistan
& Co.
& Co.
a)
Introduced cash as capital Rs.20,000.
Introduced cash as capital Rs.20,000.
b)
Purchased Merchandise for cash Rs.5,000.
Purchased Merchandise for cash Rs.5,000.
c)
Purchased Office Supplies for cash Rs.4,000.
Purchased Office Supplies for cash Rs.4,000.
d)
Merchandise costing Rs.1,400 sold to Ali for Rs.1,800 on
account.
Merchandise costing Rs.1,400 sold to Ali for Rs.1,800 on
account.
e)
Purchased merchandise from Akbar for RS.500.
Purchased merchandise from Akbar for RS.500.
f)
Received Rs.1,000 from Ali.
Received Rs.1,000 from Ali.
g)
Sold merchandise for cash Rs.800 which cost Rs.750.
Sold merchandise for cash Rs.800 which cost Rs.750.
h)
Paid Wages in cash Rs.400.
Paid Wages in cash Rs.400.
Required: Record
the above transaction in Equation form:
the above transaction in Equation form:
Solution:
Accounting Equation
|
Assets
|
=
|
EQUITES
|
|
|||||
|
|
Cash
Rs.
|
Machinery
Inventory
Rs.
|
Office Supplies
Rs.
|
Acconts
Receivable
Rs.
|
=
|
Capital
Rs.
|
A/P
Rs.
|
|
|
a
b
|
+20,000
-5,000
|
|
|
|
=
|
+20,000
|
|
|
|
Balance
c
|
+15,000
-1,000
|
+5,000
|
+1,000
|
|
=
|
+20,000
|
|
|
|
Balance
d
|
+14,000
|
+5,000
-1,400
|
+1,000
|
+1,800
|
=
=
|
+20,000
+400
|
|
|
|
Balance
e
|
+14,000
|
+3,600
+500
|
+1,000
|
+1,800
|
=
|
+20,400
|
+500
|
|
|
Balance
f
|
+14,000
+1,000
|
+4,100
|
+1,000
|
+1,800
-1,000
|
=
|
+20,400
|
+500
|
|
|
Balance
g
|
+15,000
+800
|
+4,100
-750
|
+1,000
|
+800
|
=
=
|
+20,400
+50
|
+500
|
|
|
Balance
h
|
+15,800
-400
|
+3,350
|
+1,000
|
+800
|
=
=
|
+20,450
-400
|
+500
|
|
|
Balance
|
+15,400
|
+3,350
|
+1,000
|
+800
|
=
|
20,050
|
+500
|
|
|
Total
|
20,550
|
=
|
20,550
|
|
||||
Problem No.7
Imtiaz & Sons started business
with cash Rs.10,000 and Machinery Rs.2,000. His other transactions for the
month of June 2015 were as follows:
with cash Rs.10,000 and Machinery Rs.2,000. His other transactions for the
month of June 2015 were as follows:
1.
Purchased merchandise on credit Rs.5,000.
Purchased merchandise on credit Rs.5,000.
2.
Bought equipment for cash Rs.5,000.
Bought equipment for cash Rs.5,000.
3.
Sold merchandise costing Rs.5,000 for Rs.8,000 on
account.
Sold merchandise costing Rs.5,000 for Rs.8,000 on
account.
4.
Received cash against Accounts Receivable Rs.5,000.
Received cash against Accounts Receivable Rs.5,000.
5.
Payment of creditors in full settlement of account
Rs.4,900.
Payment of creditors in full settlement of account
Rs.4,900.
6.
Rs.500 were privately used by Mr.Tahir.
Rs.500 were privately used by Mr.Tahir.
7.
Paid salary for the month Rs.500.
Paid salary for the month Rs.500.
Required: Record
the above transactions in Equation form:
the above transactions in Equation form:
Solution:
Imtiaz & Sons
Accounting Equation
As on June 30. 2015
|
ASSETS
|
=
|
EQUITES
|
||||||
|
|
Cash
Rs.
|
Machinery
Rs.
|
Merchandise
Inventory
Rs.
|
Equipment
Rs.
|
Debtor
Rs.
|
=
|
Capital
Rs.
|
Creditor
Rs.
|
|
Balance
1
|
+10,000
|
+2,000
|
+5,000
|
|
|
=
=
|
+12,000
|
+5,000
|
|
Balance
2
|
+10,000
-5,000
|
+2,000
|
+5,000
|
+5,000
|
|
=
|
+12,000
|
+5,000
|
|
Balance
3
|
+5,000
|
+2,000
|
+5,000
-5,000
|
+5,000
|
+8,000
|
=
=
|
+12,000
+3,000
|
+5,000
|
|
Balance
4
|
+5,000
+5,000
|
+2,000
|
|
+5,000
|
+8,000
-5,000
|
=
|
+15,000
|
+5,000
|
|
Balance
5
|
+10,000
-4,900
|
+2,000
|
|
+5,000
|
+3,000
|
=
=
|
+15,000
+100
|
+5,000
-5,000
|
|
Balance
6
|
+5,100
-500
|
+2,000
|
|
+5,000
|
+3,000
|
=
=
|
+15,100
-500
|
|
|
Balance
7
|
+4,600
-500
|
+2,000
|
|
+5,000
|
+3,000
|
=
=
|
+14,600
-500
|
|
|
Balance
|
+4,100
|
+2,000
|
|
+5,000
|
+3,000
|
=
|
+14,100
|
|
|
Total
|
14,100
|
=
|
14,100
|
|||||