Question

Follow up Problem 1

Show the effect of following transactions on accounting equation :
(i) Anurag commenced business with cash 4,00,000.
(ii) Borrowed cash 1,50,000 from bank.
(iii) Rent paid in cash 10,000 and proprietor with drew 40,000 for personal use.
(iv) Repaid bank loan 80,000.
(v) Purchased goods for cash 45,000.
(vi) Repaid the balance of bank loan by borrowing equal amount from Satish.
(vii) Charge interest on drawings 4,500.

Answer 1

(i) Cash increased by 4,00,000. (ii) Cash increased by 1,50,000, Bank loan also increased by 1,50,000. (iii) Cash reduced by 10,000, Owner's equity reduced by 40,000. (iv) Bank loan reduced by 80,000. (v) Cash reduced by 45,000. (vi) No net change in the equation. (vii) Owner's equity reduced by 4,500