9. work book unit 1 accounting equation_ solved

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Work Book Unit 1 (Solved)

Learning Objectives

To know basics pillars of accounting building and its balance sheet

equation.

“

A leader is a dealer in hope.” Napoleon

[email protected] Accounting Equation (Solved)

2

Unit 1

AE # 1.1 Prepare Accounting Equation on the basis of following transactions

1. Ali and Company started business with cash Rs. 100,000.

2. He purchased Furniture for cash Rs. 2,000.

3. Purchases Machinery on credit from Ahmed Rs. 10,000.

4. Purchase goods for Rs. 20,000.

5. Sales goods of Rs. 6,000.

6. Purchase goods on credit from Rehman Rs. 4,000.

7. Credit sales to Khan Rs. 2,000.

8. Cash withdraw by owner Rs. 7,000.

9. Paid rent Rs. 2,500 and wages Rs. 1,500.

Ali and Company Accounting Equation

S. No

Assets Equities Cash Furniture Machinery A/C Receivables A/C Payable O.E

1 100,000 100,000

Bal 100,000 100,000

2 (2000) 2,000

Bal 98,000 2,000 100,000

3 10,000 10,000

Bal 98,000 2,000 10,000 10,000 100,000

4 (20,000) (20,000)

Bal 78,000 2,000 10,000 10,000 80,000

5 6,000 6,000

Bal 84,000 2,000 10,000 10,000 86,000

6 4,000 (4000)

Bal 84,000 2,000 10,000 14,000 82,000

7 2,000 2,000

Bal 84,000 2,000 10,000 2,000 14,000 84,000

8 (7,000) (7,000)

Bal 77,000 2,000 10,000 2,000 14,000 77,000

9 (4,000) (4,000)

Bal 73,000 2,000 10,000 2,000 14,000 73,000 Total Rs. 87,000 Rs. 87,000


3

Unit 1

AE # 1.2 Ali Ahmed Khan is wholesale trader; following transactions are record in Accounting Equation.

i. Commence business with cash Rs. 200,000 and Land Rs. 50,000.

ii. Bought merchandising for cash Rs. 80,000.

iii. Cash sales of worth Rs. 25,000.

iv. Bought goods on credit from Salman of worth Rs. 50,000.

v. Sales on account to Karim Rs. 12,000.

vi. Purchase furniture of the value of Rs. 5,000 by cash.

vii. Received cash form Karim of Rs. 10,000.

viii. Return defective furniture of worth Rs. 1,500.

ix. Paid wages Rs. 1,000, Rent 2,000 and Electricity Bill Payable Rs. 1,500.

Ali Ahmed Khan

Accounting Equation

S. No

Assets Equities

Cash Land A/C Receivables Furniture A/C Payable O.E

i 200,000 50,000 25,000

Bal 200,000 50,000 250,000

ii (80,000) (80,000)

Bal 120,000 50,000 170,000

iii 25,000 25,000

Bal 145,000 50,000 195,000

iv 50,000 (50,000)

Bal 145,000 50,000 50,000 145,000

v 12,000 12,000

Bal 145,000 50,000 12,000 50,000 157,000

vi (5,000) 5,000

Bal 140,000 50,000 12,000 5,000 50,000 157,000

vii 10,000 (10,000)

Bal 150,000 50,000 2,000 5,000 50,000 157,000

viii 1,500 (1,500)

Bal 151,500 50,000 2,000 3,500 50,000 157,000

ix (3,000) 1,500 (4,500)

Bal 148,500 50,000 2,000 3,500 51,500 152,500

Total Rs. 204,000 Rs. 204,000


4

Unit 1

AE # 1.3 Selected Transactions from Shah Transport Services began on June 1, 2005 by Zahid Shah as

a. Zahid Shah invested Rs. 600,000.

b. A Truck was Purchase by business for Rs. 430,000.

c. Equipment purchased on credit for Rs. 9,000.

d. A bill of Rs. 7,200 for transporting goods was sent to Mr. Ashraf Abbasi, a customer.

e. Cash of Rs. 6,000 is received form the customer who was billed in d.

f. Received Rs. 22,300 is cash for transporting goods.

g. A payment of Rs. 5,000 was made on the equipment purchased in c.

h. Paid expenses of different types for Rs. 1,700 in cash.

i. Equipment of Rs. 1,200 was withdrawn from business for Zahid Shah’s personal use.

Required

Arrange the Assets, Liabilities and Owner’s Equity accounts in an Accounting Equation, using the following account titles:

Cash, Trucks, Equipment, Account Receivables, Account Payable and Owner’s Equity.

Shah Transport Services

Accounting Equation

S. No Assets Equities

Cash Truck Equipment A/C Receivables A/C Payable O.E

a 600,000 600,000 Bal 600,000 600,000 b (430,000) 430,000

Bal 170,000 430,000 600,000 c 9,000 9,000

Bal 170,000 430,000 9,000 9,000 600,000 d 7,200 7,200

Bal 170,000 430,000 9,000 7,200 9,000 607,200 e 6,000 (6,000)

Bal 176,000 430,000 9,000 1,200 9,000 607,200 f 22,300 22,300

Bal 198,300 430,000 9,000 1,200 9,000 629,500 g (5,000) (5,000)

Bal 193,300 430,000 9,000 1,200 4,000 629,500 h (1,700) (1,700)

Bal 191,600 430,000 9,000 1,200 4,000 627,800 i (1,200) (1,200)

Bal 191,600 430,000 7,800 1,200 4,000 626,600

Total Rs. 630,600

Rs. 630,600


5

Unit 1

AE # 1.4 Prove that the Accounting Equation is satisfied in all following transactions of Jamil Ahmed

owner of business enterprises.

I. Started business with cash value of Rs. 500,000.

II. Rent paid in advance for a year Rs. 6,000.

III. Purchased merchandising inventory for cash Rs. 80,000 and on account Rs. 20,000.

IV. Purchased Marketable securities for cash Rs. 100,000.

V. Sales goods for Rs. 30,000 (cost 20,000).

VI. During the period rent expires Rs. 2,000

VII. Discount allowed during the trading was Rs. 1,000

VIII. Received cash dividend Rs. 4,000 on marketable securities.

Jamil Ahmed

Accounting Equation

S. No

Assets Equities Cash Prepaid Rent Inventory M. Securities A/C Payables O.E

I 500,000 500,000

Bal 500,000 500,000

II (6,000) 6,000

Bal 494,000 6,000 500,000

III (80,000) 100,000 20,000 Bal 414,000 6,000 100,000 20,000 500,000

IV (100,000) 100,000

Bal 314,000 6,000 100,000 100,000 20,000 500,000

V 30,000 (20,000) 10,000

Bal 344,000 6,000 80,000 100,000 20,000 510,000

VI (2,000) (2,000)

Bal 344,000 4,000 80,000 100,000 20,000 508,000

VII (1,000) (1,000)

Bal 343,000 4,000 80,000 100,000 20,000 507,000

VIII 4,000 4,000

Bal 347,000 4,000 80,000 100,000 20,000 511,000

Total Rs. 531,000

Rs. 531,000


6

Unit 1

AE # 1.5 Adil Ahmed had the following transactions. Use accounting equation to show their effect on his

Assets, Liabilities, and Capital:

a) Invested Rs. 15,000 in cash.

b) Purchased securities for cash Rs. 7,500.

c) Purchased a home for Rs. 15,000: giving Rs. 5,000 in cash and the balance through loan account.

d) Sold securities costing Rs. 1,000 for Rs. 1,500.

e) Purchase an old car for Rs. 2,800 cash.

f) Received cash as salary Rs. 3,600.

g) Paid cash Rs.500 for loan and Rs.300 for interest.

h) Paid cash for direct expenses Rs.300.

i) Received cash for dividend on securities Rs.200.

Adil Ahmed Accounting Equation


Cash Securities Home Car Loan O.E

a) 15,000 15,000

Bal 15,000 15,000

b) (7,500) 7,500 Bal 7,500 7,500 15,000

c) (5000) 15,000 10,000

Bal 2,500 7,500 15,000 10,000 15,000

d) 1500 (1,000) 500

Bal 4,000 6,500 15,000 10,000 15,500

e) (2,800) 2,800

Bal 1,200 6,500 15,000 2,800 10,000 15,500

f) 3,600 3,600

Bal 4,800 6,500 15,000 2,800 10,000 19,100

g) (800) (500) (300)

Bal 4,000 6,500 15,000 2,800 9,500 18,800

h) (300) (300)

Bal 3,700 6,500 15,000 2,800 9,500 18,500

i) 200 200

Bal 3,900 6,500 15,000 2,800 9,500 18,700

Total

Rs. 28,200

Rs. 28,200


7

Unit 1

AE # 1.6 Sameena after receiving her degree in computer science, begin her own business called Sameena

Computer Services. She completed the following transactions soon after starting the business.

a) Sameena began her business with Rs. 90,000 cash investment and system library which cost is Rs. 200,000.

b) Paid Rs. 5,000 as one month’s rent of office.

c) Purchase a computer of Rs. 20,000.

d) Purchase computer components on credit Rs. 6,000.

e) Develop software and collected revenue form client Rs. 15,000.

f) Billed a client Rs. 1,000 upon completion of a composing assignment.

g) Paid expenses Rs. 1,500.

h) Paid Rs. 5,000 amount owed on computer components.

i) Received 800 from client billed previously.

Required

Arrange the Assets and Equities in Balance Sheet Equation using following account title: Cash, S. Library, Computer, C.

Components, A/C Receivables, A/C Payable and O.E.

Sameena Computer Services

Accounting Equation


Cash S. Library Computer C. Components A/C Receivables A/C Payable O.E

a 90,000 200,000 290,000 Bal 90,000 200,000 290,000 b (5,000) (5,000)

Bal 85,000 200,000 285,000 c (20,000) 20,000

Bal 65,000 200,000 20,000 285,000 d 6,000 6,000

Bal 65,000 200,000 20,000 6,000 6,000 285,000 e 15,000 15,000

Bal 80,000 200,000 20,000 6,000 6,000 300,000 f 1,000 1,000

Bal 80,000 200,000 20,000 6,000 1,000 6,000 301,000 g (1,500) (1,500)

Bal 78,500 200,000 20,000 6,000 1,000 6,000 299,500 h (5,000) (5000)

Bal 73,500 200,000 20,000 6,000 1,000 1,000 299,500 i 800 (800)

Bal 74,300 200,000 20,000 6,000 200 1,000 299,500

Total Rs. 300,500

Rs. 300,500


8

Unit 1

AE # 1.7 On 1st January, 2009 the balances of Khan Bros. are as follows Assets Equities Cash …………………………. 25,000 Creditor ……………… 40,000

Debtor ……………………….. 17,000 Capital ……………....... 94,000 Inventory…..………………… 22,000

Building ………………………70,000 Total Rs. 134,000 Rs. 134,000

Transaction during the January was

January 1) Purchase goods for cash Rs. 4,000 subject to a trade discount of 10% 5) Sold goods for cash Rs. 12,000 costing Rs. 10,500 7) Cash paid to creditor Rs. 25,000 9) Sold goods for cash Rs. 5,000 and on credit Rs. 3,000 costing Rs. 6,000 11) Goods returned by a cash customer Rs. 2,000 costing Rs. 1,900 15) Cash received from debtors Rs. 14,000 18) Cash paid for furniture purchased for owner domestic use Rs. 1,000 22) Depreciation on building Rs. 1,400 (Using WDM)

30) Bad debts during the period was Rs. 700

Requirement: Show the effects of above transaction on the accounting equation of Khan Bros.

Khan Bros Accounting Equation

S. No

Assets Equities

Cash Debtor Inventory Building Creditor Capital Bal 25,000 17,000 22,000 70,000 40,000 94,000

1 (3,600) 3,600

Bal 21,400 17,000 25,600 70,000 40,000 94,000 5 12,000 (10,500) 1,500

Bal 33,400 17,000 15,100 70,000 40,000 95,500 7 (25,000) (25,000)

Bal 8,400 17,000 15,100 70,000 15,000 95,500 9 5,000 3,000 (6,000) 2,000

Bal 13,400 20,000 9,100 70,000 15,000 97,500 11 (2,000) 1,900 (100) Bal 11,400 20,000 11,000 70,000 15,000 97,400 15 14,000 (14,000) Bal 25,400 6,000 11,000 70,000 15,000 97,400 18 (1,000) (1,000) Bal 24,400 6,000 11,000 70,000 15,000 96,400 22 (1,400) (1,400) Bal 24,400 6,000 11,000 68,600 15,000 95,000 30 (700) (700) Bal 24,400 5,300 11,000 68,600 15,000 94,300

Total Rs. 109,300 Rs. 109,300


9

Unit 1

AE # 1.8 Hassan brothers engage in a service business completed the following selected transactions during June 2009.

2009 June 2 Received cash from the owner Rs. 20,000 and equipment Rs. 8,000 5 Purchase supplies on account Rs. 3,000. 7 Return defective supplies purchased on account Rs. 1,000 12 Charged customers for services sold on account Rs. 12,000 15 Paid utilities expenses Rs. 1,500. 20 Paid to a creditor on account Rs. 500. 22 Received cash on account from charged customers Rs. 7,000. 25 Hassan’s drawings Rs. 5,000. 28 Depreciation expense estimated on equipment at the rate of 5% by WDM. 30 Salaries expenses outstanding at the end of month Rs. 2,100. 31 Cost of supplies on hand at the end of the month Rs. 1,200.

Using following heads of accounts for above mentioned transactions. Cash, Equipment, Supplies, Account Receivable, Salary Payable, Account Payable and O.E

Hassan Brothers Accounting Equation

S. No

Assets Equities Cash Equipment Supplies A/R A/P S. Payable O.E

June 2 20,000 8,000 28,000 Bal 20,000 8,000 28,000 5 3,000 3,000 Bal 20,000 8,000 3,000 3,000 28,000 7 (1,000) (1,000) Bal 20,000 8,000 2,000 2,000 28,000 12 12,000 12,000 Bal 20,000 8,000 2,000 12,000 2,000 40,000 15 (1,500) (1,500) Bal 18,500 8,000 2,000 12,000 2,000 38,500 20 (500) (500) Bal 18,000 8,000 2,000 12,000 1,500 38,500 22 7,000 (7,000) Bal 25,000 8,000 2,000 5,000 1,500 38,500 25 (5,000) (5,000) Bal 20,000 8,000 2,000 5,000 1,500 33,500 28 (400) (400) Bal 20,000 7,600 2,000 5,000 1,500 33,100 30 2,100 (2,100) Bal 20,000 7,600 2,000 5,000 1,500 2,100 31,000 31 (800) (800) Bal 20,000 7,600 1,200 5,000 1,500 2,100 30,200

Total Rs. 33,800 Rs. 33,800


10

Unit 1

AE # 1.9 Following Transactions are related to Brother Corporation. You are required to make Equation.

Opening Balances

Inventory….… 23,000 Furniture ………..… 10,000 Marketable Securities …... 5,000 Bank ……. 25,000

Cash ………… 40,000 Account Payable …. 30,000 Debtors ……………….… 17,000 O.E …........ 90,000

1. Received dividend on marketable securities by bank of Rs. 500 and sold marketable securities of Rs. 1,000 by cash.

2. Defective inventory returned to vendor of Rs. 7,000 who reduced account payable and paid carriage expense of Rs.

2,000.

3. Obtained a bank loan of Rs. 13,000 by cash and paid Rs. 5,000 to creditor by bank.

4. Paid Rent for 2 years of worth Rs. 6,000 by cash and received commission of worth Rs. 500 by bank.

5. Payment made for furniture purchased for owner domestic use for Rs. 3,000 by bank.

6. Goods return by cash customer of Rs. 2,500 which cost Rs. 2,100.

7. Sold goods on account of Rs. 7,500 and by cash Rs. 2,500 which cost was Rs. 8,000.

Brother Corporation

Accounting Equation


Cash A/C Rec Stock Furniture P. Rent Bank M. Sec Creditors B. Loan Capital

Bal 40,000 17,000 23,000 10,000 25,000 5,000 30,000 90,000

1 1,000 500 (1,000) 500

Bal 41,000 17,000 23,000 10,000 25,500 4,000 30,000 90,500

2 (2,000) (7,000) (7,000) (2,000)

Bal 39,000 17,000 16,000 10,000 25,500 4,000 23,000 88,500

3 13,000 (5,000) (5,000) 13,000

Bal 52,000 17,000 16,000 10,000 20,500 4,000 18,000 13,000 88,500

4 (6,000) 6,000 500 500

Bal 46,000 17,000 16,000 10,000 6,000 21,000 4,000 18,000 13,000 89,000

5 (3,000) (3,000)

Bal 46,000 17,000 16,000 10,000 6,000 18,000 4,000 18,000 13,000 86,000

6 (2,500) 2,100 (400)

Bal 43,500 17,000 18,100 10,000 6,000 18,000 4,000 18,000 13,000 85,600

7 2,500 7,500 (8,000) 2,000

Bal 46,000 24,500 10,100 10,000 6,000 18,000 4,000 18,000 13,000 87,600

Total Rs. 118,600 Rs. 118,600


11

Unit 1

AE # 1.10 On November 1, ABC Company started the business by depositing Rs. 80,000 in a bank.

Nov.8 Purchased a building for Rs. 36,000, paying Rs. 6,000 by bank and issuing a note payable for balance.

Nov.12 Purchased Inventory on account of Rs. 13,800.

Nov. 16 Cash withdrawal of Rs. 10,000 for business purpose and retained as cash account.

Nov.19 Purchased Tools for cash Rs. 3,000

Nov.20 Sold some inventory on account of Rs. 7,500 which cost was Rs. 2,800 collectible within 45 days.

Nov.21 Paid cash Rs. 2,000 in partial payment of an account payable.

Nov.23 Sold some of the tools at a price equal to their cost, 1,500 and received amount through bank.

Nov 25 Defective inventory returned to vendor of Rs. 1,000.

Nov.29 Received cash Rs. 3,500 in partial collection of the account receivable from the sale of inventory Nov. 20.

Nov. 30 Inventory had lost by fire of worth Rs. 500.

ABC Company Accounting Equation

S. No

Assets Equities Bank Building Inventory Cash Tools A/R N/P A/P O.E

Nov 1 80,000 80,000

Bal 80,000 80,000 8 (6,000) 36,000 30,000 Bal 74,000 36,000 30,000 80,000 12 13,800 13,800 Bal 74,000 36,000 13,800 30,000 13,800 80,000 16 (10,000) 10,000 Bal 64,000 36,000 13,800 10,000 30,000 13,800 80,000 19 (3,000) 3,000 Bal 61,000 36,000 13,800 10,000 3,000 30,000 13,800 80,000 20 (2,800) 7,500 4,700 Bal 61,000 36,000 11,000 10,000 3,000 7,500 30,000 13,800 84,700 21 (2,000) (2,000) Bal 61,000 36,000 11,000 8,000 3,000 7,500 30,000 11,800 84,700 23 1,500 (1,500) Bal 62,500 36,000 11,000 8,000 1,500 7,500 30,000 11,800 84,700 25 (1,000) (1,000) Bal 62,500 36,000 10,000 8,000 1,500 7,500 30,000 10,800 84,700 29 3,500 (3,500) Bal 62,500 36,000 10,000 11,500 1,500 4,000 30,000 10,800 84,700 31 (500) (500) Bal 62,500 36,000 9,500 11,500 1,500 4,000 30,000 10,800 84,200

Total Rs. 125,000 Rs. 125,000


12

Unit 1

AE # 1.11 Following Transactions are related to M.A Industries. You are required to make Equation.

1. Muhammad Ali owner of Muhammad Ali Industries started business by depositing Rs. 180,000 in company bank

account, Stock Rs. 20,000 and Cash in hand Rs. 50,000

2. Purchased Land for Rs. 40,000 by issuance of check and Furniture Rs. 7,000 by issuance of Note Payable.

3. Sold part of land at a price Rs. 20,000 equal to cost Rs. 8,000 collectable within three months by Note receivable

4. Purchased inventory on credit for Rs. 5,500 and by check Rs. 4,500.

5. Received Rs. 1,500 cash on collection of note receivable and paid Rs. 2,000 by bank on account of note payable.

6. Purchase Marketable securities of total cost of Rs. 25,000 paid 20,000 by bank and Rs. 5,000 by cash account.

7. Paid rent Expenses Rs. 3,000, Salaries Expenses Rs. 1,000 and withdrawal of cash by owner of Rs. 2,500.

8. Received dividend on securities by bank of Rs. 1,500 and sold marketable securities of Rs, 8,000 by cash.

M. A Industries Accounting Equation


Bank Stock Cash Land Fur. N/R M. sec N/P A/P O.E

1 180,000 20,000 50,000 250,000

Bal 180,000 20,000 50,000 250,000

2 (40,000) 40,000 7,000 7,000

Bal 140,000 20,000 50,000 40,000 7,000 7,000 250,000

3 (8,000) 20,000 12,000

Bal 140,000 20,000 50,000 32,000 7,000 20,000 7,000 262,000

4 (4,500) 10,000 5,500

Bal 135,500 30,000 50,000 32,000 7,000 20,000 7,000 5,500 262,000

5 (2,000) 1,500 (1,500) (2,000)

Bal 133,500 30,000 51,500 32,000 7,000 18,500 5,000 5,500 262,000

6 (20,000) (5,000) 25,000

Bal 113,500 30,000 46,500 32,000 7,000 18,500 25,000 5,000 5,500 262.000

7 (6,500) (6,500)

Bal 113,500 30,000 40,000 32,000 7,000 18,500 25,000 5,000 5,500 255,500

8 1,500 8,000 (8,000) 1,500

Bal 115,000 30,000 48,000 32,000 7,000 18,500 17,000 5,000 5,500 257,000

Total Rs. 267,500 Rs. 267,500

9. work book unit 1 accounting equation_ solved

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