# DK Goel Solutions Chapter 6 Accounting Equations

Read below DK Goel Solutions Class 11 Chapter 6 Accounting Equation. These solutions have been prepared based on the latest Class 11 DK Goel Accountancy book issued for this academic year.

DK Goel Solutions Class 11 Chapter 6 provides all the accounting equations and a lot of numerical problems. The chapter also includes a lot of good quality questions which are very well designed and can be very helpful to understand the concepts of Accountancy for Class 11 students.

DK Goel Solutions Class 11 Chapter 6 solutions are free and will help you to prepare for Class 11 Accountancy

## Accounting Equations DK Goel Class 11 Accountancy Solutions

Students can refer below for solutions for all questions given in your DK Goel Accountancy Textbook for Class 11 in Chapter 6

Question 1: Give two basic purposes of the accounting equation.

Solution 1: Below are the purposes of the accounting equation:-

(i) Accounting equations despites the accuracy of a financial transaction.

(ii) From accounting equations we can easily prepare final accounts.

Question 2: Which of the following equations are correct?
I. Assets = Capital + Liabilities
II. Assets = Capital – Liabilities
III. Assets = Liabilities – Capital
IV. Capital = Assets – Liabilities
V. Capital = Assets + Liabilities
VI. Liabilities = Capital + Assets
VII. Liabilities = Capital – Assets
VIII. Liabilities = Assets – Capital

Solution 2: The correct equations from the above equations:-
I. Assets = Capital + Liabilities
IV. Capital = Assets – Liabilities
VIII. Liabilities = Assets – Capital
Hence, the correct equations are I, IV and VIII.

Question 3: The position of a businessman on 30th June 1994 was as follows –

Cash Rs. 5,000, Debtor Rs. 20,000, Machinery Rs. 60,000, Stock Rs. 25,000, Capital Rs. 75,000. Calculate his liabilities.

Solution 3:
It is given that
Capital = Rs. 75,000

Calculation of Total Assets:-
Total Assets = Cash + Debtors + Machinery + Stock
Total Assets = Rs. 5,000 + Rs. 20,000 + Rs. 60,000 + Rs. 25,000
Total Assets = Rs. 1,10,000

Calculation of Liabilities:-
Liabilities = Assets – Capital
Liabilities = Rs. 1,10,000 – Rs. 75,000
Liabilities = Rs. 35,000

Question 4: What entry (debit or credit) would you make to:-
(a) Increase in revenue
(b) Decrease in expense
(c) Record drawing
(d) Record the fresh capital introduced by owner

Solution 4:
(a) Credit – Increase in revenue
(b) Credit – Decrease in expense
(c) Debit in Capital Account – Record drawing
(d) Credit in Capital Account – Record the fresh capital introduced by owner

Question 5: If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or credit?

Solution 5: (i) Assets decrease will be the credit.

(ii) Liability Decrease will be the debit.

Question 6: Name the transaction that will

(i) Decrease the assets and decrease the capital

(ii) Increase the assets and increase the liabilities

(iii) Increase the assets and decrease another asset

(iv) Decrease the assets and decrease the liabilities

Solution 6: (i) Decrease the assets and decrease the capital – Cash withdraw for personal use Drawings.

(ii) Increase the assets and increase the liabilities – Purchase an asset on credit basis.

(iii) Increase the assets and decrease another asset – Sale or purchases of stock on cash basis.

(iv) Decrease the assets and decrease the liabilities – Paid amount to creditors.

Question 7: What will be the effect of the following on the accounting equation:-
(i) Purchased goods for Rs. 20,000 form Mahesh on credit
(ii) Sold goods to Suresh costing Rs. 8,000 for Rs. 10,000 in cash
(iii) Paid wages Rs. 500
(iv) Withdrew in cash for private use Rs. 2,000
(v) Paid to creditors Rs. 2,000

Solution 7: (i) Stock Increases by Rs. 20,000 on assets and Creditors Increases by Rs. 20,000 on liabilities.

(ii) Cash Increase by Rs. 10,000 on assets, Stock decrease by Rs. 8,000 on assets and Capital increase by Rs. 2,000.

(iii) Cash Decrease by Rs. 500 on assets and Capital decrease by Rs. 500.

(iv) Cash Decrease by Rs. 2,000 on assets and Capital decrease by Rs. 2,000.

(v) Cash Decrease by Rs. 2,000 on assets and creditors decrease by Rs. 2,000 on liabilities.

Question 8: If the total asset of a business is Rs. 2,00,000 and the net worth (capital) is Rs. 1,50,000. Calculate creditors.

Solution 8:
Liabilities (Creditors) = Assets – Capital
Creditors = Rs. 2,00,000 – Rs. 1,50,000
Creditors = Rs. 50,000
Therefore, the amount of creditors are Rs. 50,000.

Question 9: A business on 1st April 2011 with a capital of Rs. 5,00,000. On 31st March 2012, his assets were worth Rs. 7,80,000 and liabilities Rs. 70,000. Find out his closing capital and profits earned during the year.

Solution 9:
Calculation of Closing Capital:-
Closing Capital = Closing Assets – Closing liabilities
Closing Capital = Rs. 7,80,000 – Rs. 70,000
Closing Capital = Rs. 7,10,000

Calculation of Profit:-
Profit = Closing Capital – Opening Capital
Profit = Rs. 7,10,000 – Rs. 5,00,000
Profit = Rs. 2,10,000
Therefore, Profit of the firm is Rs. 2,10,000.

Question 10: On which side will the increase in the following account be recorded? Also, mention the nature of the account.

1. Cash
2. Machinery
3. Debtor
4. Creditor
5. Proprietor’s Account
7. Salary Paid

Solution 10:

1. Cash
Nature of Account – Assets
Side of the Account – Debit
2. Machinery
Nature of Account – Asset
Side of the Account – Debit
3. Debtors
Nature of Account – Asset
Side of the Account – Debit
4. Creditors
Nature of Account – Liabilities
Side of the Account – Credit
5. Proprietor’s Accounts
Nature of Account – Capital
Side of the Account – Credit
Nature of Account – Income
Side of the Account – Credit
7. Salary paid
Nature of Account – Expenses
Side of the Account – Debit
Nature of Account – Income
Side of the Account – Credit

Question 11: On which side will the increase in the following account be recorded? Also, mention the nature of the account.

1. Furniture
2. Bank
3. Proprietor’s Account
4. Salary Paid
5. Salary Outstanding
6. Subash – A Customer

Solution 11: S.no.-Particulars-Nature of Account-Side of the Account

1. Furniture
Nature of Account – Assets
Side of the Account – Debit
2. Bank-Assets-Credit
Nature of Account – Assets
Side of the Account – Debit
3. Proprietor’s Account-Capital-Debit
Nature of Account – Capital
Side of the Account – Debit
4. Salary Paid-Expenses-Credit
Nature of Account – Expenses
Side of the Account – Credit
5. Salary Outstanding
Nature of Account – Liabilities
Side of the Account – Debit
6. Subash
Nature of Account – Customer (Assets)
Side of the Account – Credit

### Very Short Questions of Accounting Equations

Question 1: What is an accounting equation?

Solution 1: Accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital. The equation reads as:-

Assets = Liabilities + Capital

Question 2: Give fundamental accounting equation.

Solution 2: Below is the fundamental accounting equation:-

Assets = Liabilities + Capital

Question 3: If the capital of a firm is Rs. 5,00,000 and outside liabilities are Rs. 2,00,000. Evaluate total assets of the company.

Solution 3:
It is given that,
Capital = Rs. 5,00,000
Liabilities = Rs. 2,00,000

Assets = Liabilities + Capital
Assets = Rs. 5,00,000 + Rs. 2,00,000
Assets = Rs. 7,00,000
Therefore, the Total Assets will be Rs. 7,00,000

Question 4: If total assets of a company are Rs. 10,00,000 and capital is Rs. 4,00,000. Calculate creditors.

Solution 4:
Liabilities (Creditors) = Assets – Capital (Net worth)
Creditors = Rs. 10,00,000 – Rs. 4,00,000
Creditors = Rs. 6,00,000

Question 5: X’ commenced business on April 1st 2013 with a capital of Rs. 6,00,000. On 31st March, 2014 his assets were worth Rs. 8,00,000 and liabilities Rs. 50,000. Find out his closing capital and profits earned during the year.

Solution 5:
Calculation of closing stock:-
Closing Capital = Closing Assets – Closing liabilities
Closing Capital = Rs. 8,00,000 – Rs. 50,000
Closing Capital = Rs. 7,50,000

Calculation of Profit:-
Profit = Closing Capital – Opening Capital
Profit = Rs. 7,50,000 – Rs. 6,00,000
Profit = Rs. 1,50,000

Question 6: What is debit?

Solution 6: The output of the growth in assets and the reduction in liabilities is debit. Debits are the equilibrium of credits that counter each other. It is considered a debit if a number is entered on the left-hand side of an account.

Question 7: What is credit?

Solution 7: Credit is the result of a fall in savings and a growth in liabilities. Credits are the balance of debits, each of which is the reverse. It is considered a credit if a number is entered on the right-hand side of an account.

Question 8: Why are the rules of credit and debit same for both capital and liabilities?

Solution 8: The credit and debit laws are the same on all resources and liabilities since the owner and company are the separate entities according to the concept of the business entity. It is believed that the company owner is the borrower of the company and the company is named to compensate its owners.

Question 9: Name the side on which increase in capital is recorded.

Solution 9: The capital rise is recoded on the side of credit.

Numerical Questions of DK Goel Solutions Class 11 Chapter 6 Accounting Equations

Question 1: Prepare Accounting Equation from the following:-

Solution 1:

Working Note:-

(i) In transaction 6 goods costing Rs. 40,000 sold on 20% profit (40,000 × 20%) = 40,000 × 20100 = Rs. 8,000.

Selling price of goods = 40,000 + 8,000 = Rs. 48,000.

Point in Mind DK Goel Solutions Class 11 Chapter 6 :-

Accounting equation is based on the dual concept of accounting, according to which, every transaction has two aspects namely Debit and Credit. It means that every transaction in accounting affects both Debit (Dr.) and Credit (Cr.)

Question 2: (A) Show the Accounting Equation on the basis of the following and present a balance sheet on the last new equation balances:

Solutions 2: (A)

Working Note:-

In transaction 4 goods costing Rs. 500 sold at Rs. 700. So, the profit will be Rs. 700 – Rs. 500 = Rs. 200 it will rise our capital by Rs. 200.

Point in Mind:-

Accounting equation thus refers to an equation in which total assets are always equal to the total Liabilities (i.e. Capital + Liabilities).

Question 2: (B) Prove that the accounting equation is satisfied in all the following transactions of Rajaram. Also prepare a balance sheet:-

Solutions 2: (B)

Working Note:-

In transaction 5 goods costing Rs. 60,000 sold at Rs. 80,000. So, the profit will be Rs. 80,000 – Rs. 60,000 = Rs. 20,000 it will rise our capital by Rs. 20,000.

Point in Mind:-

Accounting equation thus refers to an equation in which total assets are always equal to the total Liabilities (i.e. Capital + Liabilities).

Question 3: Prepare Accounting Equation from the following:

(a) Started business with Cash Rs. 2,00,000.

(b) Purchased goods for Cash Rs. 60,000 and on Credit Rs. 1,50,000.

(c) Sold goods for Cash costing Rs. 40,000 at a profit of 20% and on Credit costing Rs. 72,000 at a profit of 25%.

(d) Paid for Rent Rs. 5,000.

Solution 3:

Working Note:-

(i) In transaction 3 the

Cost of goods sold is Rs. 40,000. Sold on cash 20% of profit Rs. 40,000 × 20100 = Rs. 8,000.

Selling price = Rs. 40,000 + Rs. 8,000 = Rs. 48,000.

Cost of goods sold is Rs. 72,000. Sold on cash 20% of profit Rs. 72,000 × 25100 = Rs. 18,000.

Selling price = Rs. 72,000 + Rs. 18,000 = Rs. 90,000.

Total cost of goods sold = Rs. 40,000 + 72,000 = 1,12,000.

Point in Mind:-

The accounting equation is always equal from both sides debit and credit. It shows the accuracy of recording of a financial transaction.

Question 4: Prepare accounting equation from the following.

Solution 4:

Working Note:-

(i) In transaction 4 the cost of goods Rs. 20,000 sold at Rs. 26,000. So, the profit will be Rs. 26,000 – Rs. 20,000 = Rs. 6,000.

Point in Mind:-

The accounting equation is always equal from both sides debit and credit. It shows the accuracy of recording of a financial transaction.

Question 5: Mohit has the following transaction. Prepare accounting equation.

Working Note:-

(i) In transaction 3 the cost of goods Rs. 17,500 sold at Rs. 20,000. So, the profit will be Rs. 17,500 – Rs. 20,000 = Rs. 2,500.

Point in Mind:-

Every transaction has two aspects- debit and credit. It holds that for every debit there is a credit of equal amount and vice versa.

Question 6: What will be the effect of the following on the Accounting Equation?

(i) Harish started business with cash Rs. 1,80,000

(ii) Purchased goods for cash Rs. 60,000 and on credit Rs. 30,000

(iii) Sold goods for cash Rs. 40,000; costing Rs. 24,000

(iv) Rent paid Rs. 5,000; and rent outstanding Rs. 2,000

(v) Sold goods on credit Rs. 50,000 (costing Rs. 38,000)

(vi) Salary paid in advance Rs. 3,000

Solution 6:

Working Note:-

(i) In transaction 3 the cost of goods Rs. 24,000 sold at Rs. 40,000. So, the profit will be Rs. 17,500 – Rs. 20,000 = Rs. 16,000.

Point in Mind:-

Every transaction has two aspects- debit and credit. It holds that for every debit there is a credit of equal amount and vice versa.

Question 7: Use Accounting Equation to show the effect of the following transactions of M/s Royal Traders.

Solution 7:

Point in Mind:-

Outstanding transactions are the liability for the business firm and prepaid transaction are the assets for the business firm.

Question 8 (A):  Prepare Accounting Equation from the following.

1. Started business with cash Rs. 75,000 and goods Rs. 25,000
2. Paid for Rent Rs. 2,000
3. Bought goods for cash Rs. 30,000 and on credit for Rs. 44,000
4. Goods costing Rs. 50,000 sold at a profit of 25%, out of which Rs. 27,500 received in Cash
5. Purchased a Motor-cycle for personal use Rs. 20,000

Solution 8 (A):

Working Note:-

(i) In transaction 4 the cost of goods Rs. 50,000 sold at Rs. 25% of profit.

So, the profit will be

Rs. 50,000 × 25100 = Rs. 12,500

Selling price = Rs. 50,000 + Rs. 12,500 = Rs. 62,500.

In which Cash Sale = 27,500 and Credit Sale = Rs. 35,000.

Point in Mind:-

Every transaction has two aspects- debit and credit. It holds that for every debit there is a credit of equal amount and vice versa.

Question 8: (B) Prepare Accounting Equation from the following and also prepare a Balance Sheet:-

1. Raghu started business with Cash Rs.1,50,000
2. Bought goods for cash Rs.80,000 and on credit for Rs.40,000
3. Goods costing Rs.75,000 sold at a profit of 3312 %. Half the payment received in cash
4. Goods costing Rs.10,000 sold for Rs.12,000 on credit
5. Paid for Rent Rs.2,000 and for salaries Rs.4,000
6. Goods costing Rs.20,000 sold for Rs.18,500 for Cash

Solution 8 (B):

Working Note:-

In transaction 3 the cost of goods Rs. 75,000 sold at Rs. 3313% of profit.

Hence, the profit will be Rs. 75,000 × 3313% = Rs. 25,000.

Selling price = Rs. 75,000 + Rs. 25,000 = Rs. 1,00,000.

In which Cash Sale = 50,000 and Credit Sale = Rs. 50,000.

Point in Mind:-

Every transaction has two aspects- debit and credit. It holds that for every debit there is a credit of equal amount and vice versa.

Question 9: If the Capital of a business is Rs. 1,20,000 and Outside liabilities are Rs. 20,000, calculate total assets of the business.

Solution 9: We know that

Assets = Liabilities + Capital

Assets = Rs. 20,000 + Rs. 1,20,000

Assets = Rs. 1,40,000

Point In Mind:-

The formulas using to calculate Assets, Liabilities and Capital are:-

Assets = Liabilities + Capital

Liabilities = Assets – Capital

Capital = Assets – Liabilities

Question 10: If total assets of a business are Rs. 1,30,000 and capital is Rs. 80,000, calculate creditors.

Solution 10: Assets = Rs. 1,30,000

Capital = Rs. 80,000

We know that

Liabilities = Assets – Capital

Liabilities = Rs. 1,30,000 – Rs. 80,000

Liabilities = Rs. 50,000

Point in Mind:-

The accounting equation is always equal from both sides debit and credit. It shows the accuracy of recording of a financial transaction.

Question 11: ‘A’ commenced his cloth business on 1st April, 2011 with a capital of Rs. 3,00,000. On 31st March, 2012 his assets were worth Rs. 5,00,000 and liabilities Rs. 1,00,000. Find out his closing capital and profits earned during the year.

Solution 11: Opening Capital = Rs. 3,00,000

Assets = Rs. 5,00,000

Liabilities = Rs. 1,00,000

Calculation of Closing Capital:-

Closing Capital = Assets – Liabilities

Closing Capital = Rs. 5,00,000 – Rs. 1,00,000

Closing Capital = Rs. 4,00,000

Calculation of Profit:-

Profit = Closing Capital – Opening Capital

Profit = Rs. 4,00,000 – Rs. 3,00,000

Profit = Rs. 1,00,000

Point in Mind:

Closing Capital = Opening Capital + Additional Capital + Profit – Drawings

Question 12: (A) Yogesh commenced business on 1st April, 2011 with a Capital of Rs. 5,00,000 and a loan of Rs. 1,00,000 borrowed from Citi Bank. On 31st March, 2012, his assets were Rs. 8,00,000. Calculate his closing capital and profits earned during the year.

Solution 12: (A) Opening Capital = Rs. 5,00,000

Assets = Rs. 8,00,000

Liabilities (Loan) = Rs. 1,00,000

Calculation of Closing Capital

Closing Capital = Assets – Liabilities

Closing Capital = Rs. 8,00,000 – Rs. 1,00,000

Closing Capital = Rs. 7,00,000

Calculation of Profit

Profit = Closing Capital – Opening Capital

Profit = Rs. 7,00,000 – Rs. 5,00,000

Profit = Rs. 2,00,000

Working Note:-

(i) It is assumed that loan borrowed from Citi Bank has not been paid till the end of the accounting year.

Point in Mind:-

(i) Closing Capital = Opening Capital + Additional Capital + Profit – Drawings

Question 12 (B): If in the above case, the proprietor had introduced fresh capital of Rs. 40,000 and had withdrawn Rs. 10,000 for personal purposes, calculate his profits.

Solution 12: (B) Opening Capital = Rs. 5,00,000

Assets = Rs. 8,00,000

Liabilities (Loan) = Rs. 1,00,000

Calculation of Closing Capital

Closing Capital = Assets – Liabilities

Closing Capital = Rs. 8,00,000 – Rs. 1,00,000

Closing Capital = Rs. 7,00,000

Calculation of Profit

Closing Capital = Opening Capital + Additional Capital + Profit – Drawings

Rs. 7,00,000 = Rs. 5,00,000 + Rs. 40,000 + Profit – Rs. 10,000

Rs. 7,00,000 = Rs. 5,30,000 + Profit

Rs. 7,00,000 – Rs. 5,30,000 = Profit

Profit = Rs. 7,00,000 – Rs. 5,30,000

Profit = Rs. 1,70,000

Point in Mind:-

(i) Closing Capital = Opening Capital + Additional Capital + Profit – Drawings

Question 13: Give one example of each of the following transactions

1. Increase in an asset and a liability
2. Decrease in an asset and a liability
3. Increase in assets and capital
4. Decrease in assets and capital

Solution 13:

Question 14: On which side the increase in the following accounts will be recorded? Also mention the nature of account:−

1. Furniture
2. Rent Paid
4. Salary Paid
5. Proprietor’s Paid
6. Debtor
7. Creditor

Solution 14:
1.) Furniture
Nature of Account – Assets
Name of the side Debit

2.) Rent Paid
Nature of Account – Expenses
Name of the side Debit

Nature of Account – Income
Name of the side Credit

4.) Salary Paid
Nature of Account – Expenses
Name of the side – Debit

5.) Proprietor’s Paid
Nature of Account – Capital
Name of the side – Credit

6.) Debtors
Nature of Account – Assets
Name of the side Debit

7.) Creditor
Nature of Account – Assets
Name of the side Debit

Question 15: On which side the decrease in the following accounts will be recorded? Also mention the nature of account:−

1. Cash Bank
2. Bank Overdraft
3. Rent Paid
4. Outstanding Rent
5. Prepaid Insurance
6. Manoj, Proprietor of the business

Solution 15:

1. Cash Bank
Nature of Account:– Assets
Name of the side:– Credit
2. Bank Overdraft
Nature of Account:– Liabilities
Name of the side:– Debit
3. Rent Paid
Nature of Account:– Expenses
Name of the side:– Credit
4. Outstanding Rent
Nature of Account:- Liabilities
Name of the side:– Debit
5. Prepaid Insurance
Nature of Account:- Assets
Name of the side:- Credit
6. Manoj, Proprietor of the business
Nature of Account:- Capital
Name of the side:– Debit

Question 16: From the following transactions, state the nature of accounts and state the accounts which will be debited and credited:

1. Ganesh started business with Cash Rs. 2,00,000
2. Purchased goods for Cash Rs. 60,000
3. Sold goods for cash Rs. 75,000
4. Purchased goods from Nakul on Credit for Rs. 80,000
5. Sold goods to Bhushan on Credit for Rs. 50,000
6. Paid Cash to Nakul Rs. 20,000
7. Received Cash from Bhushan Rs. 10,000
8. Paid salary Rs. 20,000

Solution 16:
1.) Ganesh started business with Cash Rs. 2,00,000.
Nature of Account:– Assets
Debit Account:- Cash A/c
Nature of Account:- Liability
Credit Account:- Capital A/c

2.) Purchased goods for Cash Rs. 60,000
Nature of Account:- Assets
Debit Account:- Purchases A/c
Nature of Account:- Assets
Credit Account:- Cash A/c

3.) Sold goods for cash Rs. 75,000
Nature of Account:- Assets
Debit Account:- Cash A/c
Nature of Account:- Assets
Credit Account:- Sales A/c

4.) Purchased goods from Nakul on Credit for Rs. 80,000
Nature of Account:- Assets
Debit Account:- Purchases A/c
Nature of Account:- Liability
Credit Account:- Nakul’s A/c

5.) Sold goods to Bhushan on Credit for Rs. 50,000
Nature of Account:- Assets
Debit Account:- Bhushan’s A/c
Nature of Account:- Assets
Credit Account:- Sales A/c

6.) Paid Cash to Nakul Rs. 20,000
Nature of Account:- Liability
Debit Account:- Nakul’s A/c
Nature of Account:– Assets
Credit Account:- Cash A/c

7.) Received Cash from Bhushan Rs. 10,000
Nature of Account:- Assets
Debit Account:- Cash A/c
Nature of Account:- Assets
Credit Account:- Bhushan’s A/c

8.) Paid salary Rs. 20,000
Nature of Account:– Expenses
Debit Account:- Salary A/c
Nature of Account:– Assets
Credit Account:- Cash A/c

Question 17: Open ‘T’ shape account for Machinery and write the following on the proper side.

Solution 17:

Working Note:-

Increase in assets will be debit and decrease In assets will be credited. Here Machinery is an asset.

Question 18: Open ‘T’ shape account of our creditor ‘Raghubir’ and write the following transactions on the proper side.

1. Purchased goods from Raghubir on credit for Rs. 50,000
2. Returned goods to Raghubir for Rs. 5,000
3. Paid to Raghubir Rs. 30,000
4. Purchased goods from Raghubir on credit for Rs. 16,000
5. Paid to Raghubir Rs. 20,000

Solution 18:

Working Note for DK Goel Solutions Class 11 Chapter 6:-

Decrease in liabilities will be debit and increase in liabilities will be credited. Here Raghubir is a creditor (liability).

Question 19: Put the following on the proper side of Cash account, Debtor’s account and Creditor’s account.

1. Sold goods for cash Rs. 60,000
2. Sold goods to Hari on credit Rs. 20,000
3. Purchased goods from Krishan on credit Rs. 36,000
4. Purchased goods from Krishan for cash Rs. 10,000
5. Cash received from Hari Rs. 15,000
6. Cash paid to Krishan Rs. 28,000

Solution 19:

Point of Knowledge:-

1. Increase in asset will be debited and decrease will be credited.
2. Increase in the liabilities will be credited and decrease will be debited.
3. Increase in the capital will be credited and decrease will be debited.
4. Increase in the revenue or income will be credited and decrease will be debited.
5. Increase in expenses and losses will be debited and decrease will be credited.

Question 20: From the following transactions prepare the Proprietor’s Account in ‘T’ shape.

Solution 20:

Point in mind:-

1. Asset gains will be debited and credited with reductions.
2. Increased liabilities would be credited and debited for a decline.
3. The capital gain shall be credited and the reduction shall be debited.
4. Revenue or benefit increases will be credited and reductions will be debited.
5. Increased costs and deficits would be debited and compensated with a reduction.

Question 21: Prepare the Accounting Equation on the basis of the following

1. Started business with cash Rs. 1,40,000 and Stock Rs. 2,50,000.
2. Sold goods (costing Rs. 50,000) at a profit of 25% on the cost.
3. Deposited into bank account Rs. 1,80,000.
4. Purchased goods from Mohan Rs. 80,000.

Solution 21:

Working Note:-

In transaction 2 goods costing Rs. 50,000 sold at 25% profit on cost = Rs. 50,000 × 25100 = 12,500.

Point in mind:-

1. Asset gains will be debited and credited with reductions.
2. Increased liabilities would be credited and debited for a decline.

Question 22: Prepare Accounting Equation on the basis of the following transactions.

1. Started business with cash Rs. 70,000.
2. Credit purchase of goods Rs. 18,000.
3. Payment made to creditors in full settlement Rs. 17,500.
4. Purchase of machinery for cash Rs. 20,000.

Solution 22:

Working Note:-

Amount paid to creditor Rs. 17,500 in full settlement instant of Rs. 18,000. The difference of Rs. 500 treated as discount received.

Point in mind:-

The credit and debit laws are the same on all resources and liabilities since the owner and company are the separate entities according to the concept of the business entity. It is believed that the company owner is the borrower of the company and the company is named to compensate its owners.

Question 23: Prepare accounting equation from the following

1. Started business with cash Rs. 50,000 and goods Rs. 30,000
2. Purchased goods for cash Rs. 30,000 and on credit from Karan Rs. 20,000
3. Goods costing Rs. 40,000 were sold for Rs. 55,000 for cash
4. Withdrew cash for personal use Rs. 10,000
5. Rent outstanding Rs. 2,000

Solution 23:

Working Note:-
For transaction 3 costing of goods Rs. 40,000 sold at Rs. 55,000.
Profit = Selling price – Cost Price
Profit = Rs. 55,000 – Rs. 40,000
Profit = Rs. 15,000

Point in mind:-
In the accounting equation if the capital shows negative figure then it is drawings.

Question 24: Show the accounting equation on the basis of the following transactions and present a Balance Sheet of the last new equation balance.

Solution 24:

Working Note DK Goel Solutions Class 11 Chapter 6 :-
For transaction 3 goods costing Rs. 3,000 sold at Rs. 4,000.
Profit = Selling price – Cost Price
Profit = Rs. 4,000 – Rs. 3,000
Profit = Rs. 1,000

Point in mind:-
Accounting equation thus refers to an equation in which total assets are always equal to the total Liabilities (i.e. Capital + Liabilities).

Question 25: Prove that the accounting equation is satisfied in the following transactions.

Solution 25:

Working Note:-
For transaction 3 goods costing Rs. 50,000 sold at Rs. 60,000.
Profit = Selling price – Cost Price
Profit = Rs. 60,000 – Rs. 50,000
Profit = Rs. 10,000

(ii)
Total Goods = Rs. 60,000
1/3 of goods sold = Rs. 60,000 × 1/3 = Rs. 20,000
Profit = Rs. 20,000 × 20%
Profit = Rs. 4,000
Selling price = Rs. 20,000 + Rs. 4,000
Selling price = Rs. 24,000
Cash Sale = 24,000 × 50% = Rs. 12,000
Credit Sales = 24,000 × 50% = Rs. 12,000

Point in mind for DK Goel Solutions Class 11 Chapter 6 :
(1) Rule of Personal Account: Debit the receiver and credit the giver.
(2) Rule of Real Account: Debit what comes in and credit what goes out.
(3) Rule of Nominal Account: Debit all expenses and losses credit all incomes and gains.

What is the Accounting Equation?

The accounting equation is the core foundation of the double-entry accounting system. On the balance sheet, it defines that the set of assets of a company is proportional to the sum of the company’s shareholder’s equity and liabilities of the firm.

What do you mean by asset accounts?

Assets are basically the economic resources of a company, it may be in liquid or materialistic form, like properties. The assets can be measured in terms of money. However, there are several aspects related to the assets, like tangibility, type, and many more. An asset account keeps track of a firm’s assets that the company owner brings into the business.

What are capital accounts?

Capital is basically the funds or resources invested in the business by the company owner. The owner can introduce capital as liquid funds or assets. To frame a successful business model, the business must pay back the amount invested coupled with some profits. The record and presentation of these capital investments are quoted as capital accounting.

Write the Accounting Equation.

The Accounting equation is –
Assets = Capital + Assets of a firm
A good financial statement works on the grounds of a well-balanced accounting equation, i.e., each debit must have equal credit, defining the dual aspect of transactions.

What is an liabilities account?

Liability is basically the funds or resources borrowed by a firm from outsiders. In simple words, it is the debt payable to the outsiders by an entity. Liabilities can be either short-term or long-term. For instance, bills payable are a short-term liability. However, bank loans are long-term liabilities. Liabilities accounts track the payable debts by a company to help it clear all the overdue on time.

Write some primary purposes of the accounting equation.

The basic purposes of the accounting equation are as follows –
● When the accounting equation is balanced and equal, it defines the accuracy in recording a company’s financial transactions.
● It primarily helps firms to frame the perfect balance sheets.