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
Assets
Furniture

Equities

Machinery

A/C Receivables

A/C Payable

O.E

S. No

Cash

100,000

100,000

Bal

100,000

100,000

(2000)

2,000

Bal

98,000

2,000

3
Bal

98,000

(20,000)

Bal

78,000

6,000

Bal

84,000

2,000

100,000
10,000

10,000

10,000

10,000

(20,000)
2,000

10,000

10,000

84,000

2,000

10,000

2,000

10,000

10,000

86,000

4,000

(4000)

14,000

82,000

2,000

7
Bal

84,000

(7,000)

Bal

77,000

(4,000)

Bal

73,000

Total

80,000
6,000

6
Bal

100,000

2,000

10,000

2,000

2,000
14,000

84,000
(7,000)

2,000

10,000

2,000

14,000

77,000
(4,000)

2,000

10,000

2,000

14,000

73,000

Rs. 87,000

Rs. 87,000

2
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Accounting Equation (Solved)

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
Assets

Equities

S. No

Cash

Land

A/C Receivables

Furniture

200,000

50,000

25,000

Bal

200,000

50,000

250,000

ii

(80,000)

Bal

120,000

iii

25,000

Bal

145,000

145,000

50,000

170,000
25,000

50,000

195,000

50,000

50,000

(50,000)

50,000

145,000

12,000

v
Bal

145,000

vi

(5,000)

Bal

140,000

vii

10,000

Bal

150,000

viii

1,500

Bal

151,500

ix

(3,000)

Bal

148,500

Total

O.E

(80,000)

iv
Bal

A/C Payable

50,000

12,000

12,000

50,000

157,000

5,000

50,000

157,000

5,000

50,000

157,000

50,000

157,000

1,500

(4,500)

51,500

152,500

5,000
50,000

12,000
(10,000)

50,000

2,000

(1,500)
50,000

50,000

2,000

3,500

2,000

3,500

Rs. 204,000

Rs. 204,000

3
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Accounting Equation (Solved)

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 Shahs personal use.

Required
Arrange the Assets, Liabilities and Owners Equity accounts in an Accounting Equation, using the following account titles:
Cash, Trucks, Equipment, Account Receivables, Account Payable and Owners Equity.

Shah Transport Services

Accounting Equation
Assets
Cash

S. No
a
Bal
b
Bal
c
Bal
d
Bal
e
Bal
f
Bal
g
Bal
h
Bal
i
Bal

600,000
600,000
(430,000)
170,000
170,000

Truck

Equities

Equipment

A/C Receivables

A/C Payable

430,000
430,000
430,000

600,000
9,000
9,000

9,000
9,000

170,000
6,000
176,000
22,300
198,300
(5,000)
193,300
(1,700)
191,600

430,000

9,000

430,000

9,000

7,200
7,200
(6,000)
1,200

430,000

9,000

1,200

430,000

9,000

1,200

9,000
(5,000)
4,000

430,000

1,200

4,000

191,600

430,000

9,000
(1,200)
7,800

1,200

4,000

Total

O.E
600,000
600,000

Rs. 630,600

9,000
9,000

600,000
7,200
607,200
607,200
22,300
629,500
629,500
(1,700)
627,800
(1,200)
626,600

Rs. 630,600

4
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Accounting Equation (Solved)

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
Assets
S. No

Cash

500,000

Bal

500,000

Prepaid Rent

(6,000)

Bal

494,000

6,000

Bal

414,000

IV

(100,000)

Bal

314,000

30,000

Bal

344,000

M. Securities

A/C Payables

500,000
100,000

6,000

20,000

100,000

20,000

500,000

20,000

500,000

100,000
6,000

100,000

100,000

(20,000)
6,000

10,000

80,000

100,000

20,000

(2,000)

VI
Bal

344,000

VII

(1,000)

Bal

343,000

VIII

4,000

Bal

347,000

Total

O.E

500,000

II

(80,000)

Inventory

500,000
6,000

III

Equities

4,000

510,000
(2,000)

80,000

100,000

20,000

508,000
(1,000)

4,000

80,000

100,000

20,000

507,000
4,000

4,000

80,000

100,000

Rs. 531,000

20,000

511,000

Rs. 531,000

5
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Accounting Equation (Solved)

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
Assets
Securities

Equities
Home

Car

Loan

O.E

S. No

Cash

a)

15,000

15,000

Bal

15,000

15,000

b)

(7,500)

7,500

Bal

7,500

7,500

c)

(5000)

Bal

2,500

7,500

d)

1500

(1,000)

Bal

4,000

6,500

e)

(2,800)

Bal

1,200

f)

3,600

Bal

4,800

g)

(800)

Bal

4,000

h)

(300)

Bal

3,700

i)

200

Bal

3,900

Total

15,000
15,000

10,000

15,000

10,000

15,000
500

15,000

10,000

15,500

10,000

15,500

2,800
6,500

15,000

2,800

3,600
6,500

6,500

15,000

15,000

2,800

2,800

10,000

19,100

(500)

(300)

9,500

18,800
(300)

6,500

15,000

2,800

9,500

18,500
200

6,500

15,000

Rs. 28,200

2,800

9,500

18,700

Rs. 28,200

6
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Accounting Equation (Solved)

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 months 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
Assets
Computer

Equities

S. No

Cash

S. Library

C. Components

A/C Receivables

A/C Payable

a
Bal
b
Bal
c
Bal
d
Bal
e
Bal

90,000
90,000
(5,000)
85,000
(20,000)
65,000

200,000

290,000

200,000

290,000
(5,000)

200,000

285,000

200,000

20,000
6,000

6,000

65,000
15,000
80,000

200,000

20,000

6,000

6,000

285,000
15,000

200,000

20,000

6,000

6,000

f
Bal
g
Bal

300,000
1,000

80,000
(1,500)
78,500

200,000

20,000

6,000

1,000

6,000

301,000
(1,500)

200,000

20,000

6,000

1,000

299,500

h
Bal
i
Bal

(5,000)
73,500
800
74,300

6,000
(5000)

200,000

20,000

6,000

1,000
(800)

1,000

299,500

200,000

20,000

6,000

200

1,000

299,500

20,000
285,000

1,000

Total

O.E

Rs. 300,500

Rs. 300,500

7
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Accounting Equation (Solved)

Unit 1

AE # 1.7 On 1st January, 2009 the balances of Khan Bros. are as follows
Assets

Equities

Cash . 25,000
Debtor .. 17,000
Inventory.. 22,000
Building 70,000
Total

Creditor 40,000
Capital ....... 94,000

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
Assets
S. No
Bal

Cash
25,000

(3,600)

Bal

21,400

5
Bal
7
Bal
9
Bal
11
Bal
15
Bal
18
Bal
22
Bal
30
Bal

12,000
33,400
(25,000)
8,400
5,000
13,400
(2,000)
11,400
14,000
25,400
(1,000)
24,400
24,400
24,400

Total

Debtor
17,000

Equities

Inventory
22,000

Building
70,000

Creditor
40,000

Capital
94,000
94,000

3,600
17,000

25,600

70,000

40,000

17,000

(10,500)
15,100

70,000

15,100
(6,000)
9,100
1,900
11,000

70,000

40,000
(25,000)
15,000

70,000

15,000

70,000

15,000

11,000

70,000

15,000

6,000

11,000

15,000

6,000
(700)
5,300

11,000

70,000
(1,400)
68,600

11,000

68,600

15,000

17,000
3,000
20,000
20,000
(14,000)
6,000

Rs. 109,300

15,000

1,500
95,500
95,500
2,000
97,500
(100)
97,400
97,400
(1,000)
96,400
(1,400)
95,000
(700)
94,300

Rs. 109,300

8
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Accounting Equation (Solved)

Unit 1

AE # 1.8
Hassan brothers engage in a service business completed the following selected transactions
during June 2009.
2009
June 2
5
7
12
15
20
22
25
28
30
31

Received cash from the owner Rs. 20,000 and equipment Rs. 8,000
Purchase supplies on account Rs. 3,000.
Return defective supplies purchased on account Rs. 1,000
Charged customers for services sold on account Rs. 12,000
Paid utilities expenses Rs. 1,500.
Paid to a creditor on account Rs. 500.
Received cash on account from charged customers Rs. 7,000.
Hassans drawings Rs. 5,000.
Depreciation expense estimated on equipment at the rate of 5% by WDM.
Salaries expenses outstanding at the end of month Rs. 2,100.
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
Assets
S. No
June 2

Cash
20,000

Equipment
8,000

Bal

20,000

8,000

20,000

8,000

20,000

8,000

5
Bal
7
Bal

Equities
Supplies

15
Bal
20
Bal
22
Bal
25
Bal

3,000
3,000
(1,000)
2,000

3,000
3,000
(1,000)
2,000

28,000
12,000
40,000
(1,500)
38,500

2,000

8,000

2,000

12,000

8,000

2,000

8,000

2,000

12,000
(7,000)
5,000

2,000

5,000

1,500

20,000

8,000
(400)
7,600

2,000

5,000

1,500

20,000

7,600

5,000

1,500

2,100
2,100

20,000

7,600

2,000
(800)
1,200

5,000

1,500

2,100

31
Bal

Total

O.E
28,000

28,000

8,000

20,000
(1,500)
18,500
(500)
18,000
7,000
25,000
(5,000)
20,000

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

Rs. 33,800

38,500

1,500

30
Bal

S. Payable

12,000
12,000

28
Bal

A/P

28,000

12
Bal

A/R

38,500
(5,000)
33,500
(400)
33,100
(2,100)
31,000
(800)
30,200

Rs. 33,800

9
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Accounting Equation (Solved)

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
Assets
S. No

Cash

A/C Rec

Stock

Furniture

Bal

40,000

17,000

23,000

10,000

1,000

Bal

41,000

(2,000)

Bal

39,000

13,000

Bal

52,000

(6,000)

Bal

46,000

17,000

23,000

Equities
P. Rent

10,000

Bank

M. Sec

Creditors

25,000

5,000

30,000

500

(1,000)

25,500

4,000

(7,000)
17,000

16,000

10,000

25,500

4,000

(5,000)
17,000

17,000

16,000

16,000

10,000

10,000

20,500
6,000

500

6,000

21,000

4,000

B. Loan

90,000
500

30,000

90,500

(7,000)

(2,000)

23,000

88,500

(5,000)

13,000

18,000

13,000

46,000

(2,500)

Bal

43,500

17,000

18,100

2,500

7,500

(8,000)

Bal

46,000

24,500

10,100

Total

17,000

16,000

10,000

6,000

18,000

88,500
500

4,000

18,000

13,000

(3,000)

Bal

Capital

89,000
(3,000)

4,000

18,000

13,000

2,100

86,000
(400)

10,000

6,000

18,000

4,000

18,000

13,000

85,600
2,000

10,000

6,000

18,000

Rs. 118,600

4,000

18,000

13,000

87,600

Rs. 118,600

10
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Accounting Equation (Solved)

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
Assets
S. No
Nov 1
Bal
8
Bal

Bank
80,000

Building

80,000
(6,000)

36,000

74,000

36,000

16

36,000

13,800

19

64,000
(3,000)
61,000

36,000

Bal

13,800

13,800

80,000

10,000

30,000

13,800

80,000

10,000

3,000

30,000

13,800

80,000

7,500

4,700

36,000

11,000

10,000
(2,000)

3,000

7,500

30,000

13,800
(2,000)

84,700

61,000
1,500

36,000

11,000

8,000

3,000
(1,500)

7,500

30,000

11,800

84,700

62,500

36,000

11,000

8,000

1,500

7,500

30,000

11,800

84,700

(1,000)

(1,000)

62,500

36,000

10,000

8,000
3,500

1,500

7,500
(3,500)

30,000

10,800

84,700

62,500

36,000

10,000
(500)

11,500

1,500

4,000

30,000

10,800

84,700
(500)

62,500

36,000

9,500

11,500

1,500

4,000

30,000

10,800

84,200

31
Bal

30,000

61,000

29
Bal

80,000
13,800

(2,800)

25
Bal

O.E
80,000

3,000

21
23

A/P

10,000

20

Bal

N/P

30,000
13,800

Bal

A/R

13,800
36,000

Bal

Tools

30,000

74,000
(10,000)

Bal

Equities
Cash

80,000

12
Bal

Inventory

Total

Rs. 125,000

Rs. 125,000

11
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Accounting Equation (Solved)

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
Assets
S. No

Bank

Stock

Cash

180,000

20,000

50,000

250,000

Bal

180,000

20,000

50,000

250,000

(40,000)

Bal

140,000

20,000

50,000

Land

Equities
Fur.

N/R

140,000

20,000

(4,500)

10,000

Bal

135,500

30,000

(2,000)

Bal

133,500

(20,000)

Bal

113,500

50,000

7,000

7,000

40,000

7,000

7,000

32,000

7,000

250,000

7,000

262,000
5,500

50,000

32,000

7,000

51,500

32,000

7,000

20,000

7,000

46,500

5,500

262,000

(1,500)

(2,000)

18,500

5,000

5,500

262,000

5,000

5,500

262.000

25,000
32,000

7,000

18,500

25,000

(6,500)

Bal

113,500

1,500

Bal

115,000

Total

30,000

40,000

(6,500)
32,000

7,000

18,500

8,000
30,000

O.E

12,000

20,000

(5,000)
30,000

A/P

20,000

1,500
30,000

N/P

40,000

(8,000)

Bal

M. sec

48,000

25,000

5,000

5,500

255,500

(8,000)
32,000

7,000

18,500

Rs. 267,500

17,000

1,500
5,000

5,500

257,000

Rs. 267,500

12
zaheerswati@ciit.net.pk

Accounting Equation (Solved)