. Transactions of Mohan Traders are given below. Show the effects of these transactions on assets, liabilities and capital with the help of Accounting equation. a. Business started with cash ₹1,00,000 b. Cash purchase ₹50,000 c. Cash sale of ₹60,000​

Answers 2

Explanation:

Statement showing the effect of various transactions on Accounting Equation

answer img

Accounting Equation is Asset = Liability + Capital.

As we have to show  effect  of each transaction through accounting equation.

A - Business satrted with cash 1,00,000

Cash = Liability + Capital

1,00,0000 = Liability + 1,00,000

As bsuiness is started with cash so cash is increasing and this is capital also as it is invested in the business which will be repayed when business will end .

B - Cash Purchase 50,000

Cash + Purchase = Liability + Capital

50,000 + 50,0000 = Liability + 1,00,000

As we have purchased which is our asset so it nis increased and for purchasing goods we have given cash so it has reduced .

C -  Cash Sale of 60,000

Cash = Liability + Capital

50,000 + 60,000 = 1,10,000

As we have sold our stock more than of its value so it is profit and it has been added to capital and cash has increased as sales is done for cash and purchases is now zero as it is sold out.

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