Question

Following transactions are given:

a. Started business with cash Rs. 250,000.
b. Goods purchased on credit of Rs. 40,000.
c. Goods costing Rs. 20,000 were sold for cash for Rs. 30,000.
d. Paid to creditors Rs. 10,000.
e. Amount withdrawn by the proprietor Rs. 10,000.
f. Interest on capital Rs. 1,000.
g. Transfer from capital to loan Rs. 5,000.
Required: Accounting equation

Answer 1

To establish the bank's T-account balance sheet, you add assets including reserves, government bonds, and loans, and subtract the liabilities, i.e. deposits, to get the net worth. In this case, the bank has a net worth of $220.

Step-by-step explanation:

The student's question requires setting up a T-account balance sheet for a bank and calculating its net worth. A T-account balance sheet is a visual representation of the assets and liabilities of a bank. In this case:

Assets include reserves (50), government bonds (70), and loans made (500).Liabilities include the deposits held by the bank (400).

To calculate the bank's net worth, we subtract the liabilities from the assets:

Total Assets = Reserves + Government Bonds + Loans = 50 + 70 + 500 = 620Total Liabilities = Deposits = 400Net Worth = Total Assets - Total Liabilities = 620 - 400 = 220

Therefore, the bank's net worth is $220.