Final answer:
The Accounting Equation after all the transactions is Assets totaling Rs. 101,000, consisting of cash, receivables, unsold goods, and machinery, while Liabilities remain at Rs. 0 and Owner's Equity at Rs. 101,000.
Step-by-step explanation:
Preparing the Accounting Equation
Let's break this down step-by-step:
- Business started with cash Rs. 80,000 and goods Rs. 20,000. This means Assets = Cash + Goods = Rs. 80,000 + Rs. 20,000 = Rs. 100,000. The Equity (Owner's capital) is also Rs. 100,000 since it's the start of the business. So, the Accounting Equation would be Assets = Liabilities + Equity (A = L + E).
- 1/4 of the above goods are sold to Tushar. The cost of the goods sold is 1/4 of Rs. 20,000, which is Rs. 5,000. Sold at a profit of 20%, so the selling price is Rs. 5,000 + (20% of Rs. 5,000) = Rs. 6,000. Half the payment was received in cash, which is Rs. 3,000, and the remaining Rs. 3,000 is an Account Receivable. So, Cash increases by Rs. 3,000 and Account Receivable by Rs. 3,000. And goods decrease by Rs. 5,000, but there's a profit, so Owner's Equity increases by Rs. 1,000 (the profit).
- Bought Machinery for Rs. 20,000. This increases Assets (Machinery) by Rs. 20,000 but decreases another Asset, Cash, by Rs. 20,000, so no change in the Equity or Liabilities.
After all transactions, the Accounting Equation is:
- Assets = Cash + Receivables + Goods + Machinery = (80,000 + 3,000 - 20,000) + 3,000 + (20,000 - 5,000) + 20,000 = Rs. 101,000
- Liabilities = Rs. 0 (as no liabilities taken on)
- Equity = Rs. 80,000 (initial) + Rs. 20,000 (goods) + Rs. 1,000 (profit) = Rs. 101,000
The final Accounting Equation stands as:
A = L + E
Rs. 101,000 = Rs. 0 + Rs. 101,000