Accounting Equation From the desk f JAS

Problem 1:
Habib Ullah Sadiq is wholesale trader; following transactions must be recorded in double entry system.
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 Ali Raza Rs. 12,000.
vi. Purchase furniture of the value of Rs. 5,000 by cash.
vii. Received cash form Ali Raza of Rs. 10,000.
viii. Return defective furniture of worth Rs. 1,500.
xi. Paid wages Rs. 1,000, Rent 2,000 and Electricity Bill Payable Rs. 1,500.

Problem 2:
Muhammad Faizan Abid had the following transactions. Use double entry 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 expenses Rs. 300.
i) Received cash for dividend on securities Rs.200.

Problem 3:
Selected Transactions from Shah Transport Services began on June 1, 2016 by Zahid Shah as?
a. Zahid Shah invested Rs. 600,000.
b. 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 from 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i. Equipment of Rs. 1,200 was withdrawn from business for Zahid Shah’s personal use.

Required: Arrange the Assets, Liabilities and Owner’s Equity accounts in an Accounting Equation as well as in
general journal.

Problem 4:
Prove that the Accounting Equation is satisfied in all following transactions of Wajeeha Ejaz 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 from Mr. Tahir.
IV. Purchased Marketable securities for cash Rs. 100,000.
V. Cash Sales Rs. 30,000 (cost 20,000).
VI. During the period rent expires Rs. 2,000.
VII. Commission paid during the trading was Rs. 1,000.
VIII. Received cash dividend Rs. 4,000 on marketable securities.
IX. Paid to Rs. 19,500 to Mr. Tahir in full settlement.
X. Withdrew inventory for personal purpose by owner of worth Rs. 6,000.

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Accounting Equation From the desk f JAS

Problem 5:
Show the effect of the following transactions upon the Accounting Equation?
June 2017
1 Mr. Salman started business with cash Rs. 80,000, Inventory Rs. 50,000 & Machinery Rs.5,000.
5 Purchased furniture for cash Rs. 4,000 and purchased goods from Naveed store of Rs. 25,000.
8 Sold goods to Rashid on credit basis for Rs. 8,000, costing Rs. 6,500.
12 Open a bank account and deposited Rs. 40,000.
18 Sold goods for cash Rs. 15,000, which is 20% above cost.
24 Received Rs. 7,800 from Rashid in full settlement for June 8 th transaction.
29 Paid Rs. 24,700 to Naveed store in full settlement for June 5 th transaction by bank.
30 Paid rent and salaries for the month Rs. 4,000 and wages outstanding for month Rs. 1,000.

Example # 3:
In the table below, indicate the accounts that would be debited and credited for each of the transactions?
• Provide services to customers on account.
• Purchase land by paying cash.
• Purchase an insurance policy that will provide coverage for a two-year period.
• Acquire cash by issuing common stock.
• Receive payment from a customer for services that will be provided over the next six months.Cash
deposited into bank.
• Purchased goods by cheque.
• Drew cash from bank for office use.
• Purchased goods from Miss Noreen.
• Cash sales made.
• Paid cash to Miss Noreen.
• Discount Received by cash.
• Drew cash from bank for personal use of proprietor.
• Received cash from credit customer.
• Paid rent by cash.

Double Entry:

Debits and Credits in Common Accounting Transactions

The following bullet points note the use of debits and credits in the more common business transactions:

 Sale for cash: Debit the cash account | Credit the revenue account
 Sale on credit: Debit the accounts receivable account | Credit the revenue account
 Receive cash in payment of an account receivable: Debit the cash account | Credit the accounts
receivable account
 Purchase supplies from supplier for cash: Debit the supplies expense account | Credit the cash
account
 Purchase supplies from supplier on credit: Debit the supplies expense account | Credit the
accounts payable account
 Purchase inventory from supplier for cash: Debit the inventory account | Credit the cash account
 Purchase inventory from supplier on credit: Debit the inventory account | Credit the accounts
payable account
 Pay employees: Debit the wages expense and payroll tax accounts | Credit the cash account
 Take out a loan: Debit cash account | Credit loans payable account
 Repay a loan: Debit loans payable account | Credit cash account

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Accounting Equation From the desk f JAS
Problem 1:
On April 01, 2016 Anees started business with Rs. 100,000 and other transactions for the month are:
2. Purchase Furniture for Cash Rs. 7,000.
8. Purchase Goods for Cash Rs. 2,000 and for Credit Rs. 1,000 from Khalid Retail Store.
14. Sold Goods to Khan Brothers Rs. 12,000 and Cash Sales Rs. 5,000.
18. Owner withdrew of worth Rs. 2,000 for personal use.
22. Paid Khalid Retail Store Rs. 500.
26. Received Rs. 10,000 from Khan Brothers.
30. Paid Salaries Expense Rs. 2,000

Problem 2:
Prepare general journal entries for the following transactions of a business called Pose for Pics in 2016:
Aug. 1: Hashim Khan, the owner, invested Rs. 57,500 cash and Rs. 32,500 of photography equipment in the
business.
04: Paid Rs. 3,000 cash for an insurance policy covering the next 24 months.
07: Services are performed and clients are billed for Rs. 10,000.
13: Purchased office supplies for Rs. 1,400. Cash paid Rs. 400 and remaining outstanding.
20: Received Rs. 2,000 cash in photography fees earned previously.
24: The client immediately pays Rs. 15,000 for services to be performed at a later date.
29: The business acquires photography equipment. The purchase price is Rs. 100,000, pays Rs. 25,000
cash and signs a note for the balance.

Problem 3:
On March 2017, Farhan Rahim, starts wholesaling business. Following transactions as follows:
1. He started business with capital of Rs. 15,000 and Land worth Rs. 10,000.
8. Bought goods from Bilal and Friends Rs. 1,000 and by cash from XYZ Co. Rs 2,000.
13. Sold goods to Rehman & sons Rs. 1,500 and sale by cash Rs. 5,000.
17. Gave away charity of cash Rs. 50 and merchandising worth Rs. 30.
21. Paid Bilal and Friends cash Rs. 975; discount received Rs. 25.
28. Received cash from Rehman & Sons Rs. 1,450; allowed him discount of Rs. 50.

Problem 4:
Shah Sauood Marine is a boat repair yard. During August 2016, its transactions included the following:
03. Loan taken from Habib Bank Ltd. of Rs. 25,000. Rs. 20,000 withdrawn for business and remaining in the
bank a/c.
06. Paid rent for the month of August Rs. 4,400 and accrued rent expenses was Rs. 600.
12. At request of Kiwi Insurance, Inc, made repairs on boat of Jon Seaways. Sent bill for Rs. 5,620 for services
rendered to Kiwi Insurance Inc. (credit Repair Service Revenue).
18. Made repairs to boat of Dennis Copper and collected in full the charge of Rs. 2,830.
20. Placed Advertisement in The Dawn of Rs. 165, payment to be made within 30 days.
25. Received a check for 5,620 from Kiwi Insurance Inc representing collection of the receivable of August 12.
30. Sent check to The Dawn in payment of the liability incurred on August 20.

Problem 5:
1st January, 2017, Saeed Ahmad started business other transactions for the month of June as follows:
02. Purchased from Kareem goods of list price of Rs. 6,000 subject to 10% trade discount by cash.
04. Sold goods to Din Muhammad Rs. 800 and cash sales of Rs. 200.
10. Distributed goods worth Rs. 200 as free samples and goods taken away by the proprietor for personal use
Rs. 100.
12. Received discount Rs 20 and Commission Rs 500.
17. Goods returned by Din Muhammad Rs. 200 and payment other outstanding amount.
24. Furniture lost by fire of worth Rs. 500.

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