Recording of Transactions – I — Practice

Question 1

State the basic accounting equation.

Accepted Answer

Assets = Liabilities + Capital.

✦ Answer: Assets = Liabilities + Capital.

Question 2

Is an increase in an asset debited or credited?

Accepted Answer

Debited.

✦ Answer: debited.

Question 3

Name the source document prepared when goods are sold on credit.

Accepted Answer

An invoice/bill (sales invoice).

✦ Answer: invoice/bill.

Question 4

Show the effect on the accounting equation: started business with ₹50,000 cash, then bought goods for ₹10,000 cash.

Accepted Answer

Step 1 — Capital introduced: Assets (Cash) 50,000 = Capital 50,000.

Step 2 — Goods bought for cash: Cash −10,000, Stock +10,000 → Assets still 50,000 = Capital 50,000.

✦ Answer: equation stays 50,000 = 50,000 (assets rearranged).

Question 5

Pass the journal entry: purchased furniture for cash ₹12,000.

Accepted Answer

Step 1 — Furniture (asset) increases → debit; Cash (asset) decreases → credit.

Step 2 — Furniture A/c Dr 12,000; To Cash A/c 12,000 (Being furniture bought for cash).

✦ Answer: Furniture A/c Dr 12,000 / To Cash A/c 12,000.

Question 6

Pass the entry: sold goods on credit to Mohan ₹8,000.

Accepted Answer

Step 1 — Mohan (debtor, asset) increases → debit; Sales (income) increases → credit.

Step 2 — Mohan A/c Dr 8,000; To Sales A/c 8,000 (Being goods sold on credit).

✦ Answer: Mohan A/c Dr 8,000 / To Sales A/c 8,000.

Question 7

Pass a compound entry: paid salary ₹6,000 and rent ₹4,000 in cash.

Accepted Answer

Step 1 — Salary and Rent (expenses) increase → both debited; Cash decreases → credited.

Step 2 — Salary A/c Dr 6,000; Rent A/c Dr 4,000; To Cash A/c 10,000 (Being salary and rent paid).

✦ Answer: Salary Dr 6,000, Rent Dr 4,000 / To Cash 10,000.

Question 8

Pass entries: (a) owner withdrew ₹5,000 cash for personal use; (b) took goods worth ₹2,000 for home.

Accepted Answer

Step 1 — (a) Drawings A/c Dr 5,000; To Cash A/c 5,000.

Step 2 — (b) Drawings A/c Dr 2,000; To Purchases A/c 2,000 (goods taken reduce purchases).

✦ Answer: Drawings Dr in both; credit Cash then Purchases.

Question 9

State the debit/credit rule for liabilities and give an example entry.

Accepted Answer

Step 1 — Liabilities increase on credit, decrease on debit.

Step 2 — E.g. bought goods on credit from Sohan ₹7,000: Purchases A/c Dr 7,000; To Sohan A/c 7,000 (creditor/liability increases → credit).

✦ Answer: liabilities credited on increase; Purchases Dr / To Sohan.

Practice — Recording of Transactions – I