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CA Foundation · Accounting · Theoretical Framework

Anita started a business with cash ₹5,00,000. She then bought furniture for ₹80,000 on credit from Bright Furnishers, and paid ₹30,000 of that amount in cash. What is the total of assets and the total of liabilities immediately afterwards?

Assets are ₹5,50,000 and liabilities ₹50,000. Cash falls to ₹4,70,000 after the part payment, furniture adds ₹80,000, and the creditor balance is ₹50,000. Capital of ₹5,00,000 equals assets minus liabilities, so the equation balances.

  1. AAssets ₹5,50,000; Liabilities ₹50,000
  2. BAssets ₹5,80,000; Liabilities ₹50,000Correct
  3. CAssets ₹5,00,000; Liabilities ₹80,000
  4. DAssets ₹5,80,000; Liabilities ₹80,000

Explanation

Cash after capital: 5,00,000. Furniture bought on credit: assets 5,80,000, liabilities 80,000. Payment of 30,000 reduces cash and liability: cash 4,70,000 + furniture 80,000 = 5,50,000... Recheck: cash 5,00,000 - 30,000 = 4,70,000; furniture 80,000; total 5,50,000; liabilities 50,000; capital 5,00,000. So the correct figures are assets 5,50,000 and liabilities 50,000.

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