CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger
Mr. Arjun started business with cash Rs 5,00,000. He purchased furniture for Rs 1,00,000 in cash and goods for Rs 2,00,000 on credit from Sharma & Co. He then withdrew Rs 20,000 cash for personal use. What is his capital balance in the accounting equation after these transactions?
Capital is Rs 4,80,000. Total assets are cash 3,80,000, furniture 1,00,000 and stock 2,00,000, which is 6,80,000. Subtracting creditors of 2,00,000 leaves 4,80,000. This equals the initial capital of 5,00,000 less drawings of 20,000.
- ARs 4,80,000Correct
- BRs 5,00,000
- CRs 4,00,000
- DRs 2,80,000
Explanation
Assets: cash 5,00,000 - 1,00,000 - 20,000 = 3,80,000; furniture 1,00,000; stock 2,00,000; total 6,80,000. Liabilities are 2,00,000. Capital = 6,80,000 - 2,00,000 = 4,80,000. Ignoring the drawings gives 5,00,000, which is wrong.
Did you get it right without looking?
One question tells you little. A timed set on Journal and Ledger shows your real accuracy, how long you take and where you lose marks.
More Journal and Ledger questions
- Mehta Stores' Sharma Ac shows: opening balance Rs 12,000 (Dr); goods sold on credit Rs 30,000; cash received Rs 25,000; goods returned by Sh…
- Which transaction would be recorded in the Journal Proper rather than in any other subsidiary book or the cash book?
- Under the accounting equation, a business pays Rs 20,000 to a creditor in cash. What is the effect of this transaction?
- Which transaction would be recorded in the journal proper, rather than in a subsidiary book such as the cash book or purchases book?
- A firm records these transactions: (i) purchased machinery for Rs 60,000, paying Rs 25,000 in cash and the balance on credit; (ii) paid Rs 5…
- Anand Traders' Machinery account had a debit balance of Rs 2,40,000 on 1 April. On 1 October machinery costing Rs 60,000 was bought and Rs 5…