Q1. Analyse the following transactions for Surprise Ltd. using the concept of Accounting
Equation comprising of Assets, Liabilities and Equity. (10 Marks)
- Commenced business with cash of ₹ 5,00,000.
- Purchased equipment for cash ₹ 2,00,000.
- Purchased furniture worth ₹50,000 on credit from IndiMart.
- Purchased raw materials for ₹25,000 against cash from XYZ Suppliers.
- Deposited cash of ₹ 1,25,000 in the current account.
- Sold goods for ₹75,000 and received a cheque against the same.
SOLUTION:
- Commenced business with cash of ₹ 5,00,000. Assets: Cash +₹ 5,00,000 Equity: +₹ 5,00,000
- Purchased equipment for cash ₹ 2,00,000. Assets: Cash -₹ 2,00,000, Equipment +₹ 2,00,000
- Purchased furniture worth ₹50,000 on credit from IndiMart. Assets: Furniture +₹ 50,000 Liabilities: IndiMart +₹ 50,000
- Purchased raw materials for ₹25,000 against cash from XYZ Suppliers. Assets: Raw materials +₹ 25,000 Liabilities: Cash -₹ 25,000
- Deposited cash of ₹ 1,25,000 in the current account. Assets: Cash -₹ 1,25,000, Current account +₹ 1,25,000
- Sold goods for ₹75,000 and received a cheque against the same. Assets: Cash +₹ 75,000 Equity: Sales +₹ 75,000
Overall impact: Assets: Cash -₹ 2,50,000, Equipment +₹ 2,00,000, Furniture +₹ 50,000, Raw materials +₹ 25,000 Liabilities: IndiMart +₹ 50,000 Equity: +₹ 80,000 (₹ 5,00,000 + ₹ 75,000 – ₹ 2,50,000)
Please note that this analysis is based on the given transactions and the accounting equation. Additional information might be required for a comprehensive analysis of Surprise Ltd.’s financial position.