DK Goel Solutions Class 11 Accountancy Chapter 6 Accounting Equations (Updated For 2021-22)

Question 4: What entry (debit or credit) would you make to:-
(a) Increase in revenue
(b) Decrease in expense
(c) Record drawing
(d) Record the fresh capital introduced by the owner

Solution 4:
(a) Credit – Increase in revenue
(b) Credit – Decrease in expense
(c) Debit in Capital Account – Record drawing
(d) Credit in Capital Account – Record the fresh capital introduced by the owner

Question 5: If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or credit?

Solution 5: (i) Assets decrease will be the credit.

(ii) Liability Decrease will be the debit.

Question 6: Name the transaction that will

(i) Decrease the assets and decrease the capital

(ii) Increase the assets and increase the liabilities

(iii) Increase the assets and decrease another asset

(iv) Decrease the assets and decrease the liabilities

Solution 6: (i) Decrease the assets and decrease the capital – Cash withdraws for personal use Drawings.

(ii) Increase the assets and increase the liabilities – Purchase an asset on a credit basis.

(iii) Increase the assets and decrease another asset – Sale or purchases of stock on a cash basis.

(iv) Decrease the assets and decrease the liabilities – Paid amount to creditors. 

Question 7: What will be the effect of the following on the accounting equation:-
(i) Purchased goods for Rs. 20,000 from Mahesh on credit
(ii) Sold goods to Suresh costing Rs. 8,000 for Rs. 10,000 in cash
(iii) Paid wages Rs. 500
(iv) Withdrew in cash for private use Rs. 2,000
(v) Paid to creditors Rs. 2,000

Solution 7: (i) Stock Increases by Rs. 20,000 on assets and Creditors Increases by Rs. 20,000 on liabilities. 

(ii) Cash Increase by Rs. 10,000 on assets, Stock decrease by Rs. 8,000 on assets and Capital increase by Rs. 2,000.

(iii) Cash Decrease by Rs. 500 on assets and Capital decrease by Rs. 500.

(iv) Cash Decrease by Rs. 2,000 on assets and Capital decrease by Rs. 2,000.

(v) Cash Decreases by Rs. 2,000 on assets and creditors decrease by Rs. 2,000 on liabilities.

Question 8: If the total asset of a business is Rs. 2,00,000 and the net worth (capital) is Rs. 1,50,000. Calculate creditors.

Solution 8:
Liabilities (Creditors) = Assets – Capital
Creditors = Rs. 2,00,000 – Rs. 1,50,000
Creditors = Rs. 50,000
Therefore, the amount of creditors are Rs. 50,000.

Question 9: A business on 1st April 2011 with a capital of Rs. 5,00,000. On 31st March 2012, his assets were worth Rs. 7,80,000 and liabilities Rs. 70,000. Find out his closing capital and profits earned during the year.

Solution 9:
Calculation of Closing Capital:-
Closing Capital = Closing Assets – Closing liabilities
Closing Capital = Rs. 7,80,000 – Rs. 70,000
Closing Capital = Rs. 7,10,000

Calculation of Profit:-
Profit = Closing Capital – Opening Capital
Profit = Rs. 7,10,000 – Rs. 5,00,000
Profit = Rs. 2,10,000
Therefore, Profit of the firm is Rs. 2,10,000.

Question 10: On which side will the increase in the following account be recorded? Also, mention the nature of the account.

1. Cash 
2. Machinery 
3. Debtor 
4. Creditor 
5. Proprietor’s Account
6. Rent Received
7. Salary Paid
8. Interest Received

Solution 10:

1. Cash
   Nature of Account – Assets
   Side of the Account – Debit
2. Machinery
   Nature of Account – Asset
   Side of the Account – Debit
3. Debtors
   Nature of Account – Asset
   Side of the Account – Debit
4. Creditors
   Nature of Account – Liabilities
   Side of the Account – Credit
5. Proprietor’s Accounts
   Nature of Account – Capital
   Side of the Account – Credit
6. Rent Received
   Nature of Account – Income
   Side of the Account – Credit
7. Salary paid
   Nature of Account – Expenses
   Side of the Account – Debit
8. Interest Received
   Nature of Account – Income
   Side of the Account – Credit

Question 11: On which side will the increase in the following account be recorded? Also, mention the nature of the account.

1. Furniture
2. Bank
3. Proprietor’s Account
4. Salary Paid
5. Salary Outstanding
6. Subash – A Customer

Solution 11: S.no.-Particulars-Nature of Account-Side of the Account

1. Furniture
   Nature of Account – Assets
   Side of the Account – Debit
2. Bank-Assets-Credit
   Nature of Account – Assets
   Side of the Account – Debit
3. Proprietor’s Account-Capital-Debit
   Nature of Account – Capital
   Side of the Account – Debit
4. Salary Paid-Expenses-Credit
   Nature of Account – Expenses
   Side of the Account – Credit
5. Salary Outstanding
   Nature of Account – Liabilities
   Side of the Account – Debit
6. Subash
   Nature of Account – Customer (Assets)
   Side of the Account – Credit

Very Short Questions of Accounting Equations

Question 1: What is an accounting equation?

Solution 1: The accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital. The equation reads as:-

Assets = Liabilities + Capital

Question 2: Give a fundamental accounting equation.

Solution 2: Below is the fundamental accounting equation:-

Assets = Liabilities + Capital

Question 3: If the capital of a firm is Rs. 5,00,000 and outside liabilities are Rs. 2,00,000. Evaluate the total assets of the company.

Solution 3:
It is given that,
Capital = Rs. 5,00,000
Liabilities = Rs. 2,00,000

Assets = Liabilities + Capital
Assets = Rs. 5,00,000 + Rs. 2,00,000
Assets = Rs. 7,00,000
Therefore, the Total Assets will be Rs. 7,00,000

Question 4: If total assets of a company are Rs. 10,00,000 and capital is Rs. 4,00,000. Calculate creditors.

Solution 4:
Liabilities (Creditors) = Assets – Capital (Net worth)
Creditors = Rs. 10,00,000 – Rs. 4,00,000
Creditors = Rs. 6,00,000

Question 5: ‘X’ commenced business on April 1st 2013 with a capital of Rs. 6,00,000. On 31st March 2014, his assets were worth Rs. 8,00,000 and liabilities Rs. 50,000. Find out his closing capital and profits earned during the year.

Solution 5:
Calculation of closing stock:-
Closing Capital = Closing Assets – Closing liabilities
Closing Capital = Rs. 8,00,000 – Rs. 50,000
Closing Capital = Rs. 7,50,000

Calculation of Profit:-
Profit = Closing Capital – Opening Capital
Profit = Rs. 7,50,000 – Rs. 6,00,000
Profit = Rs. 1,50,000

Question 6: What is debit?

Solution 6: The output of the growth in assets and the reduction in liabilities is debit. Debits are the equilibrium of credits that counter each other. It is considered a debit if a number is entered on the left-hand side of an account.

Question 7: What is credit?

Solution 7: Credit is the result of a fall in savings and growth in liabilities. Credits are the balance of debits, each of which is the reverse. It is considered a credit if a number is entered on the right-hand side of an account.

Question 8: Why are the rules of credit and debit the same for both capital and liabilities?

Solution 8: The credit and debit laws are the same on all resources and liabilities since the owner and company are separate entities according to the concept of the business entity. It is believed that the company owner is the borrower of the company and the company is named to compensate its owners.

Question 9: Name the side on which a capital increase is recorded.

Solution 9: The capital rise is recorded on the side of credit.