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Cash Goods Accured Prepaid Machinery Capital Creditors Prepaid Outstanding
Income Expense Rent Exp
Old Equation 2,17,000 + 20,000 + 10,000 + 4,000 + 80,000 = 3,06,000 + 10,000 + 5,000 + 8,000
Transactions – 0 + 0 + 0 + 0 + 0 = – 10,000
+ 10,000 + 0 + 0 + 0
N.E. 2,17,000 + 20,000 + 10,000 + 4,000 + 80,000 = 3,06,000 + 10,000 + 5,000 + 8,000
Explanation:-The transaction will affect Liability side as Interest of Capital should be
added back & deducted from Capital as both of them belong to the owner.
· Transaction related to interest on Drawing
As interest on Drawing is the Income of business it should be shown or added
back in the capital as well as interest of Drawing is the amount which is to be
given by the owner to the business so it is treated as drawing and deducted from
the Capital.
A. Interest on Drawing Rs. 1,000
Effect
Assets = Capital + Liabilities
Cash Goods Accured Prepaid Machinery Capital Creditors Prepaid Outstanding
Income Expense Rent Exp
Old Equation 2,17,000 + 20,000 + 10,000 + 4,000 + 80,000 = 3,06,000 + 10,000 + 5,000 + 8,000
Transactions – 0 + 0 + 0 + 0 + 0 = – 1,000
+ 1,000 + 0 + 0 + 0
N.E. 2,17,000 + 20,000 + 10,000 + 4,000 + 80,000 = 3,06,000 + 10,000 + 5,000 + 8,000
Explanation:- The transaction will effect Liability side as Interest of Drawing should
be added back & deducted from Capital as both of them belong to the owner.
· Transaction related to Drawing
As Drawing is the amount withdrawn by owner from business so it is to be
deducted from Capital & also from the Cash.
