# CIE Accounting Paper-2: Specimen Questions 55 - 55 of 103

## Passage

Miss. Rosy started a small business as a sole proprietor in the year 2013 and had the following transaction during the year:

• Commenced business with cash £200000
• Purchases made for cash £80000 and credit £120000
• Made Sales of £160000 in cash of goods costing £120000
• Rent paid £2000 and outstanding rent for the year was £400
• Bought car on credit £20000
• Purchased a mobile phone for personal use £20000
• Purchased a land for cash £80000

## Question number: 55 (5 of 7 Based on Passage) Show Passage

Essay Question▾

### Describe in Detail

How will Miss Rosy account for the above transactions in her books of accounts using the Accounting Equation?

### Explanation

 ASSET AMOUNT CAPITAL AMOUNT LIABILITY AMOUNT 1 Cash 200000 = Capital 200000 + LIABILITY 0 200000 = 200000 2 Cash 120000 = Capital 200000 + Creditors 120000 Stock 200000 320000 = 200000 + 120000 3 Cash 280000 = Capital 240000 + Creditors 120000 Stock 80000 360000 = 240000 + 120000 4 Cash 278000 = Capital 238000 + Creditors 120000 Stock 80000 358000 = 238000 + 120000 5 Cash 278000 = Capital 237600 + Creditors 120000 Stock 80000 O/S rent 400 358000 = 237600 + 120400 6 Cash 278000 = Capital 237600 + Creditors 140000 Stock 80000 O/S rent 400 Car 20000 378000 = 237600 + 140400 7 Cash 258000 = Capital 217600 + Creditors 140000 Stock 80000 O/S rent 400 Car 20000 358000 = 217600 + 140400 8 Cash 178000 = Capital 217600 + Creditors 140000 Stock 80000 O/S rent 400 Car 20000 Land 80000 358000 = 217600 + 140400

WORKINGS:

 2 Cash 200000 5 Capital 238000 Less: Purchases stock 80000 Less: O/S Exp 400 120000 237600 3 Cash 120000 6 Creditors 120000 Add Sales 160000 Add Car 20000 280000 140000 Capital 200000 7 Cash 278000 Add Profit 40000 Less: Mobile phone 20000 240000 258000 Stock 200000 Capital 237600 Less Sales 120000 Less: Phone Personal use 20000 80000 217600 4 Cash 280000 Less Rent paid 2000 8 Cash 258000 278000 Less: Land 80000 178000 Capital 240000 Less: Expense Rent 2000 238000
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