CBSE

ACCOUNTING EQUATION WS 2
Class 11 - Accountancy

Section A
1. Fresh capital introduction will increase: [1]

a) Assets and Liabilities b) Liabilities and equity

c) Assets and Capital d) Capital and Liabilities

2. Accounting equation may effect [1]

a) Only one side by increasing / decreasing it b) None

by equal amount

c) Both d) Both side of equation by equal amount

3. Voucher is prepared for: [1]

a) Cash/Credit purchase b) Cash received and paid

c) All of these d) Cash/Credit sales

4. Collection of account receivable will: [1]

a) Increase assets and decrease assets b) Decrease assets and Increase liabilities

c) Decrease assets only d) Increase assets and decrease liabilities

5. Payment to a creditor means [1]

a) Increase in asset and increase in liability b) Increase in asset and decrease in liability.

c) Decrease in asset and increase in liability. d) Decrease in asset and decrease in liability.
6. Due to the following transactions, the total of accounting equation will be: [1]
i. Commenced business with cash ₹ 4,00,000
ii. Purchased goods on credit ₹ 1,75,000
iii. Goods costing ₹ 1,00,000 sold at a profit of 20% for cash
iv. Rent paid ₹ 5,000

a) ₹ 3,40,000 b) ₹ 4,90,000

c) ₹ 5,90,000 d) ₹ 4,40,000
7. The owner withdraws business assets for personal use. [1]

a) Assets: Decrease, Liabilities: No Effect, b) Assets: No .Liabilities: Increase, Equity: No

Equity: Decrease Effect

c) Assets: Decrease, Liabilities: Decrease, d) Assets: Increase .Liabilities: Increase,

Equity: Decrease Equity: Increase
8. Purchase of machine by cash means: [1]

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 a) increase in asset and decrease in another b) Decrease in asset and decrease in liability.
asset

c) the decrease in asset and increase in capital d) increase in asset and decrease in liability
9. Which of the following is the correct accounting equation for repayment of loan amount of ₹ 1,00,000 along [1]
with interest of ₹ 10,000?

a) Assets (1,00,000) = Liabilities (1,00,000) + b) Assets (1,10,000) = Liabilities (0) + Capital

Capital (0) (1,10,000)

c) Assets (1,10,000) = Liabilities (1,00,000) + d) Assets (1,10,000) = Liabilities (1,10,000) +

Capital (10,000) Capital (0)

10. X commenced business on 1st April 2022 with a capital of ₹ 6,00,000. On 31st March 2023, his assets were [1]

worth ₹ 8,00,000 and liabilities ₹ 50,000. Find out his closing capital.

a) ₹ 5,50,000 b) ₹ 7,50,000

c) ₹ 6,50,000 d) ₹ 2,00,000
11. Payment to creditors in cash will affect [1]

a) Only liability side of the equation b) Only assets side of the equation

c) Asset and Liability both d) Only capital side of the equation

12. The decrease in one liability may lead to: [1]

a) increase in another liability b) the decrease in an asset

c) the decrease in an capital d) either decrease in an asset or increase in

another liability
13. As the effect of a transaction, capital of the company increased by ₹ 2,000 and assets also increased by ₹ 2000. [1]
Identify the transaction.

a) Commission received worth ₹ 2,000 b) Goods costing ₹ 10,000 sold for ₹ 8,000

c) Both Goods costing ₹ 10,000 sold for ₹ d) Goods purchased on credit ₹ 2,000
8,000 and Commission received worth ₹
2,000
14. When goods are returned to supplier assets and ________ are ________ by same amount. [1]

a) liabilities, increased b) liabilities, decreased

c) assets, increased d) assets, decreased

15. Calculate total expenses if capital Rs.2,00,000, creditors Rs. 50,000, revenue Rs.5,00,000 and asset Rs. 5,00,000. [1]

a) Rs.5,50,000 b) Rs.7,00,000

c) Rs.2,50,000 d) Rs.3,50,000
16. For which of the following transactions, assets and capital will decrease by same amount? [1]

a) Goods sold for cash at a profit b) Depreciation provided on fixed assets

c) Goods sold for cash d) Fixed asset purchased on credit

17. If the business's owner withdraws cash for his/her personal use what will be the effect on capital? [1]

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 a) Increase in capital b) Remain the same

c) No effect on capital d) Decrease in capital

18. As a result of the following transactions, the total of accounting equation will be ________ [1]
i. Started business with Cash ₹ 5,00,000
ii. Goods purchased for cash ₹ 2,00,000
iii. Goods costing ₹ 1,50,000 sold for ₹ 1,60,000 on credit:

a) ₹ 6,60,000 b) ₹ 5,10,000

c) ₹ 4,60,000 d) ₹ 7,10,000
19. Accounting equation is also known as ________ equation. [1]

a) Fundamental b) Balance sheet

c) Transactional d) Arithmetic finance

20. What will be the effect of following transaction on the accounting equation? [1]
Goods sold on credit to X (costing ₹ 10,000 ) for ₹ 15,000.

a) None of these b) Assets (₹ 10,000); Liabilities, (₹ 15,000);

Capital, ₹ 5000

c) Assets, (₹ 15,000 ); Liabilities, (₹ 15,000); d) Assets (₹ 5,000); Liabilities, 0; Capital, (₹

Capital, 0 5000)
21. Example of an assets is [1]

a) A loan given to the company b) Factory owned by the company

c) The capital of the company d) Amount owned by the company to one of its
suppliers for the purchase of goods
22. Neeraj Ltd. is engaged in a laptop trading business the total assets of business are ₹ 10,40,000 and outside [1]
liabilities are ₹ 1,80,000. What will be the owner's equity?

a) Can't be determined b) ₹ 9,60,000

c) ₹ 8,60,000 d) ₹ 12,20,000
23. Rohit is a sole proprietor has the following balances: Premises- Rs.55000, Cash at bank- Rs.6500, Inventory – [1]
Rs.12500 and creditors- Rs.14000. Find out the amount of capital.

a) Rs.15000 b) Rs.35000

c) Rs.31000 d) Rs.60000
24. The accounting equation should remain in balance because every transaction affects how many accounts? [1]

a) Two or more b) Only One

c) Only two d) Only three

25. There will be ________ by same amount, when a land is purchased by paying the amount from bank account. [1]

a) Increase in asset, decrease in liabilities b) Decrease in asset, decrease in liabilities

c) Increase in asset, increase in liabilities d) Decrease in one asset, increase in another

asset

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26. Goods costing Rs. 20,000 were sold for cash at a profit of 25%. By what amount stock account will decrease [1]

a) Rs.25,000 b) Rs.15,000

c) Rs.20,000 d) Rs.20,500
27. Difference between assets and liabilities is [1]

a) Capital b) Drawings

c) Cash d) Liabilities
28. An increase in provision for bad debt will [1]

a) Decrease liabilities b) Increase Assets

c) Increase net income d) Increase liabilities

29. Which of the following is not an assets [1]

a) Loan b) Land

c) Building d) Investment
30. Sumit owns a company and purchase goods on credit from his personal funds and used the same for business [1]
purpose. What is the effect on assets

a) Increase stock b) Reduce cash

c) Increase cash d) Reduce Bank

31. The Basic accounting equation is [1]

a) Assets = Expenses + Capital b) Asset = Expense + Income

c) Assets= Cash + Capital d) Assets = Capital + Liabilities

32. Items owned by a business that have monetary value are ____ [1]

a) Assets b) Capital

c) Debentures d) Liabilities
33. Source Documents of Accounting are: [1]

a) Cheque b) All of these

c) Cash Memo d) Invoice and Bills

34. A business had net capital at 1 January and 31st December 2012 of Rs. 75,600 and Rs. 73,800 respectively. [1]
During the year, the proprietor introduced additional capital of Rs. 17,700 and withdrew cash and goods to the
value of Rs. 16,300. What profit or loss was made by the business in 2012.

a) Rs.3000 Profit b) Rs.3200 Profit

c) Rs.3200 Loss d) Rs.3000 Loss

35. What will be the effect on the accounting equation for outstanding expenses? [1]
(Options are in the format of assets, liabilities, capital).

a) No change, Increase, Decrease b) Decrease, Increase, Decrease

c) Decrease, Decrease, No change d) Decrease, No change, Decrease

36. Which of the following equations is correct? [1]

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 a) Assets + capital = - Liabilities b) Assets - Liabilities = Capital

c) Assets + Capital = Liabilities d) Assets + Liabilities = Capital

37. The company pays its creditors by cheque. What is the effect on assets and liabilities [1]

a) Increase Bank and Increase Capital b) Reduce Bank and Reduce Liability

c) Increase Bank and Reduce Capital d) Reduce Bank and Increase Capital
38. If the total liabilities of a business decrease by Rs.5000 what will be the effect on total asset? (assuming the [1]
amount of capital remain same)

a) Increase by Rs.5000 b) Increase by Rs.10000

c) Decrease by Rs.5000 d) Remain constant

39. The owner invests personal cash in the business. [1]

a) Assets: Decrease, Liabilities: Decrease, b) Assets: No Effect, Liabilities: Increase ,

Equity: Decrease Equity: No Effect

c) Assets: No Effect, Liabilities: Decrease, d) Assets: Increase, Liabilities: No Effect,

Equity: No Effect Equity: Increase
40. What shall be the amount of Capital if Cash is ₹ 5,000; Furniture ₹ 12,000; Stock ₹ 30,000 and Creditors ₹ [1]
6,000?

a) ₹ 41,000 b) 43,000

c) ₹ 53,000 d) ₹ 47,000
41. Calculate the amount of cash if: other assets( Except Cash) = Rs.10,000 liabilities= Rs.10,000 Total Capital= [1]
Rs.5000

a) Rs.3000 b) Rs.1000

c) Rs.5000 d) Rs.10000
42. A mathematical expression, which shows that the ________ and ________ of a firm are equal, is known as [1]
accounting equation.

a) liabilities and capital b) liabilities and assets

c) Transactional d) assets and capital

43. Find out the value of assets if: Liabilities= Rs.5000 and Capital= Rs.1000 [1]

a) Rs.4000 b) Rs.3000

c) Rs.5000 d) Rs.6000
44. If the Owner's Equity is 20,000 and Creditors Equity is 40,000. What will be the assets of the firm? [1]

a) 80000 b) 60000

c) 40000 d) 20000
45. Following are the steps involved in developing an accounting equation (in particular order). Arrange the steps in [1]
correct sequence.
i. Find out the effect (in terms of increase or decrease) of a transaction on assets, capitals or liabilities.

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 ii. Show the effect on appropriate side of an equation and ensure that the total of right hand side is equal to the
total of left hand side.
iii. Ascertain the variables (i.e. assets, liabilities or capital) involved in a transaction.

a) (iii), (i), (ii) b) (iii), (ii), (i)

c) (ii), (iii), (i) d) (i), (ii). (iii)

46. Which equation is correct out of the following: [1]

a) Assets = Liabilities - Capital b) Assets = Net worth - Liabilities

c) Assets = Capital - Liabilities d) Assets = Capital + liabilities

47. Goods costing ₹ 20000 have sold for cash at 25 % profit. By what amount cash will increase [1]

a) ₹ 20500 b) ₹ 25000

c) ₹ 15000 d) ₹ 15500
48. For which of the following transactions, capital account will be increased and decreased by the same amount? [1]

a) Interest on drawings provided b) Income received in advance

c) Bad debts on the insolvency of a debtor d) Outstanding expenses paid

49. Which equation is correct out of the following: [1]
i. Liabilities = Assets + Capital
ii. Assets = Liabilities - Capital
iii. Capital = Assets + Liabilities
iv. Capital = Assets - Liabilities

a) Statement (ii) is Correct. b) Statement (iv) is Correct.

c) Statement (i) is Correct. d) Statement (iii) is Correct.

50. As a result of the following transactions, the total of accounting equation will be ________. [1]
i. Started business with cash ₹ 2,00,000.
ii. Purchased furniture ₹ 25,000.
iii. Purchased goods on credit ₹ 60,000.

a) ₹ 2,25,000 b) ₹ 2,60,000

c) ₹ 2,35,000 d) ₹ 2,85,000
51. Which equation is incorrect out of the following: [1]

a) Liabilities = Assets - Capital b) Assets = Liabilities - Capital

c) Assets = Liabilities + Capital d) Capital = Assets - Liabilities

52. Capital of a business decreases if there is an increase in [1]

a) Income b) Drawings

c) Fresh Capital d) Gains

53. What shall be the amount of Capital if Cash is Rs 5,000; Furniture Rs 12,000; Stock Rs 30,000 and Creditors Rs [1]
6,000?

a) Rs 46,000 b) Rs 53,000

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 c) Rs 47,000 d) Rs 41,000
54. Voucher is prepared from: [1]

a) Ledger Account b) All of these

c) Source Documents d) Journal Entry

55. Goods costing Rs.15,000 were sold for cash at a profit of 20%. By what amount cash increase [1]

a) Rs.13,000 b) Rs.12,000

c) Rs.18,000 d) Rs.15,000
56. Services for which prepaid expenses were paid are now availed by Sonu Enterprises. What will be its effect on [1]
the accounting equation?

a) Increase in asset, increase in liabilities b) Increase in asset, increase in capital

c) Decrease in asset, decrease in capital d) Decrease in asset, decrease in liabilities

57. If Cash= Rs.1000; inventories= Rs.4000 Debtors= Rs.5000; fixed assets=? Capital + Liabilities= Rs.18000. Find [1]
out the Amount of fixed assets?

a) Rs.15000 b) Rs.20000

c) Rs.8000 d) Rs.10000
58. When cash is withdrawn by proprietor, what is its impact on accounting equation? [1]

a) Increase in assets, increase in capital b) Decrease in assets, decrease in capital

c) Increase in assets, increase in liabilities d) Decrease in assets, decrease in liabilities

59. Total assets in a business are ₹ 8,00,000 and total liabilities are ₹ 5,00,000. The difference is called: [1]

a) expenses b) income

c) goodwill d) capital
60. Capital at the end Rs.45,500 and capital in the beginning Rs.50,000. Difference of opening and closing capital is [1]
___

a) Rs.4500 loss b) Rs. 4500 additional capital

c) Rs.4500 revenue d) Rs. 4500 profit

61. Which of the following is a liability [1]

a) An overdrawn balance on the firm’s bank b) Money owned by the firm

account

c) Cash in hand d) Factory owned by the firm

62. Accounting equation is based on [1]

a) Single concept b) Both

c) Dual concept d) None

63. Goods costing Rs. 15,000 were sold for cash at a profit of 20%. By what amount stock account will decrease: [1]

a) Rs.20,500 b) Rs.15,000

c) Rs.25,000 d) Rs.1,500

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64. Main elements of accounting equation are: [1]

a) Bank balance, Investments and Bills b) Capital, Creditors and Bills Payable
Receivable

c) Assets, Liabilities and Capital d) Cash, Stock and Debtors

65. Purchase of furniture on credit means: [1]

a) increase in asset and increase in liability b) the decrease in asset and increase in liability

c) increase in asset and decrease in liability d) the decrease in asset and decrease in
liability
66. An increase in one asset is accompanied by: [1]

a) increase in capital b) decrease in another asset

c) increase in a liability d) All of these

67. If assets = Rs. 60000 and liabilities = Rs.25000, What is the capital in the business? [1]

a) Rs.95000 b) Rs.35000

c) Rs.25000 d) Rs.85000
68. From the following information, calculate the total assets of the business Capital during the period = ₹ 80,000; [1]
Creditors = ₹ 60,000, Revenue during the period = ₹ 1,00,00 Expenses during the period = ₹ 80,000; Value of
unsold stock = ₹ 20,000

a) ₹ 1,60,000 b) ₹ 80,000

c) ₹ 1,80,000 d) ₹ 1,40,000
Section B
Question No. 69 to 70 are based on the given text. Read the text carefully and answer the questions: [2]
Pradhan Opticals is a spectacles shop in Lucknow. The shop procures the frames from a local frame manufacturing
firm. The shop arranges the lenses from Delhi as and when orders come in according to specifications by the customer.
After the pandemic, to boast the business further, it decided to enter into collaborations with hospital chains to provide
the black spectacles required after the cataract surgery. It shipped 20,000 units of ₹ 5 each of such spectacles to the
local hospital. This transaction was on credit basis. However, the hospital returned 10,000 units as those units were
found to be defective.
After 6 months, the hospital chain went bankrupt and the shop lost its money as bad debt. It decided to stop the credit
policy altogether so that it prevents losses in the future.
At the end of the year, the company was left with ₹ 1,00,000 worth of goods and no debtors. The company also had a
creditor of raw materials of ₹ 20,000 and a creditor of a small machinery (not written off) ₹ 10,000.
69. What was the affect of the return by the hospitals on the accounting equation?
[Use format Assets = Liabilities + Capital]

a) (50,000) + 50,000 = 0 + 0 b) (50,000) + (50,000) = 0 + 0

c) 50,000 = 50,000 + 0 d) (50,000) = (50,000) + 0

70. What was the capital of the firm at the end of the year?

a) ₹ 90,000 b) ₹ 80,000

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 c) ₹ 70,000 d) ₹ 1,00,000

Question No. 71 to 72 are based on the given text. Read the text carefully and answer the questions: [2]
Joe and Jimmy started a bat manufacturing company. They set up a factory in Meerut (UP) on a land purchased for ₹
40,00,000. They purchased raw material from a trader in Jalandhar (Punjab) for ₹ 5,00,000 at credit.
However, they did not like the quality of some of the goods that were sent and therefore decided to return the same.
The company were producing premium bats. Even some of the domestic players of Indian cricket team purchased bats
from the company and endorsed the same as well. This led to mass orders rolling in frequently.
After a year, they also started to get bulk orders from academies, institutes and corporates. On one instance, they were
given an order by NPS Public School, one of the largest school chains in the country for bat worth ₹ 2,50,000.
The company took a week to fulfil and received half the payment while the other half was due for 6 months later. The
company successfully delivered the bats to the head office of NPS Public School in Delhi.
71. What was the accounting equation for the transaction of land purchased? (The options are in the format of Assets =
Liabilities + Capital)

a) 40,00,000 + (40,00,000) = 0 + 0 b) 40,00,000 = 40,00,000 + 0

c) 0 = 40,00,000 + (40,00,000) d) 40,00,000 = 0 + 40,00,000

72. As a result of transaction with NPS school, the company's net assets ________, liabilities ________ and capital (ignore
profit/loss).

a) increased, increased, unchanged b) unchanged, unchanged, unchanged

c) increased, unchanged, unchanged d) decreased, decreased, unchanged

Section C
Question No. 73 to 75 are based on the given text. Read the text carefully and answer the questions: [3]
KLR Ltd. is publicly listed company trading in EV batteries. The company is known to have an advanced version of
EV battery which can be used in almost all types of EV cars. As a result of onset of EV trend in India, company is
getting lot of pre-orders.
Recently, one of the largest cab aggregators of India collaborated with the company to get batteries. Against this order,
company received an advance of ₹ 10,00,000. When the EV batteries were delivered, company received the rest of the
payment of ₹ 5,00,000.
The company sent a source document for these goods sold. Consequently, the company deposited the money received
in the bank account.
To produce and fulfil the further orders, the company decided to purchase a new 3D moulder. It was worth ₹ 1,00,000
and company issued a document in writing drawn upon a specified banker and payable on demand.
The company also employed an experienced manager to streamline the operations. As a result, company continued to
prosper and its stock prices also shot up.
73. What is the accounting equation for advance received against order?
[Use format Asset = Liabilities + Capital]

a) 10,00,000 + (10,00,000) = 0 + 0 b) 15,00,000 + (15,00,000) = 0 + 0

c) 10,00,000 = 10,00,000 + 0 d) 10,00,000 = (10,00,000) + 0

74. Which document is highlighted in the line, It was worth ₹ 1,00,000 and company issued a document in writing
drawn upon a specified banker and payable on demand?

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 a) Credit note b) Debit note

c) Pay-in-slip d) Cheque
75. Which of following would be unchanged as a result of transaction of purchasing 3D moulder of ₹ 1,00,000?

a) Liabilities b) Capital

c) Assets d) All of these

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