Accounting Equation & Journal Entries Complete Solution Sheet
Complete Question Statements with Step-by-Step Journal Entries, Tabular Analysis & Equation Proof.
💡 Basic Formulae & Rules
Basic Equation:
Assets = Liabilities + Owner's Equity
Assets = Liabilities + Owner's Equity
Extended Equation:
Assets = Liabilities + Capital + Revenue - Expenses - Drawings
Assets = Liabilities + Capital + Revenue - Expenses - Drawings
Debit / Credit Rules:
Assets & Expenses: ↑ Dr, ↓ Cr
Liabilities, Capital & Revenue: ↑ Cr, ↓ Dr
Assets & Expenses: ↑ Dr, ↓ Cr
Liabilities, Capital & Revenue: ↑ Cr, ↓ Dr
Problem 01: Bengal Travel Agency
January 2025📋 Problem Statement:
On January 1, 2025, Mr. Baker established Bengal Travel Agency. The following transactions were completed during the month:
- Jan 1: Invested cash to start the agency Tk. 5,00,000.
- Jan 2: Paid cash for office rent three months Tk. 45,000.
- Jan 5: Purchased office equipment for cash Tk. 20,000.
- Jan 10: Incurred advertising costs in the Daily Times, on account Tk. 5,000.
- Jan 14: Purchased office supplies for cash Tk. 5,000.
- Jan 18: Earned for services rendered Tk. 50,000 (Tk. 30,000 cash received from customers and the balance Tk. 20,000 is billed to customers on account).
- Jan 20: Withdrew cash for personal use Tk. 10,000.
- Jan 23: Paid the Daily Times amount due on January 10.
- Jan 25: Purchased additional office supplies on account Tk. 5,000.
- Jan 29: Paid employees' salaries Tk. 25,000.
- Jan 30: Paid telephone, gas and electricity bills Tk. 3,000.
- Jan 31: Received in cash from customers who have previously been billed on January 18.
- Jan 31: Received cash from a new customer for services rendered Tk. 40,000.
Required: (a) Prepare Journal entries (b) Prepare tabular analysis showing their effects on accounting equation.
Part (a): Journal Entries
| Date | Accounts Title & Explanation | Debit (Tk.) | Credit (Tk.) |
|---|---|---|---|
| Jan 1 | Cash Dr. Capital Cr. (Owner invested cash into business) | 5,00,000 | 5,00,000 |
| Jan 2 | Prepaid Rent Dr. Cash Cr. (Paid office rent for 3 months in advance) | 45,000 | 45,000 |
| Jan 5 | Office Equipment Dr. Cash Cr. (Purchased equipment for cash) | 20,000 | 20,000 |
| Jan 10 | Advertising Expense Dr. Accounts Payable Cr. (Incurred ad cost on account) | 5,000 | 5,000 |
| Jan 14 | Office Supplies Dr. Cash Cr. (Purchased supplies for cash) | 5,000 | 5,000 |
| Jan 18 | Cash Dr. Accounts Receivable Dr. Service Revenue Cr. (Services rendered for cash & credit) | 30,000 20,000 | 50,000 |
| Jan 20 | Drawings Dr. Cash Cr. (Cash withdrawn for personal use) | 10,000 | 10,000 |
| Jan 23 | Accounts Payable Dr. Cash Cr. (Paid due amount to Daily Times) | 5,000 | 5,000 |
| Jan 25 | Office Supplies Dr. Accounts Payable Cr. (Purchased supplies on account) | 5,000 | 5,000 |
| Jan 29 | Salaries Expense Dr. Cash Cr. (Paid employees' salaries) | 25,000 | 25,000 |
| Jan 30 | Utilities Expense Dr. Cash Cr. (Paid telephone, gas, electricity bills) | 3,000 | 3,000 |
| Jan 31 | Cash Dr. Accounts Receivable Cr. (Received payment from billed customers) | 20,000 | 20,000 |
| Jan 31 | Cash Dr. Service Revenue Cr. (Cash received for services rendered) | 40,000 | 40,000 |
Part (b): Tabular Analysis of Accounting Equation
| Date | Cash | A/R | Prepaid Rent | Supplies | Equipment | = | A/P | + | Capital / OE | Remarks |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 1 | +500,000 | - | - | - | - | = | - | + | +500,000 | Investment |
| Jan 2 | -45,000 | - | +45,000 | - | - | = | - | + | - | - |
| Jan 5 | -20,000 | - | - | - | +20,000 | = | - | + | - | - |
| Jan 10 | - | - | - | - | - | = | +5,000 | + | -5,000 | Ad Expense |
| Jan 14 | -5,000 | - | - | +5,000 | - | = | - | + | - | - |
| Jan 18 | +30,000 | +20,000 | - | - | - | = | - | + | +50,000 | Service Revenue |
| Jan 20 | -10,000 | - | - | - | - | = | - | + | -10,000 | Drawings |
| Jan 23 | -5,000 | - | - | - | - | = | -5,000 | + | - | - |
| Jan 25 | - | - | - | +5,000 | - | = | +5,000 | + | - | - |
| Jan 29 | -25,000 | - | - | - | - | = | - | + | -25,000 | Salaries Exp |
| Jan 30 | -3,000 | - | - | - | - | = | - | + | -3,000 | Utilities Exp |
| Jan 31 | +20,000 | -20,000 | - | - | - | = | - | + | - | - |
| Jan 31 | +40,000 | - | - | - | - | = | - | + | +40,000 | Service Revenue |
| Bal. | 477,000 | 0 | 45,000 | 10,000 | 20,000 | = | 5,000 | + | 547,000 | Balanced |
Proof of Equation: Total Assets = Tk. (477,000 + 45,000 + 10,000 + 20,000) = Tk. 552,000 | Total Liabilities + OE = Tk. (5,000 + 547,000) = Tk. 552,000.
Problem 02: Mr. Arun Roy (Medical Practice)
April 2025📋 Problem Statement:
Mr. Arun Roy passing Bachelor Degree in Medical began practice on April 1, 2025. During the first month, the following transactions occurred:
- Apr 1: Starting business with Cash Tk. 25,000; Furniture costing Tk. 20,000.
- Apr 1: Paid rent for the month of April, 2025 Tk. 1,000.
- Apr 2: Purchased medical equipment for cash Tk. 5,000.
- Apr 4: Purchased medical supplies Tk. 2,000 on account.
- Apr 10: Service revenue received for cash Tk. 16,000.
- Apr 15: Billed patient Tk. 5,000 for treatment service rendered.
- Apr 20: Cash Tk. 2,000 borrowed from a bank on a note payable.
- Apr 25: Received Tk. 3,000 from the patient billed on April 15.
- Apr 30: Paid salaries Tk. 1,000 and electricity bill Tk. 700.
- Apr 31: Received a telephone bill for Tk. 1,000.
- Apr 31: Medical supplies used Tk. 1,200.
Required: Prepare journal entries AND prepare tabular summary showing their effects on accounting equation.
Tabular Summary
| Date | Cash | A/R | Supplies | Furniture | Equipment | = | A/P | N/P | + | Capital / OE | Remarks |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Apr 1 | +25,000 | - | - | +20,000 | - | = | - | - | + | +45,000 | Capital |
| Apr 1 | -1,000 | - | - | - | - | = | - | - | + | -1,000 | Rent Exp |
| Apr 2 | -5,000 | - | - | - | +5,000 | = | - | - | + | - | - |
| Apr 4 | - | - | +2,000 | - | - | = | +2,000 | - | + | - | - |
| Apr 10 | +16,000 | - | - | - | - | = | - | - | + | +16,000 | Revenue |
| Apr 15 | - | +5,000 | - | - | - | = | - | - | + | +5,000 | Revenue |
| Apr 20 | +2,000 | - | - | - | - | = | - | +2,000 | + | - | Note Payable |
| Apr 25 | +3,000 | -3,000 | - | - | - | = | - | - | + | - | - |
| Apr 30 | -1,700 | - | - | - | - | = | - | - | + | -1,700 | Salaries & Elec |
| Apr 31 | - | - | - | - | - | = | +1,000 | - | + | -1,000 | Tel Bill |
| Apr 31 | - | - | -1,200 | - | - | = | - | - | + | -1,200 | Supplies Used |
| Bal. | 38,300 | 2,000 | 800 | 20,000 | 5,000 | = | 3,000 | 2,000 | + | 61,100 | Balanced |
Proof of Equation: Total Assets = Tk. 66,100 | Total Liabilities + OE = Tk. 66,100.
Problem 03: Bithi Repair Centre
January 2026📋 Problem Statement:
Mr. Hashem Owns Bithi Repair Centre on 31st December 2025 with the following Ledger balances: Cash TK 20,000, Supplies Tk 2,500, Accounts receivable Tk 30,000, Tools Tk 20,000, Motor Vehicles Tk 10,000 & Accounts Payable Tk 5,000. During the month of January, 2026 the following transactions are completed:
- Jan 1: Paid rent for the month January Tk. 10,000.
- Jan 2: Purchase supplies for cash Tk. 1,000.
- Jan 4: Paid cash on accounts payable Tk. 3,500.
- Jan 6: Received cash Tk. 6,000 for service rendered.
- Jan 10: Billed for service rendered Tk. 3,000.
- Jan 15: Purchased tools for cash Tk. 1,000.
- Jan 20: Purchased supplies on account Tk. 2,000.
- Jan 25: Received payment against bill of January 10 for service rendered Tk. 2,000.
- Jan 26: A Karim withdrew Tk. 500 for his personal use.
- Jan 27: Paid cash Tk. 500 for the rent of Karim residence.
- Jan 30: Paid cash for Salaries 1,000, Electricity bill 500.
- Jan 31: At the end of the month supplies worth Tk. 500 were on hand.
Required: (a) Show the effects of the above transactions in the accounting equation in a Tabular form. (b) Prepare journal entries (c) Prove the Equation.
Opening Capital Calculation (Jan 1):
Total Assets (Cash 20k + Supplies 2.5k + AR 30k + Tools 20k + Vehicles 10k) = Tk. 82,500
Liabilities (A/P) = Tk. 5,000 | Capital = Assets - Liabilities = Tk. 77,500
Total Assets (Cash 20k + Supplies 2.5k + AR 30k + Tools 20k + Vehicles 10k) = Tk. 82,500
Liabilities (A/P) = Tk. 5,000 | Capital = Assets - Liabilities = Tk. 77,500
Part (a): Tabular Analysis of Accounting Equation
| Date | Cash | A/R | Supplies | Tools | Vehicles | = | A/P | + | Capital / OE | Remarks |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 1 | +20,000 | +30,000 | +2,500 | +20,000 | +10,000 | = | +5,000 | + | +77,500 | Opening Balance |
| Jan 1 | -10,000 | - | - | - | - | = | - | + | -10,000 | Rent Exp |
| Jan 2 | -1,000 | - | +1,000 | - | - | = | - | + | - | - |
| Jan 4 | -3,500 | - | - | - | - | = | -3,500 | + | - | - |
| Jan 6 | +6,000 | - | - | - | - | = | - | + | +6,000 | Service Revenue |
| Jan 10 | - | +3,000 | - | - | - | = | - | + | +3,000 | Service Revenue |
| Jan 15 | -1,000 | - | - | +1,000 | - | = | - | + | - | - |
| Jan 20 | - | - | +2,000 | - | - | = | +2,000 | + | - | - |
| Jan 25 | +2,000 | -2,000 | - | - | - | = | - | + | - | - |
| Jan 26 | -500 | - | - | - | - | = | - | + | -500 | Drawings |
| Jan 27 | -500 | - | - | - | - | = | - | + | -500 | Personal Rent |
| Jan 30 | -1,500 | - | - | - | - | = | - | + | -1,500 | Salaries & Elec |
| Jan 31 | - | - | -5,000 | - | - | = | - | + | -5,000 | Supplies Used |
| Bal. | 10,000 | 31,000 | 500 | 21,000 | 10,000 | = | 3,500 | + | 69,000 | Balanced |
Part (b): Journal Entries
| Date | Accounts Title & Explanation | Debit (Tk.) | Credit (Tk.) |
|---|---|---|---|
| Jan 1 | Rent Expense Dr. Cash Cr. (Paid office rent for January) | 10,000 | 10,000 |
| Jan 2 | Supplies Dr. Cash Cr. (Purchased supplies for cash) | 1,000 | 1,000 |
| Jan 4 | Accounts Payable Dr. Cash Cr. (Paid cash to creditors) | 3,500 | 3,500 |
| Jan 6 | Cash Dr. Service Revenue Cr. (Received cash for service rendered) | 6,000 | 6,000 |
| Jan 10 | Accounts Receivable Dr. Service Revenue Cr. (Billed client for service rendered) | 3,000 | 3,000 |
| Jan 15 | Tools Dr. Cash Cr. (Purchased tools for cash) | 1,000 | 1,000 |
| Jan 20 | Supplies Dr. Accounts Payable Cr. (Purchased supplies on account) | 2,000 | 2,000 |
| Jan 25 | Cash Dr. Accounts Receivable Cr. (Received payment against Jan 10 bill) | 2,000 | 2,000 |
| Jan 26 | Drawings Dr. Cash Cr. (Owner withdrew cash for personal use) | 500 | 500 |
| Jan 27 | Drawings Dr. Cash Cr. (Paid rent of owner's personal residence) | 500 | 500 |
| Jan 30 | Salaries Expense Dr. Electricity Expense Dr. Cash Cr. (Paid salaries and electricity bill) | 1,000 500 | 1,500 |
| Jan 31 | Supplies Expense Dr. Supplies Cr. (Supplies used during the month: 5,500 - 500 = 5,000) | 5,000 | 5,000 |
Part (c): Proof of Accounting Equation
Proof: Total Assets = Tk. (10,000 + 31,000 + 500 + 21,000 + 10,000) = Tk. 72,500
Total Liabilities + OE = Tk. (3,500 + 69,000) = Tk. 72,500 (Proved).
Total Liabilities + OE = Tk. (3,500 + 69,000) = Tk. 72,500 (Proved).
Problem 04: Bahadur Traders (Merchandising)
January 2025📋 Problem Statement:
On January 1, 2025, Khan Bahadur started his merchandising business in the name of Bahadur Traders by investing cash Tk. 45,000 and Equipment Tk. 10,000. During the 1st month he completed the following transactions:
- Jan 1: Hired a building for office use for Tk. 1,000 per month and paid Tk. 2,000.
- Jan 2: Merchandise Inventory purchased Tk. 30,000, paying Tk. 23,000 in cash and the balance on account.
- Jan 10: Borrowed Tk. 10,000 from the Janata Bank on a note payable.
- Jan 14: Merchandise sales on account Tk. 50,000 (cost Tk. 28,000).
- Jan 15: Paid salaries expense Tk. 1,500 and advertising expense Tk. 1,300.
- Jan 16: Purchased office supplies for cash Tk. 1,000.
- Jan 18: Merchandise purchased on account Tk. 10,000.
- Jan 20: Paid Tk. 6,500 in full settlement for merchandise purchased on account on January 2.
- Jan 25: Received a cash payment of Tk. 48,500 for sales made on account and allowed Tk. 1,500 discount.
- Jan 28: Paid electricity bill for the month of January, 2025 Tk. 1,000.
- Jan 31: Paid salaries for the month of January, 2025 Tk. 1,500.
- Jan 31: Cost of unused supplies Tk. 500.
Required: Prepare journal entries, show the effects of the transactions on the elements of the accounting equation, and prove the Equation.
Accounting Equation Tabular Summary
| Date | Cash | A/R | Inventory | Supplies | Prepaid Rent | Equipment | = | A/P | N/P | + | Capital / OE | Remarks |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jan 1 | +45,000 | - | - | - | - | +10,000 | = | - | - | + | +55,000 | Capital |
| Jan 1 | -2,000 | - | - | - | +1,000 | - | = | - | - | + | -1,000 | Rent Exp |
| Jan 2 | -23,000 | - | +30,000 | - | - | - | = | +7,000 | - | + | - | - |
| Jan 10 | +10,000 | - | - | - | - | - | = | - | +10,000 | + | - | Note Payable |
| Jan 14 | - | +50,000 | -28,000 | - | - | - | = | - | - | + | +22,000 | Sales - COGS |
| Jan 15 | -2,800 | - | - | - | - | - | = | - | - | + | -2,800 | Sal & Adv Exp |
| Jan 16 | -1,000 | - | - | +1,000 | - | - | = | - | - | + | - | - |
| Jan 18 | - | - | +10,000 | - | - | - | = | +10,000 | - | + | - | - |
| Jan 20 | -6,500 | - | -500 | - | - | - | = | -7,000 | - | + | - | Discount Earned |
| Jan 25 | +48,500 | -50,000 | - | - | - | - | = | - | - | + | -1,500 | Sales Discount |
| Jan 28 | -1,000 | - | - | - | - | - | = | - | - | + | -1,000 | Electricity Exp |
| Jan 31 | -1,500 | - | - | - | - | - | = | - | - | + | -1,500 | Salaries Exp |
| Jan 31 | - | - | - | -500 | - | - | = | - | - | + | -500 | Supplies Exp |
| Bal. | 65,700 | 0 | 11,500 | 500 | 1,000 | 10,000 | = | 10,000 | 10,000 | + | 68,700 | Balanced |
Proof of Equation: Total Assets = Tk. 88,700 | Total Liabilities + OE = Tk. 88,700 (Proved).
Problem 05: Mr. Tarif Chowdhury (Law Practice)
September 2025📋 Problem Statement:
Mr. Tarif Chowdhury, a young lawyer, began his practice and completed these transactions during September of the current year 2025:
- Sept 2: Sold a personal investment Tk. 20,000 and invested Tk. 15,000 of the proceeds in the law practice.
- Sept 2: Rented the furnished office of a lawyer who was retiring and paid three months rent in advance Tk. 4,500.
- Sept 2: Purchased the law library of the retiring lawyer for Tk. 3,000, paying Tk. 1,500 in cash and agreeing to pay the balance within one year.
- Sept 5: Purchased office supplies for cash Tk. 1,050.
- Sept 6: Purchased law books from West Publishing Company on credit, Tk. 3,000.
- Sept 8: Completed legal work for a client and immediately collected Tk. 6,000 in cash for the work done.
- Sept 15: Completed legal work for AB Bank on credit, Tk. 6,000.
- Sept 15: Paid for the law books purchased on credit on September 6.
- Sept 19: Completed legal work for Ena Properties on credit, Tk. 6,000.
- Sept 25: Received Tk. 700 from AB Bank for the work completed on September 15.
- Sept 30: Paid the office secretary’s salary, Tk. 4,000.
- Sept 30: Paid the monthly telephone bill Tk. 1,000.
- Sept 30: Recognized that one month’s rent on the office had expired and become an expense.
- Sept 30: Took an inventory of unused office supplies and determined that supplies had been used (Tk. 550) and become an expense.
Required: Show the effects of the transactions on the elements of the accounting equation, prove the Equation, and prepare journal entries.
Tabular Summary & Proof
| Date | Cash | A/R | Prepaid Rent | Supplies | Law Library | = | A/P | + | Capital / OE | Remarks |
|---|---|---|---|---|---|---|---|---|---|---|
| Sept 2 | +15,000 | - | - | - | - | = | - | + | +15,000 | Capital |
| Sept 2 | -4,500 | - | +4,500 | - | - | = | - | + | - | - |
| Sept 2 | -1,500 | - | - | - | +3,000 | = | +1,500 | + | - | - |
| Sept 5 | -1,050 | - | - | +1,050 | - | = | - | + | - | - |
| Sept 6 | - | - | - | - | +3,000 | = | +3,000 | + | - | - |
| Sept 8 | +6,000 | - | - | - | - | = | - | + | +6,000 | Service Revenue |
| Sept 15 | - | +6,000 | - | - | - | = | - | + | +6,000 | Service Revenue |
| Sept 15 | -3,000 | - | - | - | - | = | -3,000 | + | - | - |
| Sept 19 | - | +6,000 | - | - | - | = | - | + | +6,000 | Service Revenue |
| Sept 25 | +700 | -700 | - | - | - | = | - | + | - | - |
| Sept 30 | -4,000 | - | - | - | - | = | - | + | -4,000 | Salary Exp |
| Sept 30 | -1,000 | - | - | - | - | = | - | + | -1,000 | Tel. Expense |
| Sept 30 | - | - | -1,500 | - | - | = | - | + | -1,500 | Rent Expense |
| Sept 30 | - | - | - | -550 | - | = | - | + | -550 | Supplies Exp |
| Bal. | 6,650 | 11,300 | 3,000 | 500 | 6,000 | = | 1,500 | + | 25,950 | Balanced |
Proof of Equation: Total Assets = Tk. 27,450 | Total Liabilities + OE = Tk. 27,450 (Proved).
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