Accounting Equations
A business can make a profit and yet have a lower bank balance. Which of the following might cause this to happen?
Sale of non-current assets at loss
Charging of depreciation in the income statement
Lengthening of the period of credit given to customers
Lengthening of the period on credit taken from suppliers
Lengthening of the period of credit given to customers
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Closing stock and sundry debtors are examples of:A. Fixed assets
B. Fictitious assets
C. Current assets
D. None of the above
If total assets increase by $20,000 and total liabilities increase by $12,000, the capital will:
A. Increase by $32,000
B. Increase by $8,000
C. Decrease by $32,000
D. Decrease by $8,000
Merchandise costing $1,000 are sold for $1,250. This will increase owner’s equity by:
A. $1,000
B. $1,250
C. $250
D. None of the above
Expenses paid by a business decrease:
A. Cash
B. Capital
C. Cash and capital
D. Capital and accounts payable
The excess of assets over liabilities is:
A. Capital
B. Profit
C. Equity
D. Accounts payable
Purchase of machinery for cash:
A. Increases total assets
B. Decreases total assets
C. Keeps total assets unchanged
D. Increases assets and liabilities
A sole trader increases the business’s number of motor vehicles by adding his own car to its fleet. Which elements of the accounting equation will change due to this transaction?”
A. Assets only
B. Capital only
C. Assets and capital
D. Assets and liabilities
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