Accounting Equations MCQs

Accounting Equations

Cash used by an owner to start a business is called:

Loan

Drawings

Investment

Capital

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Accounting Equations

A person who owes money to a business is known as a:

Debtor

Creditor

Investor

Partner

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Accounting Equations

The accounting equation can be written as:

Assets + Profits – Drawings – Liabilities = Closing Capital

Assets – Liabilities – Drawings = Opening Capital + Profit

Assets – Liabilities – Opening Capital + Drawings = Profit

Opening Capital + Profit – Drawings – Liabilities = Assets

Author: rikazzz Comment

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

Author: rikazzz Comment

Accounting Equations

A sole trader is $5,000 overdrawn at the bank and receives $1,000 from a credit customer in respect of its account. Which elements of the accounting equation will change due to this transaction?

Assets and liabilities only

Liabilities only

Assets only

Assets, liabilities, and capital

Author: rikazzz Comment

Accounting Equations

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?”

Assets only

Capital only

Assets and capital

Assets and liabilities

Author: rikazzz Comment

Accounting Equations

Purchase of machinery for cash:

Increases total assets

Decreases total assets

Keeps total assets unchanged

Increases assets and liabilities

Author: rikazzz Comment

Accounting Equations

The excess of assets over liabilities is:

Capital

Profit

Equity

Accounts payable

Author: rikazzz Comment

Accounting Equations

Expenses paid by a business decrease:

Cash

Capital

Cash and capital

Capital and accounts payable

Author: rikazzz Comment

Accounting Equations

Merchandise costing $1,000 are sold for $1,250. This will increase owner’s equity by:

$1,000

$1,250

$250

None of the above

Author: rikazzz Comment