Chapter 14: Equities

Which is the accounting equation?

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities = Owner's Equity

• Assets = Liabilities - Owner's Equity

• Assets = Liabilities = Owner's Equity

Capital consist

(there can be more than 1 answer)

• Contributions by the owner

• Profits (or losses)

• Drawings

• Bank loan

Cash or assets contributed by owner will _____ equity.

• Decrease

• Increase

Journal entry to record this transaction:

Equipment contributed by owner

Dr ____________

Cr _________

• Dr Capital

  Cr Equipment

• Dr Drawings

  Cr Equipment

• Dr Equipment

  Cr Capital

• Dr Equipment

  Cr Drawings

Withdrawal made by owner during the year will ______ equity.

• Increase

• Decrease

Journal entry to record the following transaction:

Owner took out cash for his personal use.

• Dr Cash

  Cr Drawings

• Dr Capital

  Cr Cash

• Dr Drawings

  Cr Cash

• Dr Cash

  Cr Capital

Journal entry to close the drawings account is:

• Dr Drawings

  Cr Income summary

• Dr Capital

  Cr Drawings

• Dr Income summary

  Cr Drawings

• Dr Drawings

  Cr Capital

Journal entry to transfer profit to capital account:

• Dr Income summary

  Cr Capital

• Dr Capital

  Cr Income summary

• Dr Profit

  Cr Capital

• Dr Capital

  Cr Profit

Journal entry to transfer loss to the capital account:

• Dr Capital

  Cr Loss

• Dr Capital

  Cr Income summary

• Dr Income summary

  Cr Capital

• Dr Loss

  Cr Capital