The Accounting Equation

Which of the following would not be considered an internal user of accounting data for the KMP Company?

• President of the company

• Production manager

• Merchandise inventory clerk

• President of the employees' labor union

The best definition of assets is the:

• cash owned by the company

• collections of resources belonging to the company and the claims on these resources

• owners’ investment in the business

• resources belonging to a company that have future benefit to the company

Assets are shown in the balance sheet as:

• Debt

• Capital

• Credit

• Asset

Which assets are labelled as non-physical items?

• Property

• Intangible Assets

• Equipment

• Plants and plots

The amount of money that a company owes to its creditors is called:

• Liabilities

• Current Liabilities

• Assets

• Credit ratings

Which of the following is the correct formula for the Accounting Equation?

• Assets = Liabilities – Capital

• Assets = Liabilities + Capital

• Liabilities = Assets + Capital

• Capital = Assets + Liabilities

In the accounting equation, assets are equal to:

• Revenues – Expenses

• Liabilities – Capital

• Liabilities + Capital

• None of the above

If a company’s assets are $50,000 and its liabilities are $20,000, what is its capital?

• $30,000

• $25,000

• $35,000

• $40,000

What happens to the accounting equation if a company borrows $10,000 from a bank?

• Assets increase by $10,000

• Assets decrease by $10,000

• Liabilities increase by $10,000

• Equity increases by $10,000

Which of the following transactions would increase both assets and liabilities?

• Purchasing inventory on credit

• Selling inventory for cash

• Paying off a bank loan

• Receiving cash from customers