Accounting Basics Quiz

What is the accounting equation?

• Assets + Liabilities = Owner's Equity

• Assets = Liabilities - Owner's Equity

• Assets = Owner's Equity - Liabilities

• Assets = Liabilities + Owner's Equity

What is considered capital in accounting?

• Resources invested by the business owners

• Costs incurred by a business

• Money owed to outsiders

• Income earned by a business

Which of the following is an example of an asset?

• Cash at Bank

• Trade Payables

• Owner's Drawings

• Loan from Public Bank

What are liabilities in accounting?

• Resources owned by a business

• Money owed to outsiders

• Costs incurred by a business

• Income earned by a business

What happens to Owner's Equity when a profit is made?

• It decreases

• It becomes a liability

• It remains the same

• It increases

What is the effect of drawings on Owner's Equity?

• It decreases Owner's Equity

• It has no effect

• It increases Owner's Equity

• It converts equity to liabilities

Which of the following is a current liability?

• Long-term loan

• Mortgage loan

• Trade Receivables

• Bank overdraft

What is retained profit?

• Profit distributed to owners

• Profit kept in the business

• Total revenue earned

• Total expenses incurred

What is the relationship between income and expenses?

• Loss = Income + Expenses

• Expenses = Income + Profit

• Profit = Income - Expenses

• Income = Expenses

What is the effect of paying a trade payable?

• No effect

• Owner's Equity increases

• Liabilities decrease

• Assets increase