Accounting Chapter 1

What is the basic accounting equation?

• Liabilities = Assets + Equity

• Assets = Liabilities + Equity

• Assets = Equity - Liabilities

• Equity = Assets - Liabilities

Define assets in accounting.

• Assets in accounting are resources owned by a company that have economic value and are expected to provide future benefits.

• Assets in accounting are liabilities of a company

• Assets in accounting are expenses incurred by a company

• Assets in accounting are intangible concepts with no value

Explain the concept of liabilities.

• Liabilities are assets owned by an entity.

• Liabilities are obligations that an entity owes to other parties.

• Liabilities are revenues generated by an entity.

• Liabilities are expenses incurred by an entity.

What is owner's equity?

• Owner's equity is the profit earned by the business

• Owner's equity is the residual interest in the assets of the business after deducting liabilities.

• Owner's equity is the total assets of the business

• Owner's equity is the amount of money the owner invests in the business

Differentiate between revenue and expenses.

• Revenue is the income, while expenses are the costs.

• Revenue is the outcome, while expenses are the investments.

• Revenue is the profit, while expenses are the losses.

• Revenue is the savings, while expenses are the earnings.

What is the purpose of a trial balance?

• To calculate employee salaries

• To determine the company's profit margin

• To ensure total debits equal total credits in the general ledger

• To track customer orders

Define the term 'debit' in accounting.

• An entry on the left side of a double-entry accounting system representing an increase in assets or a decrease in liabilities or equity.

• An increase in liabilities

• A decrease in assets

• A credit entry in accounting

Explain the term 'credit' in accounting.

• A credit in accounting is an entry that has no impact on the financial statements.

• A credit in accounting is an entry that decreases a liability or equity account, or increases an asset or expense account.

• A credit in accounting is an entry that increases an asset or expense account, or decreases a liability or equity account.

• A credit in accounting is an entry that increases a liability or equity account, or decreases an asset or expense account.

What is the role of a balance sheet?

• To determine market share

• To predict future financial performance

• To calculate employee salaries

• To provide a snapshot of a company's financial position

Define the term 'income statement'.

• An income statement is a financial statement that shows a company's revenues and expenses over a specific period of time, typically a quarter or a year. It provides information on the profitability of the business by detailing the net income or loss for the period.

• An income statement is a document that lists all the assets and liabilities of a company.

• An income statement is a report that summarizes a company's cash flows.

• An income statement is a financial statement that shows a company's market share.