BASIC ACCOUNTING TERMS

Which of the following is correct accounting equation?

• Assets = liabilities - capital

• Assets = liabilities + capital

• Assets + capital = liabilities

• Capital = Assets + liabilities

If a company’s assets increased by ₹10000 and its laibilities increased by ₹4000 then by how much owners capital will be changed ??

• Decrease by ₹6000

• Increase by ₹6000

• Increase by ₹10,000

• Decrease by ₹4000

Which of the following transactions will increase the owners capital ?

• Taking loan from bank

• Purchasing equipment with cash

• Owner investing additional capital in business

• Paying off a creditor

Which of the following is not an asset ?

• Accounts receiveable

• Inventory

• Accounts payable

• Cash

Which financial statement is based on accounting equations?

• Income statement

• Balance sheet

• Statement of cash flow

• Statement of retained earnings

Which of the following would not affect the accounting equation ?

• Providing services on account

• Purchasing supplies for cash

• Owner withdrawing cash for personal use

• Declaring a dividend

If a business purchases $2,000 worth of inventory on credit, what is the effect on the accounting equation?

• Assets increase by $2,000 and liabilities increase by $2,000

• Assets increase by $2,000 and owner's equity increases by $2,000

• Liabilities increase by $2,000 and owner's equity decreases by $2,000

• Assets increase by $2,000 and liabilities decrease by $2,000

If a business collects $1,000 from a customer who previously received services on credit, how does this transaction affect the accounting equation?

• Assets increase by $1,000 and liabilities increase by $1,000

• Assets increase by $1,000 and owner's equity increases by $1,000

• One asset increased by $1000 and another decreased by $1000

• Liabilities decreases by $1000 & capital also decreases by $1000

What is the effect on the accounting equation when a company pays off a portion of its bank loan?

• Assets decrease and liabilities decrease

• Assets and liabilities will both increase

• Liabilities increase and capital increases

• Assets and capital will both decreases

A company pays $2,000 in salaries. How does this affect the accounting equation?

• Assets decrease by $2,000 and owner’s equity decreases by $2,000

• Assets decrease by $2,000 and liabilities increase by $2,000

• Liabilities decrease by $2,000 and owner’s equity increases by $2,000

• Assets decrease by $2,000 and liabilities decrease by $2,000