Accounting Equation Quiz

Given that A = Assets, L = Liabilities, and OE = Owner's Equity, the Accounting Equation is

• A + OE = L.

• L + OE = A.

• A = L + OE.

• L - OE = A.

Jasmine Carr is the owner of Shifty Removals. She withdraws cash from the business every month for her personal use. The accounting concept used to recognise her withdrawals is the

• accounting entity concept.

• accounting period concept.

• legal entity concept.

• accounting equation.

Di Lane is the owner of Secret Whispers. At a business conference, she paid $120 to a creditor of the firm for which she will not receive reimbursement from the business. The effect on the accounting equation of Secret Whispers would be

• no change in assets; decrease in liabilities; decrease in owner's equity.

• decrease in assets; no change in liabilities; decrease in owner's equity.

• decrease in assets; decrease in liabilities; increase in owner's equity.

• no change in assets; decrease in liabilities; increase in owner's equity.

In reference to the Balance Sheet, which of the following statements is incorrect?

• The accounting equation can be represented by A = L + OE.

• A Sole Trader business is not a legal entity.

• The Accounting Equation reflects the Accounting Entity concept.

• Liabilities represent all the debts of the business.

A very large business has a small amount of stationery on hand at the end of the financial year. It does not feel it necessary to count this up and value it. Which of the following concepts is being applied?

• Relevance.

• Materiality.

• Accounting Entity.

• Monetary Concept.

The monetary concept states that

• all financial information should be recorded in Australian dollars.

• all financial information should be recorded in the currency of the country in which the business operates.

• only those transactions which can be recorded in financial terms should be included in the accounting records.

• both quantitative and qualitative information must be included in the accounting records.

Action Sports Shop purchased new premises for $290,000 (paying $30,000 in cash and arranging a credit on the accounting equation will be mortgage to finance the balance), and equipment for $12,000 on credit. The effect of these transactions

• increase assets $302,000, increase liabilities $272,000, increase owner's equity $30,000.

• increase assets $272,000, increase liabilities $272,000, no change owner's equity.

• increase assets $290,000, increase liabilities $260,000, increase owner's equity $30,000.

• increase assets $290,000, increase liabilities $290,000, no change owner's equity.

What is the missing amount for Liabilities when Assets are $20,000 and Owner's Equity is $5,000?

• $15,000

• $25,000

• $5,000

• $10,000

What is the missing amount for Owner's Equity when Assets are $12,000 and Liabilities are $10,000 ?

• $4,000

• $2,000

• $10,000

• $22,000

What is the missing amount for Assets when Liabilities are $3,300 and Owner's Equity is $6,600?

• $9,900

• $3,300

• $6,600

• $12,000