Chapter 3 Elements of Accounting and the Accounting Equation

Define assets.

• Assets are obligations owed by a business to others that are expected to be settled in the future.

• Assets are resources a business owns or controls that are expected to provide future benefits.

• Assets are amounts earned from the activities of a business.

• Assets are costs incurred to earn income in the same accounting period.

Define liabilities.

• Liabilities are obligations owed by a business to others that are expected to be settled in the future.

• Liabilities are resources a business owns or controls that are expected to provide future benefits.

• Liabilities are amounts earned from the activities of a business.

• Liabilities are costs incurred to earn income in the same accounting period.

Define equity.

• Equity is obligations owed by a business to others that are expected to be settled in the future.

• Equity is amount claimed by the owner(s) on the net assets of a business.

• Equity is amount earned from the activities of a business.

• Equity are costs incurred to earn income in the same accounting period.

Define income.

• Income is amount claimed by the owner(s) on the net assets of a business.

• Income are resources a business owns or controls that are expected to provide future benefits.

• Income is amount earned from the activities of a business.

• Income are costs incurred to earn income in the same accounting period.

Define expense(s).

• Expense is amount claimed by the owner(s) on the net assets of a business.

• Expenses are obligations owed by a business to third parties that are expected to be settled in the future.

• Expense is amount earned from the activities of a business.

• Expenses are costs incurred to earn income in the same accounting period.

Select all assets.

• Premises

• Motor vehicles

• Fixtures and fittings

• Trade payables

• Trade receivables

Select all liabilities.

• Bank loan

• Cash at bank

• Inventory

• Trade payables

• Trade receivables

Equity consists of

• Capital

• Drawings

• Liabilities

• Profit

The following are income except

• Discount allowed

• Commission income

• Service fee revenue

• Discount received

• Rent income

The following are expenses except

• Discount allowed

• Wages and salaries

• Service fee revenue

• Advertising

• Stationery