Very, Very, Very Important Definitions

What is the definition of an Asset?

• Any item owned by an entity and used to generate benefits for one year or more in the future.

• A liability that must be paid within the next month.

• A service provided by a third party to an organization.

• A document that records only cash transactions.

Which of the following is an example of an Asset?

• Loan

• Land

• Trade payables

• Other payables

An asset that is expected to generate benefits for more than one year is called a:

• Current asset

• Non-current asset

What is the definition of a Liability?

• Amounts owed by an entity which must be repaid within 1 year or after 1 year.

• Assets owned by an entity that generate revenue.

• Profits earned by a company during a financial year.

• Expenses paid in advance for future benefits.

Which of the following is an example of a Liability?

• Inventory

• Trade receivables

• Trade payables

• Land

A liability that must be repaid within one year is called a:

• Non-current liability

• Current liability

What is the definition of 'Capital'?

• Owners’ investment in a business.

• Profit re-invested in business.

• The total sales of a business.

• The number of employees in a business.

What is the definition of 'Drawings'?

• Negative capital or items taken from by the owner from a business for NON-BUSINESS or PERSONAL USE.

• Profits earned by the business during a financial year.

• Assets purchased for business expansion.

• Loans taken by the business from a bank.

What is the definition of Income/Revenue?

• Amount earned from the sale of goods or providing services.

• Total expenses incurred during a period.

• The value of assets owned by a company.

• The amount of tax paid by a business.

Which of the following is an example of Income/Revenue?

• Rent

• Sales (goods sold)

• Salaries

• Insurances