Accounting Equation And Double Entries

Question 1

Give Three ways of writing the accounting equation.

Answer 1

Assets= Owners equity + Liabilities
Owners equity= Assets- Liabilities
Liabilities= Assets- Owners equity

Question 2

Explain the term ‘Assets’.

Answer 2

Any possession owned by the business which has a monetary value.

Question 3

Explain the term ‘Income’.

Answer 3

Is the monetary value that the business receives during a financial period.

Question 4

Explain the term “Owner’s Equity”.

Answer 4

Is the owners monetary interest in the business. By giving capital to the business, the owners equity increases. By taking money from the business for personal use the owners equity decreases.

Question 5

Explain the following term ‘Expenses’.

Answer 5

Monetary value that the business pays during a financial period- amounts paid for the daily running cost of the business.

Question 6

Explain the term ‘Liabilities’.

Answer 6

Amount that the business owes to other parties for example, Loans & creditors