Accounting Equations

Question 1

Profit in Income Statement

Answer 1

Profit = Income - Expenses

Profit = Revenues earned - Expenses incurred

Question 2

Capital

Answer 2

Capital = Assets - Liabilities

Question 3

Current Ratio

Answer 3

Current Ratio = Current Assets / Current Liabilties

Question 4

Accounting Equation

Answer 4

Assets - (Liabilities + Capital) = Income - Expenses

(SoFP/ Balance Sheet) (P&L account)

Question 5

Cost of Sales

Answer 5

n. b. purchase of goods for resale recorded as Purchases - an Expense
n. b. Unsold goods recorded as Inventories - an Asset

Cost of Sales = Opening Inventory + Purchases - Closing Inventory

Question 6

Profit in Statement of Financial Position

Answer 6

Profit = closing equity + drawings - opening equity

Question 7

Retained earnings

Answer 7

retained earnings = profits for the year - dividends paid

Question 8

Equity

Answer 8

Equity = Assets - Liabilities

Question 9

Total Comprehensive Income

Answer 9

TCI = (A- L) t - (A-L ) t-1

= E t. - E t-1