CHAPTER 3 elements of financial statements and accounting equations

Question 1

Define assets

Answer 1

assets are resources that are owned or controlled by the business which are expected to provide future benefits

Question 2

Define liability

Answer 2

liabilities are obligations owed by the business to other which are expected to be settled in the future

Question 3

Define expense

Answer 3

expenses are costs incurred in the operation of the business to earn income in the same accounting period

Question 4

Define income

Answer 4

incomes are amount earned through the business activities

Question 5

Define revenue

Answer 5

revenue are amounts earned through the business main activities

Question 6

define other income

Answer 6

other income are amounts earned by the other business activities

Question 7

how to calculate equity

Answer 7

owner’s equity = capital + profit - drawings
or
owner’s equity = capital - loss - drawings

Question 8

how to calculate profit for the period

Answer 8

profit for the period = income - expenses

Question 9

state the basic accounting equation

Answer 9

assets = liabilities + equity

Question 10

state the expanded accounting equation for sole-proprietorship

Answer 10

assets = liabilities + equity + income - expense - drawings