Elements Of Financial Statement And The Accounting Equation Chapter 3

Question 1

All business activity are represented by five accounting elements. Name all the five accounting element.

Answer 1

Assets, liabilities, equity, income and expense.

Question 2

What is the definition of assets?

Answer 2

Assets are resources that a business Owns/controls that are expected to bring future benefits .

Question 3

Name all the assets

Answer 3

Cash in hand, Cash at bank, Inventory, Trade Receivables ,Property, Plant and Equipment, Office Equipment, Motor Vehicles, Fixtures and Fittings

Question 4

What is the definition of liabilities?

Answer 4

Liabilities are obligation owed by the business to other that are expected to be settled in the future.

Question 5

Name all the liabilities

Answer 5

Bank loan
Mortgage loan
Trade payables
Bank overdraft

Question 6

What is the definition of equity?

Answer 6

Equity refers to the claim by the owner on the net assets of a business.

Question 7

What is under equity?

Answer 7

Income
Expense
Drawings
Capital

Question 8

What is the definition of income?

Answer 8

Income refers to amounts earned through the activities of a business.

Question 9

What is the definition of expense?

Answer 9

Expense are costs incurred in the operation of a business to earn income in the same accounting period.

Question 10

What is the basic accounting equation?

Answer 10

Assets = Liabilities + Equity

Question 11

What is the expanded accounting equation?

Answer 11

Assets = Liabilities + Capital + Income - Expense - Drawings.