Introduction to Accounting

Question 1

State the accounting equation

Answer 1

Assets = Liabilities + Equities

Question 2

What is an asset?

Answer 2

1. Resources owned or controlled by a business

2. Have expected future benefits

Question 3

What are Current Assets?

Answer 3

Assets that can last for less than a year.

Question 4

What are Fixed Assets?

Answer 4

Assets that can last for more than 1 year.

Question 5

What is the amount of equity given the following?

Assets = 300,000
Liabilities = 200,000

Answer 5

Equity = Assets - Liabilities

300,000 - 200,000 = 100,000

Question 6

What are Liabilities?

Answer 6

Debts owed by a business to parties outside a business.

Question 7

Is “Bank” an asset or a liability?

Answer 7

Asset. “Bank” would refer to money in the bank.

If it is a “Bank Loan”, it is a Liability.

Question 8

What type of assets are “Furniture and Fittings”

Answer 8

Non-Current Assets

Question 9

What kind of Liability is a “10 year bank loan”?

Answer 9

Long Term Liability

Question 10

What are the 2 types of Assets?

Answer 10

1. Current Assets

2. Fixed Assets

Question 11

What are the 2 types of Liabilities?

Answer 11

1. Current Liabilities

2. Long Term Liabilities

Question 12

Is “amount invested by owners” considered Asset, Liability or Equity?

Answer 12

Equity

Question 13

What are the 3 types of Business Organisations?

Answer 13

1. Sole Proprietorship
2. Partnership
3. Corporation