Statement of financial position

Question 1

What is the basic accounting equation ?

Answer 1

Assets = liabilities + equity

Question 2

What is the equity equation ?

Answer 2

share capital + retained earnings

Question 3

What is the equation for retained earnings ?

Answer 3

Revenue - expenses - dividends

Question 4

What transactions should we record in the accounting system ?

Answer 4

Every time there is an event or transaction within the business, it has two effects on the accounting equation. On monetary unit and economic entity

Question 5

What is a monetary unit ?

Answer 5

Included in the accounting records. Only transactional data can be expressed in terms of money

Question 6

What is an economic entity ?

Answer 6

requires that activities of the entity be kept separate and distinct from the activities of the owner and all other economic entities

Question 7

How would you set up the balance sheet under assets ?

Answer 7

Cash + equipment

Question 8

What would you set up on the balance sheet under liabilities ?

Answer 8

accounts payable + share capital

Question 9

What would you set up on the balance sheet under equity ?

Answer 9

retained earnings
revenue - expenses - dividends