The Accounting Equation

Question 1

Assets

Answer 1

Current - assets only held for a short time

Non - current - assets held and used in operations for a long time

Question 2

Liabilities

Answer 2

Something you owe to someone else
Current - payable within the year
Non - current - payable in more than a years time

Question 3

The business as a separate entity

Answer 3

limited liability company - law recognises the company as a legal entity
Sole trader - no legal separation

Question 4

Capital - Sole trader

Answer 4

capital balance at start of the year
\+
any capital they add that year 
-
any capital they take out (drawings)
\+
net profit for the year
=
closing capital balance

Question 5

The accounting equation

Answer 5

Assets = capital + liabilities or
Assets - liabilities (net assets) = capital or
Assets - liabilities = opening capital + profit + capital injections - drawings
Profit/ losses add to capital

Question 6

Creditor vs debtor

Answer 6

creditor - company owes money to - trade payable - liability

Debtor - owes the company money - trade receivable - asset