The Accounting Equation

Question 1

Asset

Answer 1

A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce future economic benefits.

Question 2

Liability

Answer 2

A present obligation of the entity to transfer an economic resource as a result of past events.

Question 3

Owner’s Equity

Answer 3

The residual interest in the assets of the entity after deducting all its liabilities.

Question 4

Current Asset

Answer 4

Cash and other types of assets held primarily for the purpose of sale or trading, or are reasonably expected to be converted to cash, sold or consumed by a business within 12 months after the end of the reporting period

Question 5

Non-Current Asset

Answer 5

Expected to be used by the business entity for a number of years (after next 12 months) and are not held for resale

Question 6

Current Liability

Answer 6

Obligations of the entity that are reasonably expected to be settled within 12 months after the end of the reporting period

Question 7

Non-Current Liability

Answer 7

Obligations of the entity that are not required to be settled within 12 months after the end of the reporting period