The Balance Sheet Equation Flashcards
1
Q
What is the balance sheet equation?
A
Assets = Capital + Liabilities
2
Q
What is an Asset?
A
An economic resource that will bring future benefit to the organization and is controlled by the entity due to a past event
3
Q
What is Capital?
A
Amount owed to the owner by the business due to past events
4
Q
What is a Liability?
A
An obligation to transfer an economic resource to someone else due to past events
5
Q
Examples of Assets?
A
- Buildings, Vehicles, Inventory, Bank, receivables
6
Q
Examples of Liabilities?
A
- Loan, payables, bank overdraft
7
Q
Examples of Capital?
A
- Money put into business, Profit and loss
8
Q
What is a Sole Trader?
A
Individual who sets up and manages their own business
9
Q
What does it mean by the term Unlimited Liability?
A
Where business losses and debts must be met by the owner
