Topic 3: The Accounting Equation Flashcards
1
Q
- State the accounting equation.
A
Assets = Liabilities + Equity
2
Q
2, Explain the term ‘drawings’.
A
Drawings refer to the withdrawal of business assets by the owner for personal use.
3
Q
- Explain the difference between bank overdraft and bank loan.
A
A bank overdraft is a negative balance in the bank account and it is a current liability, but a bank loan is a loan given by the bank to the business and it is usually classified as a non-current liability.
4
Q
- Define Assets
A
Resources owned by business to carry out its operations.
5
Q
- Define Liabilities
A
Amounts owed by business to outside parties.
6
Q
- Define Capital
A
It is the amount of Investment made by the owner to the business.
7
Q
- Define Income
A
Earnings from business operations.
8
Q
- Define Expenses
A
Spending by business operations to earn its income.
