Accounting equation – MCQs

Your answer is incorrect. The correct answer is “liabilities” (option 2).

Your answer is incorrect. The correct answer is “liabilities + capital” (option 3).

Your answer is incorrect. The correct answer is “keeps total assets unchanged” (option 3).

Your answer is incorrect. The correct answer is “capital” (option 1).

Your answer is incorrect. The correct answer is “cash and capital” (option 3).

Your answer is incorrect. The correct answer is “debtor” (option 1).

Your answer is incorrect. The correct answer is “$250” (option 3).

Your answer is incorrect. The correct answer is “cash and debtors” (option 1).

Your answer is incorrect. The correct answer is “zero” (option 2).

Your answer is incorrect. The correct answer is “prompt payment” (option 3).

Your answer is incorrect. The correct answer is “capital” (option 4).

Your answer is incorrect. The correct answer is “current assets” (option 3).

Your answer is incorrect. The correct answer is “increase by $8,000” (option 2).

Oops! Your answer is wrong. The correct answer is “Option C”
The accounting equation Assets = Opening Capital + Profit – Drawings + Liabilities can be rewritten as:
Assets – Liabilities – Opening Capital + Drawings = Profit

Oops! Your answer is wrong. The correct answer is “Option D”.

Petrol being paid in petty cash means assets decrease and drawings increase, which decreases capital. Option A is a switch between assets, while option B and C increase assets and increase liabilities.

Oops! Your answer is wrong. The correct answer is “Option C”.

The lengthening of the period on credit is given to customers, since this means that while there are increased profits as the level of sales increases, it takes longer to collect cash from those customers.

Oops! Your answer is wrong. The correct answer is “Option D”.

A relates to the income statement, B and C suggest that the statement of financial position represents a valuation that is incorrect, while D is correct in that it is the definition of a statement of financial positions’ purpose.

Oops! Your answer is wrong. The correct answer is “Option A”.

The overdraft liability will decrease and receivables will decrease by an equal amount.

Oops! Your answer is wrong. The correct answer is “Option A”.

Assets will increase as the sole trader has acquired inventory, and liabilities will increase as the goods were purchased on credit.

Oops! Your answer is wrong. The correct answer is “Option A”.

Assets increase as cash on receipt of the loan funds, and liabilities will increase as the loan is a liability.

Oops! Your answer is not correct. The correct answer is “Option B”.

Assets will increase as there is an increase in cash of $500 and a decrease in inventory of only $300, and capital will increase due to the profit of $200.

Oops! You gave the wrong answer. The correct answer is “Option C”.

The car increases assets while it is treated as capital introduced rather than as a libilitiy of the business to its proprietor.

Oops! You chose the wrong options. The correct options are “A,B and G”

According to the Conceptual Framework, income, expenses and equity are elements of financial statements. The Conceptual Framework also identifies assets and liabilities as elements of financial statements.