Accounting Equation Q&A

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on March 25, 2022

Test your knowledge of the accounting equation by answering the 10 short questions given below. We suggest that you try to answer each question yourself before clicking on the “See answer” button.

If you find it difficult to answer any of these questions, read our article on the accounting equation to learn more.

1. What is the accounting equation?

2. What is owner's equity?

3. If total assets are $50,000 and total liabilities are $20,000, what is the amount of owner's equity?

4. If total liabilities are $40,000 and owner's equity is $60,000, what is the amount of total assets?

5. If total assets are $20,000 and owner's equity is $15,000, what is the amount of total liabilities?

6. Merchandise costing $12,000 are sold for $15,000. How does this transaction impact the accounting equation?

7. Merchandise costing $15,000 are sold for $12,000. How does this transaction impact the accounting equation?

8. Which financial statement is closely related to the accounting equation and why?

9. What is the difference between liabilities and owner's equity?

10. How does depreciation on a fixed asset influence the accounting equation?

Do you want to further test your knowledge about Accounting Equations? We have prepared more quizzes for you.

Accounting Equation: Fill In the Blanks

Accounting Equations MCQs

 

Frequently Asked Questions

What is the Accounting Equation?

The Accounting Equation is a fundamental Principles of Accounting that states that the value of an enterprise’s assets must equal its liabilities and shareholders’ equity. This equation ensures that all changes in an enterprise’s financial position are accounted for.

What does owner’s equity mean?

The Accounting Equation can be used to track the changes in an enterprise’s assets, liabilities, and shareholders’ equity over time. This information can help you understand your business’s financial position and make informed decisions about growing your business.

What does owner’s equity mean?

What does owner’s equity mean?

What are liabilities?

A liability is a debt or an obligation. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services.

How is Depreciation on Fixed Assets calculated?

To determine the amount of Depreciation for a depreciable asset, subtract its Salvage Value from the original cost. Divide this amount by the number of years in the asset’s useful lifespan. Divide by 12 to tell you the monthly Depreciation for the asset.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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