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03 Accounting Equation

This quiz tests your understanding of the accounting equation and the accounting elements. You will be tested on transactions affecting the accounting equation, types of accounts, and their classifications, as well as scenarios involving purchases, withdrawals, payments, and settlements in practical business situations
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A) long life.
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B) great monetary value.
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C) physical in nature.
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D) future economic benefit.
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A) Investments in cash by the owners
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B) Investments in assets other than cash by the owners
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C) Profits from profitable operation of the business
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D) All of the above
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A) Payments of cash to the owners
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B) Payment of assets other than cash to the owners
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C) Losses from unprofitable operation of the business
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D) All of the above
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A) Asset
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B) Liability
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C) Owner’s’ equity
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D) Revenue
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A) Asset
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B) Liability
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C) Owner’s’ equity
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D) Revenue
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A) Payables
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B) Receivables
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C) Loans
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D) Negative assets
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A) Assets = Equities
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B) Assets Liabilities = Owner’s Equity.
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C) Assets = Liabilities Owner’s Equity.
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D) All of these answers are correct.
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A) affect two or more accounts.
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B) increases one account and decreases the other
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C) always affect exactly two accounts.
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D) affect the same number of asset and liability accounts.
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A) assets must have decreased by $8 000.
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B) owner’s equity must have increased by $8 000.
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C) assets must have increased by $8 000 or owner’s equity must have decreased by $8 000.
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D) assets and owner’s equity each increased by $4 000.
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A) Assets = Liabilities + Owner’s Capital + Drawings + Revenue – Expenses.
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B) Assets + Owner’s Drawings + Expenses = Liabilities + Capital + Revenues.
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C) Assets + Liabilities – – Drawings = Capital + Revenues – Expenses.
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D) Assets = Revenues + Expenses + Liabilities.
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A computer dealer withdrew a laptop from the storeroom for office use. Which two accounts were affected by the transaction?


A) Office equipment and Cash in hand
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B) Office equipment and Trade Payable
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C) Office equipment and Inventory
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D) Office equipment and Capital
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A) Liabilities increase; owner’s equity decreases
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B) Assets increase; liabilities increase
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C) Assets decrease; owner’s equity increases
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D) Assets increase; owner’s equity increases
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A) Assets Increase; Liabilities decrease
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B) Assets increase; Owner’s Equity Increase
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C) Assets increase; Liabilities Increase
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D) Assets decrease; Owner’s Equity Decrease
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A) Assets Increase; Liabilities decrease
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B) Assets increase; Owner’s Equity Increase
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C) Assets increase; Liabilities Increase
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D) Assets decrease; Owner’s Equity Decrease
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A) Assets Increase; Liabilities decrease
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B) Assets increase; Owner’s Equity Increase
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C) Assets increase; Liabilities Increase
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D) Assets decrease; Liabilities Decrease
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A business issues a cheque to pay a trade payable. The effect of the transaction is to:


A) Increase assets and liabilities.
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B) Increase assets and decrease liabilities.
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C) Decrease assets and owner’s equity.
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D) Decrease assets and liabilities.
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A business issues a cheque to pay for electricity expenses. The effect of the transaction is to:


A) Increase assets and liabilities.
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B) Increase assets and decrease liabilities.
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C) Decrease assets and owner’s equity.
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D) Decrease assets and liabilities.
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Julian owns Julian Trading, which buys and sells water bottles. He withdrew $100 from the office to pay for his mother’s birthday present. What is the effect of the following transaction on Assets, Liabilities and Equity


A) Assets: -$100 Cash in Hand; Liabilities: No Effect; Equity: $100 Drawings
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B) Assets: -$100 Cash at Bank; Liabilities: No Effect; Equity: -$100 Drawings
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C) Assets: -$100 Cash in Hand; Liabilities: No Effect; Equity: -$100 Drawings
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D) Assets: -$100 Cash in Hand; Liabilities: No Effect; Equity: -$100 Drawings
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Julian paid $300 cash for fire insurance. What is the effect of the following transaction on Assets


A) Assets: -$300 Cash in Hand; Liabilities: -$300 Insurance; Equity: No Effect
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B) Assets: -$300 Cash in Hand; Liabilities: No Effect; Equity: $300 Insurance Expense
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C) Assets: -$300 Cash at Bank; Liabilities: No Effect; Equity: -$300 Insurance Expense
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D) Assets: -$300 Cash in Hand; Liabilities: No Effect; Equity: -$300 Insurance Expense
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Julian Trading purchased water bottles for $3 200 on credit from Water Inc. What is the impact of this transaction on Assets, Liabilities and Equity?


A) Assets: $3 200 Inventory; Liabilities: $3 200 Trade Payable: Water Inc; Equity: No Effect
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B) Assets: $3 200 Inventory, -$3 200 Cash at bank; Liabilities: No effect; Equity: No Effect
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C) Assets: $3 200 Inventory; Liabilities: $3 200 Loan: Water Inc; Equity: No Effect
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D) Assets: $3 200 Cash at bank; Liabilities: No Effect; Equity: $3 200 Profit
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Issued a cheque $3 100 in full settlement of the amount owing to Water Inc. Julian Trading had earlier bought inventory of $3 200 on credit from Water Inc. What is the impact of this transaction on Assets, Liabilities and Equity?


A) Assets: Cash at Bank -$3 100 ; Liabilities: Trade Payable: Water Inc -$3 200; Equity: No Effect
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B) Assets: Cash at Bank -$3 100; Liabilities: Trade Payable: Water Inc -$3 200; Equity: $100 Discount Received
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C) Assets: Cash at Bank -$3 200; Liabilities: Trade Payable: Water Inc -$3 200; Equity: $100 Discount Allowed
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D) Assets: Cash at Bank -$3 100; Liabilities: Trade Payable: Water Inc -$3 200; Equity: $100 Discount Allowed
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Don’t be discouraged by your result on the Accounting Equation Quiz. This topic can be challenging, but with dedication and focused study, you can improve your understanding. Make sure to revisit the basics of assets, liabilities, and owner’s equity. Practice more questions and seek help from your instructor or classmates if needed. Remember, learning from mistakes is a crucial part of the learning process.

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Congratulations on passing the Accounting Equation Quiz! You have demonstrated a good understanding of basic accounting concepts. Keep up the good work by reviewing more examples and practicing applying the accounting equation to different scenarios. Understanding how transactions affect assets, liabilities, and owner’s equity is key to mastering accounting principles.

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Wow! You excelled in the Accounting Equation Quiz, showcasing a strong grasp of fundamental accounting principles. Your ability to analyze how transactions impact the financial position of a business is commendable. To further enhance your skills, consider exploring more complex scenarios and advanced topics in accounting. Keep challenging yourself and aim for continuous improvement in your accounting knowledge.
Keep up the effort and dedication in your studies! Understanding the accounting equation is a foundational skill that will benefit you in various aspects of accounting and finance. Good luck with your future endeavors in mastering accounting concepts!
Keep up the effort and dedication in your studies! Understanding the accounting equation is a foundational skill that will benefit you in various aspects of accounting and finance. Good luck with your future endeavors in mastering accounting concepts!

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