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The accounting equation

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Written by Sir Bilal Hassan (Accounting)

12 Class 9 Accounting questions with answers and explanations.

Printable worksheet with answer key

All questions with answers

  1. A business has assets of Rs 120,000 and liabilities of Rs 45,000. What is capital?

    • 1 Rs 75,000
    • 2 Rs 165,000
    • 3 Rs 2.67
    • 4 Rs 45,000
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    Correct answer: Rs 75,000

    Capital = assets - liabilities = 120,000 - 45,000 = Rs 75,000.

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  2. The owner puts Rs 30,000 of personal cash into the business. How is it classified?

    • 1 Sales revenue
    • 2 An operating expense
    • 3 A trade payable
    • 4 An increase in capital
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    Correct answer: An increase in capital

    The contribution comes from the owner, not from a customer or lender. Cash and capital both increase.

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  3. A business buys equipment for Rs 8,000 cash. What happens immediately to total assets?

    • 1 They decrease by Rs 8,000
    • 2 They increase by Rs 8,000
    • 3 They double
    • 4 They stay unchanged
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    Correct answer: They stay unchanged

    Equipment rises and cash falls by the same amount. It is an exchange of assets.

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  4. A business receives a Rs 25,000 bank loan. Which two totals increase?

    • 1 Assets and sales revenue
    • 2 Capital and expenses
    • 3 Assets and liabilities
    • 4 Drawings and revenue
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    Correct answer: Assets and liabilities

    Cash is an asset and the obligation to repay is a liability. The loan itself is not income.

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  5. Which item is normally an asset of a small business?

    • 1 Money owed by a customer
    • 2 An unpaid bank loan
    • 3 The owner’s personal home unrelated to the business
    • 4 Money owed to a supplier
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    Correct answer: Money owed by a customer

    A customer balance is a receivable. Supplier balances and loans are liabilities; the owner’s separate property is not automatically a business asset.

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  6. What are drawings?

    • 1 Equipment used in production
    • 2 Resources taken by the owner for personal use
    • 3 Borrowing from a bank
    • 4 Cash received from customers
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    Correct answer: Resources taken by the owner for personal use

    Drawings reduce the owner’s interest. They are not an expense of running the business.

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  7. Opening capital is Rs 40,000, profit is Rs 9,000 and drawings are Rs 3,000, with no other changes. What is closing capital?

    • 1 Rs 49,000
    • 2 Rs 52,000
    • 3 Rs 34,000
    • 4 Rs 46,000
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    Correct answer: Rs 46,000

    Closing capital = 40,000 + 9,000 - 3,000 = Rs 46,000.

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  8. Equipment costing Rs 6,000 is bought on credit. What happens to the equation?

    • 1 Assets and capital each decrease by Rs 6,000
    • 2 Only capital increases
    • 3 Assets and liabilities each increase by Rs 6,000
    • 4 Cash decreases by Rs 6,000 immediately
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    Correct answer: Assets and liabilities each increase by Rs 6,000

    The equipment is received now and payment is owed to the supplier. No cash is paid at that point.

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  9. A business pays Rs 4,000 of loan principal from its bank account. What changes?

    • 1 Liabilities rise by Rs 4,000
    • 2 Capital increases by Rs 4,000
    • 3 Assets and liabilities each fall by Rs 4,000
    • 4 Revenue rises by Rs 4,000
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    Correct answer: Assets and liabilities each fall by Rs 4,000

    Cash and the loan balance both decrease. Principal repayment is distinct from interest expense.

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  10. Why is a proprietor’s personal grocery purchase normally recorded as drawings if paid from business cash?

    • 1 Personal groceries always create business revenue
    • 2 Drawings increase capital
    • 3 It benefits the owner personally rather than the business
    • 4 Every cash payment is wages
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    Correct answer: It benefits the owner personally rather than the business

    The business-entity distinction separates personal spending from business expenses.

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  11. Capital is Rs 65,000 and liabilities are Rs 18,000. What are total assets?

    • 1 Rs 18,000
    • 2 Rs 65,000
    • 3 Rs 83,000
    • 4 Rs 47,000
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    Correct answer: Rs 83,000

    Assets = liabilities + capital = 18,000 + 65,000 = Rs 83,000.

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  12. Which transaction increases capital through business profit, assuming no related expense in this example?

    • 1 Receiving Rs 2,000 loan principal
    • 2 Receiving Rs 2,000 from the owner
    • 3 Earning Rs 2,000 for a service provided
    • 4 Transferring Rs 2,000 from bank to cash
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    Correct answer: Earning Rs 2,000 for a service provided

    Service revenue contributes to profit. Loans, owner contributions and transfers have different accounting effects.

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