The accounting equation and double entry

The accounting equation is:

• 1 Assets = Capital − Liabilities
• 2 Assets = Liabilities + Capital
• 3 Liabilities = Assets + Capital
• 4 Capital = Assets + Liabilities

An increase in an asset is recorded on the:

• 1 Credit side
• 2 Narration column
• 3 Debit side
• 4 Date column

An increase in capital is recorded on the:

• 1 Credit side
• 2 Date column
• 3 Narration column
• 4 Debit side

An expense is recorded on the:

• 1 Narration column
• 2 Debit side
• 3 Date column
• 4 Credit side

A business has assets of Rs 80,000 and liabilities of Rs 30,000. Its capital is:

• 1 Rs 80,000
• 2 Rs 30,000
• 3 Rs 110,000
• 4 Rs 50,000

Buying stock on credit from a supplier:

• 1 Increases assets and capital
• 2 Decreases capital
• 3 Increases assets and liabilities
• 4 Decreases liabilities

The book in which a transaction is first recorded is the:

• 1 Journal
• 2 Ledger
• 3 Trial balance
• 4 Balance sheet

A trial balance is prepared to check that:

• 1 The stock is counted
• 2 The profit is correct
• 3 All errors are removed
• 4 Total debits equal total credits

The owner starts a business with Rs 50,000 in cash. The journal entry is:

• 1 Debit Cash, credit Capital
• 2 Debit Purchases, credit Cash
• 3 Debit Capital, credit Cash
• 4 Debit Cash, credit Sales

Repaying a loan of Rs 10,000 in cash:

• 1 Decreases assets and liabilities
• 2 Increases capital
• 3 Increases assets
• 4 Decreases capital

Drawings made by the owner:

• 1 Increase liabilities
• 2 Reduce capital
• 3 Are an asset
• 4 Increase capital

Which of these is a liability?

• 1 Amount owed to a supplier
• 2 Stock of goods
• 3 Cash in hand
• 4 Machinery