The accounting equation

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

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

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

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

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

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

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

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

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

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

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

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