The accounting environment and the accounting equation quiz: O-Level Principles of Accounts (SEAB/Cambridge 7087) quiz

Assets $=$ Liabilities $-$ Owner's Equity

Assets $=$ Liabilities $+$ Owner's Equity

Owner's Equity $=$ Assets $+$ Liabilities

Liabilities $=$ Assets $+$ Owner's Equity

That the owner's private transactions are recorded in the business books

That the business is treated as separate from its owner, so only the business's transactions are recorded

That every business uses the same financial year

That assets are always valued at selling price

Because drawings increase the profit

Because the business entity concept treats the owner as separate, so the withdrawal reduces capital, not profit

Because drawings are a liability of the business

Because the cash never actually leaves the business

Book-keeping interprets results; accounting only records transactions

Book-keeping is the routine recording of transactions; accounting also classifies, reports and interprets them

They are exactly the same activity

Book-keeping is done only by computers; accounting only by hand

$208{,}000$

$58{,}000$

$92{,}000$

$150{,}000$

Premises

Trade payables

A five-year bank loan

Trade receivables

A bank loan repayable in five years

Trade payables

Bank overdraft

Inventory

As a business expense of $200$

As drawings of $200$, reducing the bank and reducing owner's equity

As an increase in capital of $200$

It is not recorded at all

A bank deciding whether to grant a loan

A supplier deciding whether to sell on credit

The owner or manager assessing the business's performance

The tax authority assessing tax due

Assets rise by $3{,}000$ and liabilities rise by $3{,}000$

Assets rise by $3{,}000$ and owner's equity falls by $3{,}000$

Assets fall by $3{,}000$ and liabilities fall by $3{,}000$

Only owner's equity changes

$124{,}000$

$74{,}000$

$50{,}000$

$24{,}000$

Because every transaction has a dual effect that keeps Assets equal to Liabilities plus Owner's Equity

Because the accountant adjusts the figures until it does

Because assets are always equal to expenses

Because liabilities are ignored

To record transactions only, with no further use

To record and process transactions and communicate the information so users can make decisions

To increase the profit of the business directly

To calculate the owner's personal tax only