MCQS ON ACCOUNTING EQUATION
1. The accounting equation is:
a) Assets = Liabilities + Owner's Equity
b) Assets + Liabilities = Owner's Equity
c) Liabilities + Owner's Equity = Assets
d) Liabilities = Assets + Owner's Equity
The correct answer is a) Assets = Liabilities + Owner's Equity.
2. Which of the following represents the liabilities of a business?
a) Accounts Receivable
b) Accounts Payable
c) Cash
d) Inventory
The correct answer is b) Accounts Payable.
3. If a company has total assets of 1,000,000 and total liabilities of 400,000, what is the owner's equity?
a) 400,000
b) 600,000
c) 1,000,000
d) 1,400,000
The correct answer is a) 400,000.
4. Owner's equity can be calculated as:
a) Assets - Liabilities
b) Liabilities - Assets
c) Assets + Liabilities
d) Assets - Revenue
The correct answer is a) Assets - Liabilities.
5. Which of the following transactions will increase the assets of a company?
a) Taking a loan from the bank
b) Paying off a loan to the bank
c) Selling products on credit
d) Purchasing inventory with cash
The correct answer is d) Purchasing inventory with cash.
6. A company's liabilities are 400,000, and the owner's equity is 600,000. What are the total assets?
a) 200,000
b) 1,000,000
c) 400,000
d) 800,000
The correct answer is b) 1,000,000.
7. When a company receives cash from a customer for a sale made on credit, how does this transaction affect the accounting equation?
a) Assets increase, and liabilities increase
b) Assets increase, and owner's equity increases
c) Assets decrease, and liabilities decrease
d) Assets increase, and liabilities decrease
The correct answer is b) Assets increase, and owner's equity increases.
8. Which of the following represents the accounting equation after a business pays off a loan?
a) Assets = Liabilities + Owner's Equity
b) Assets - Liabilities = Owner's Equity
c) Assets + Liabilities = Owner's Equity
d) Liabilities = Assets + Owner's Equity
The correct answer is b) Assets - Liabilities = Owner's Equity.
9. A company purchased equipment for 50,000 cash. How does this transaction affect the accounting equation?
a) Assets increase, and liabilities decrease
b) Assets increase, and owner's equity increases
c) Assets decrease, and liabilities decrease
d) Assets decrease, and owner's equity decreases
The correct answer is b) Assets increase, and owner's equity increases.
10. If a company's owner invests an additional 100,000 cash into the business, how does this transaction affect the accounting equation?
a) Assets increase, and liabilities increase
b) Assets increase, and owner's equity increases
c) Assets decrease, and liabilities decrease
d) Assets increase, and owner's equity decreases
The correct answer is b) Assets increase, and owner's equity increases.
11. Which of the following represents the accounting equation after a company purchases inventory on credit?
a) Assets = Liabilities + Owner's Equity
b) Assets - Liabilities = Owner's Equity
c) Assets + Liabilities = Owner's Equity
d) Liabilities = Assets + Owner's Equity
The correct answer is c) Assets + Liabilities = Owner's Equity.
12. A company's total assets are 800,000, and its owner's equity is 300,000. What are its total liabilities?
a) 500,000
b) 1,100,000
c) 300,000
d) 800,000
The correct answer is a) 500,000.
13. Which of the following represents the owner's equity of a business?
a) The total value of all assets
b) The total value of all liabilities
c) The difference between assets and liabilities
d) The total revenue generated by the business
The correct answer is c) The difference between assets and liabilities.
14. If a company's assets are 1,200,000, and its liabilities are 400,000, what is the owner's equity?
a) 400,000
b) 800,000
c) 1,200,000
d) 1,600,000
The correct answer is b) 800,000.
15. When a company records revenue for services provided to a customer on credit, how does this transaction affect the accounting equation?
a) Assets increase, and liabilities increase
b) Assets increase, and owner's equity increases
c) Assets decrease, and liabilities decrease
d) Assets increase, and liabilities decrease
The correct answer is b) Assets increase, and owner's equity increases.
16. Which of the following represents the liabilities of a business?
a) Accounts Receivable
b) Accounts Payable
c) Cash
d) Inventory
The correct answer is b) Accounts Payable.
17. A company's total liabilities are 200,000, and its owner's equity is 800,000. What are its total assets?
a) 600,000
b) 400,000
c) 1,000,000
d) 200,000
The correct answer is c) 1,000,000.
18. Which of the following represents the accounting equation after a company receives a cash payment from a customer for services rendered?
a) Assets = Liabilities + Owner's Equity
b) Assets - Liabilities = Owner's Equity
c) Assets + Liabilities = Owner's Equity
d) Liabilities = Assets + Owner's Equity
The correct answer is a) Assets = Liabilities + Owner's Equity.
19. A company's total assets are 1,000,000, and its total liabilities are 300,000. What is the owner's equity?
a) 700,000
b) 1,300,000
c) 300,000
d) 1,000,000
The correct answer is a) 700,000.
20. A company's total assets are $500,000, and its total liabilities are $200,000. What is the owner's equity?
a) $700,000
b) $300,000
c) $500,000
d) $200,000
The correct answer is b) $300,000.
