If a business pays off part of its bank loan, what happens to the accounting equation?

Assets decrease, Liabilities decrease

What is the purpose of an income statement?

To show the profit or loss of a business

If a company borrows $5,000 from a bank, which accounts are affected?

Assets increase, Liabilities increase

What is the main purpose of accounting?

To communicate financial information

What happens when a company earns revenue from sales?

Assets increase, Equity increases

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Introduction to Accounting (Level 1 Commerce)

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Questions 15

Answers

1
Which group of people would use accounting to track their investments?
Investors
Customers
Employees
Accountants
2
Which of the following is NOT an accounting element?
Equity
Liabilities
Assets
Profit
3
What does 'liabilities' mean in accounting?
Money earned from sales
The owner's share in a business
Money owed to others
The total value of assets
4
If a business pays off part of its bank loan, what happens to the accounting equation?
Liabilities increase, Equity decreases
Expenses increase, Liabilities increase
Assets decrease, Liabilities decrease
Assets increase, Liabilities decrease
5
What is an example of an income source for a business?
Selling products
Buying new equipment
Purchasing inventory
Paying salaries
6
What is the purpose of an income statement?
To show the profit or loss of a business
To record every financial transaction
To list all assets of a company
To summarise daily expenses
7
Which of these is an example of an asset?
Rent paid for an office
Loan from the bank
Cash in the register
Employee salaries
8
Who uses financial statements to make lending decisions?
Customers
Business owners
Bankers
Employees
9
If a company borrows $5,000 from a bank, which accounts are affected?
Assets increase, Liabilities decrease
Equity increases, Liabilities decrease
Assets decrease, Liabilities increase
Assets increase, Liabilities increase
10
Which is the fundamental accounting equation?
Equity = Liabilities - Assets
Assets = Income - Expenses
Assets = Liabilities + Equity
Liabilities = Assets + Equity
11
What is the main purpose of accounting?
To communicate financial information
To tack inventory
To pay employees
To sell products
12
If a business as $50,000 in assets and $20,000 in liabilities, what is the equity?
$30,000
$35,000
$20,000
$25,000
13
Which of these is NOT a user of accounting information?
Business owners
Government agencies
Bank lenders
School sports teams
14
Which of these is NOT a financial statement?
Statement of a financial position
Tax form
Statement of cash flows
Income statement
15
What happens when a company earns revenue from sales?
Liabilities decrease, Equity decreases
Expenses increase, Liabilities increase
Assets increase, Equity increases
Liabilities increase, Assets decrease

Introduction to Accounting (Level 1 Commerce) Flashcards | StudBud