Chp 3: Elements and accounting equation

Question 1

Define assets

Answer 1

Resources a business owns or controls that are expected

to provide future benefits

Question 2

Define liabilities

Answer 2

Obligations** **OWED by a business to others

that are expected to be settled in the future

Question 3

Define equity

Answer 3

Amount claimed by the owner on net assets of the business.

Question 4

Define income

Answer 4

Amount EARNED through the activities of a business,

Revenue : earned from selling goods and providing services (MAIN ACTIVITY)

Other income earned from other business activities.

Question 5

Define expense

Answer 5

Cost incurred in the operation of a business to earn income in the same accounting period

Question 6

Define Accounting entity theory

Answer 6

The activities of a business are separate from the actions of the owner.

All transactions are recorded from the point of view of the business.

Question 7

State the basic accounting equation

Answer 7

Assets = Liabilities + Equity

Question 8

State the Expanded Accounting Equation

Answer 8

Assets = Liabilities + Capital + (Income – Expenses) – Drawings