The Accountin Equation

Question 1

What is the accounting equation?

Answer 1

Assets= Liabilities+Equities

Question 2

What happens in the account equation when assest decreases?

Answer 2

Equities, liabilities or a combination of the two must equally decrease.

Question 3

What are assets?

Answer 3

Assets are resources controlled by a business entity and from which future economic benefits are expected to flow to the entity.

Question 4

Name the difference between current and non-current assets.

Answer 4

1. Current assets are expected to be used within a year, such as inventory, cash and accounts receivable.
2. Non-current assets are resources that are expected to be used over a year such as land, buildings, vehicles.

Question 5

What are liabilities?

Answer 5

A liability is a legally binding obligation that is payable to another entity.

Question 6

What is the difference between current and non-current liabilities?

Answer 6

Current liabilities are payments that need to be payed within a year; non current don’t need to be paid within a year.

Question 7

What is an equity?

Answer 7

The amount of money would accrue to shareholders if the company’s assets were liquidated and all its debts paid off.