Accounting Basics: Assets, Revenue, Equity, Expenses

Questions and Answers

Match the following accounting terms with their definitions:

Asset = Item of value owned by the business Revenue = Costs incurred while earning income Liability = Amount owed by the business to external parties Owner's Equity = Amount of owner's investment in the business

Match the following accounting terms with their characteristics:

Drawings = Negative owner's equity account Capital = Value of owner's contributions to the business Revenue = Income earned from normal business activities Liability = CR by nature

Match the following examples with their corresponding accounting terms:

Cash at bank = Asset Sales = Revenue Loans to bank = Liability Wages = Expense

Match the following equations to their corresponding accounting concepts:

<p>OE = A - L = Owner's Equity calculation A = L + OE = Basic accounting identity L = A - OE = Liability calculation Revenue - Expenses = Profit = Profit calculation</p> Signup and view all the answers

Match the following accounting documents with their purposes:

<p>Balance Sheet = Lists assets, liabilities, and owner's equity Income Statement = Shows revenue and expenses Cash Flow Statement = Details cash inflows and outflows Statement of Changes in Equity = Tracks changes in owner's equity</p> Signup and view all the answers

Study Notes

Key Financial Terms

Asset: Represents items of value owned by a business, classified as a debit (DR) by nature. Examples include cash at bank, motor vehicles, and land.
Revenue: Income generated from the normal operations of a business, classified as a credit (CR) by nature. Examples consist of rent revenue, interest revenue, and sales.
Owner’s Equity: Reflects the owner's interest or investment in the business, recognized as a credit (CR). Includes capital (investment) and drawings (withdrawals).
Expenses: Costs incurred while generating income, categorized as a debit (DR) by nature. Common examples are wages, electricity, and advertising costs.
Liability: Amounts owed by the business to external parties, categorized as a credit (CR) by nature. Examples include accounts payable, loans to banks, and bank overdrafts.
Drawings: Cash or asset amounts withdrawn from the business by the owner, treated as a debit (DR); negatively impacts owner's equity.
Capital: Represents the value of the investment made by the owner into the business, classified as a credit (CR), and is part of owner’s equity.
Balance Sheet: An accounting report that provides a snapshot of a business’s assets, liabilities, and owner’s equity at a specific point in time.

Accounting Equations

Owner's Equity (OE) = Assets (A) - Liabilities (L)
Assets (A) = Liabilities (L) + Owner's Equity (OE)
Liabilities (L) = Assets (A) - Owner's Equity (OE)

Description

Test your understanding of essential accounting concepts such as assets, revenue, owner's equity, and expenses. This quiz will help you differentiate between these terms and their corresponding accounting nature. Brush up on your knowledge and prepare for your accounting assessments.