Accounting Equation Fundamentals Quiz
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Questions and Answers

What is the purpose of the accounting equation?

  • To determine the market value of a business
  • To demonstrate how transactions affect the financial statements (correct)
  • To calculate the total revenue of a business
  • To calculate the net profit of a business

    • How is capital defined in the accounting equation?

  • The total equity of a company
  • The residual interest in the assets after deducting all liabilities (correct)
  • The amount of cash available in a business
  • Total assets minus total liabilities

    • In the accounting equation, what does 'Equity' refer to?

  • The accumulated retained profits or losses of a business
  • The total assets of a business
  • The total liabilities of a business
  • The residual interest in the assets of a limited liability company (correct)

    • If a business sold all its assets and settled all its liabilities, what would be left?

    <p>Capital</p> Signup and view all the answers

    What does the accounting equation show?

    <p>The relationship between assets, liabilities, and capital</p> Signup and view all the answers

    What would be considered as 'Equity' in a limited liability company?

    <p>Accumulated retained profits or losses</p> Signup and view all the answers

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