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Questions and Answers
What is the purpose of the accounting equation?
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?
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?
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?
If a business sold all its assets and settled all its liabilities, what would be left?
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What does the accounting equation show?
What does the accounting equation show?
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What would be considered as 'Equity' in a limited liability company?
What would be considered as 'Equity' in a limited liability company?
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