10 Questions
What is represented by the residual interest in a business?
Net difference between total assets and total liabilities
What is the main source of revenue for a business that sells goods?
Sales
What type of expense is incurred by a business for its permanent and full-time employees?
Salaries expense
What is the purpose of the Taxes and Licenses expense in a business?
All of the above
What type of revenue is generated from bank deposits?
Interest Income
What is the primary characteristic of assets that distinguishes them from other types of accounts?
They are expected to provide future economic benefits to the business
Which of the following assets would be classified as non-current?
A patent purchased last year
What is the primary difference between current and non-current liabilities?
Their expected settlement period
Which of the following statements about intangible assets is true?
They are non-physical assets such as patents and trademarks
What is the purpose of classifying assets as current and non-current?
To determine their expected realization period
Study Notes
Owner's Equity
- Represents the net difference between total assets and total liabilities
- Represents ownership, terminology changes depending on the form of business organization
Revenues
- Earnings arising from the mainline of business operation
- Result from rendering services or selling goods
- Types of revenues:
- Service Revenue: earnings from rendering services
- Interest Income: interest credited by the bank to the business account
- Sales: earnings from selling goods or merchandise
- Professional Fees: earnings made by professionals from rendering services
Expenses
- Costs incurred by the business in generating revenues
- Types of expenses:
- Utilities Expense: costs associated with electricity, water, and communication
- Salaries Expense: costs incurred for services rendered by permanent and full-time employees
- Wages Expense: costs incurred for services rendered by contractual and temporary employees
- Taxes and Licenses Expense: costs incurred to register the business, acquire operating rights, and settle taxes
Assets
- Resources controlled by the business due to past transactions and events
- Expected to generate future economic benefits
- Can be classified into:
- Current Assets: expected to be realized in cash within one year or the normal operating cycle
- Non-current Assets: cannot be classified as current
- Tangible Assets: physical assets such as cash, supplies, and furniture
- Intangible Assets: non-physical assets such as patents and trademarks
Liabilities
- Present obligations of the business arising from past transactions or events
- Expected to result in an outflow of business resources
- Can be classified into:
- Current Liabilities: expected to be settled within one year or the normal operating cycle
- Non-current Liabilities: expected to be paid in cash beyond one year
Learn about the different types of assets in accounting, including current and non-current assets. Understand how assets are classified and measured, and their role in business transactions. Test your knowledge of accounting principles with this quiz!
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