Accounting Equations MCQ Quiz With Answers

Take this quick test on accounting equations to help you prepare for your exams, interviews, or different tests.

If you find it difficult to answer any of these questions, you can read about accounting ratios on this website.

This multiple choice question (MCQ) test contains 23 questions. Each question has 4 options and you'll need to choose the 1 correct option.

The results will be shown after you answer the questions and submit the quiz.

1. Resources minus capital equals:

Assets
Liabilities
Revenue
Equity

2. Assets are always equal to:

Capital
Liabilities
Liabilities + Capital
Liabilities + Accounts Payable

3. Purchase of machinery for cash:

Increases total assets
Decreases total assets
Keeps total assets unchanged
Increases assets and liabilities

4. The excess of assets over liabilities is:

Capital
Profit
Equity
Accounts payable

5. Expenses paid by a business decrease:

Cash
Capital
Cash and capital
Capital and accounts payable

6. A person who owes money to a business is known as a:

Debtor
Creditor
Investor
Partner

7. Merchandise costing $1,000 are sold for $1,250. This will increase owner's equity by:

$1,000
$1,250
$250
None of the above

8. Cash is received from Mr. Jones, a debtor of the business. It will affect:

Cash and debtors
Cash and owner's equity
Cash and creditors
Cash and merchandise

9. Capital + Liabilities - Assets = ?

10. A cash discount is provided on:

Sales
Purchases
Prompt payment
Cash purchases

11. Cash used by an owner to start a business is called:

Loan
Drawings
Investment
Capital

12. Closing stock and sundry debtors are examples of:

Fixed assets
Fictitious assets
Current assets
None of the above

13. If total assets increase by $20,000 and total liabilities increase by $12,000, the capital will:

Increase by $32,000
Increase by $8,000
Decrease by $32,000
Decrease by $8,000

14. The accounting equation can be written as:

Assets + Profits - Drawings - Liabilities = Closing Capital
Assets - Liabilities - Drawings = Opening Capital + Profit
Assets - Liabilities - Opening Capital + Drawings = Profit
Opening Capital + Profit - Drawings - Liabilities = Assets

15. The capital of a sole trader will change as a result of:

A credit customer paying by cheque
Raw materials being purchased on credit
Non-current assets being purchased on credit
Personal petrol being paid for out of the business's petty cash

16. A business can make a profit and yet have a lower bank balance. Which of the following might cause this to happen?

Sale of non-current assets at loss
Charging of depreciation in the income statement
Lengthening of the period of credit given to customers
Lengthening of the period on credit taken from suppliers

17. The purpose of a financial statement that lists an entity's total capital/liabilities is to show:

The financial performance of the entity over a period of time
The amount of the entity could be sold for in liquidation
The amount of the entity could be sold as a going concern
The financial position of the entity at a particular moment in time

18. A sole trader is $5,000 overdrawn at the bank and receives $1,000 from a credit customer in respect of its account. Which elements of the accounting equation will change due to this transaction?

Assets and liabilities only
Liabilities only
Assets only
Assets, liabilities, and capital

19. A sole trader purchases goods on credit. Which elements of the accounting equation will change due to the transaction?

Assets and liabilities
Assets and capital
Capital and liabilities
Assets only

20. A sole trader borrows $10,000 from the bank. Which elements of the accounting equation will change due to this transaction?

Assets and liabilities
Assets and capital
Capital and liabilities
Assets only

21. A sole trader sells goods for cash for $500 which had cost of $300. Which elements of the accounting equation will change due to this transaction?

Assets and liabilities
Assets and capital
Capital and liabilities
Assets only

22. A sole trader increases the business's number of motor vehicles by adding his own car to its fleet. Which elements of the accounting equation will change due to this transaction?