Tuesday, March 16, 2021 1:17 PM
PRACTICE QUESTIONS
1) Which of the following statements is incorrect?
a) Assets – Capital = Liabilities
b) Liabilities + Capital = Assets
c) Liabilities + Assets = Capital
d) Assets – Liabilities = Capital
2) Which of the following is equal to net assets?
a) Assets – capital
b) Capital + profit – drawings
c) Total liabilities – current assets
d) Total liabilities – current liabilities
3) A business has capital of $10,000. Which of the following asset and liability figures could appear in this
business’s statement of financial position?
Assets ($) Liabilities ($)
a) 6,000 16,000
b) 6,000 4,000
c) 10,000 10,000
d) 14,000 4,000
4) Which of the following is a long term liability?
a) Loan (payable in three years)
b) Creditors
c) Value added tax (sales tax) payable
d) Bank overdraft
5) Which of the following is incorrect?
Assets Liabilities Capital
a) 7,850 1,250 6,600
b) 8,200 2,800 5,400
c) 9,550 1,150 8,200
d) 6,540 1,120 5,420
6) Stock worth $5,000 is sold for $8,000. The complete effect of this transaction on the accounting equation
will be?
a) Profit will be increased by $3,000
b) Inventory will decrease by $5,000, cash will increase by $8,000 & profit will increase by $3,000
c) Inventory will decrease by $5,000, & profit will increase by $8,000
d) Cash will increase by $8,000 & profit will increase by $3,000
7) Goods which originally cost $400 were sold for $550. In the accounting equation Net Assets will;
a) Rise by $550
b) Rise by $150
c) Fall by $550
d) Fall by $150
B8 Page 1
, 8) Given opening capital of $16,500, closing capital $11,350, and drawings were $3,300, then
a) Loss for the year was $1,850
b) Profit for the year was $1,850
c) Loss for the year was $8,450
d) Profit for the year was $8,450
9) Which of the following statements is correct?
Transactions Effect
a) We paid a payable by cheque - Bank - Creditors
b) A receivable paid us $ 90 in cash + Cash + Debtors
c) J Hall lends us Rs 900 by cheque + Bank - Loan from Hall
d) Bought goods on credit + Stock + Capital
10) Which of the following best describe the meaning of “Purchases:
a) Items bought
b) Goods bought on credit
c) Goods bought for resale
d) Goods bought for cash
11) The capital of a sole trader would change as a result of which of the following?
a) A creditor being paid his account by cheque
b) Raw materials being purchased on credit
c) Fixed assets being purchased on credit
d) Wages being paid in cash
12) Given the following, what is amount of capital?
Assets: Premises $ 20,000, Inventory $ 8,500, Cash $ 100
Liabilities: Payable $ 3,000, Loan from Adam $ 4,000
a) 21,100
b) 21,600
c) 32,400
d) None of them
13) Zain has just started up a business. He introduces $10,000 of his savings, equipment worth $2,500 and
obtained a bank loan of $1,000. What is the balance of Zain’s capital?
a) $12,500
b) $13,500
c) $11,000
d) $10,000
14) A business receives an accountant’s bill of $ 500, which of the following statements correctly shows the
effect upon the accounting equation of the business, assuming the bill is unpaid.
a) Assets decrease, Liabilities increase
b) Capital decrease, Liabilities increase
c) Capital increase, Liabilities decrease
d) Assets decrease, Capital decrease
B8 Page 2
PRACTICE QUESTIONS
1) Which of the following statements is incorrect?
a) Assets – Capital = Liabilities
b) Liabilities + Capital = Assets
c) Liabilities + Assets = Capital
d) Assets – Liabilities = Capital
2) Which of the following is equal to net assets?
a) Assets – capital
b) Capital + profit – drawings
c) Total liabilities – current assets
d) Total liabilities – current liabilities
3) A business has capital of $10,000. Which of the following asset and liability figures could appear in this
business’s statement of financial position?
Assets ($) Liabilities ($)
a) 6,000 16,000
b) 6,000 4,000
c) 10,000 10,000
d) 14,000 4,000
4) Which of the following is a long term liability?
a) Loan (payable in three years)
b) Creditors
c) Value added tax (sales tax) payable
d) Bank overdraft
5) Which of the following is incorrect?
Assets Liabilities Capital
a) 7,850 1,250 6,600
b) 8,200 2,800 5,400
c) 9,550 1,150 8,200
d) 6,540 1,120 5,420
6) Stock worth $5,000 is sold for $8,000. The complete effect of this transaction on the accounting equation
will be?
a) Profit will be increased by $3,000
b) Inventory will decrease by $5,000, cash will increase by $8,000 & profit will increase by $3,000
c) Inventory will decrease by $5,000, & profit will increase by $8,000
d) Cash will increase by $8,000 & profit will increase by $3,000
7) Goods which originally cost $400 were sold for $550. In the accounting equation Net Assets will;
a) Rise by $550
b) Rise by $150
c) Fall by $550
d) Fall by $150
B8 Page 1
, 8) Given opening capital of $16,500, closing capital $11,350, and drawings were $3,300, then
a) Loss for the year was $1,850
b) Profit for the year was $1,850
c) Loss for the year was $8,450
d) Profit for the year was $8,450
9) Which of the following statements is correct?
Transactions Effect
a) We paid a payable by cheque - Bank - Creditors
b) A receivable paid us $ 90 in cash + Cash + Debtors
c) J Hall lends us Rs 900 by cheque + Bank - Loan from Hall
d) Bought goods on credit + Stock + Capital
10) Which of the following best describe the meaning of “Purchases:
a) Items bought
b) Goods bought on credit
c) Goods bought for resale
d) Goods bought for cash
11) The capital of a sole trader would change as a result of which of the following?
a) A creditor being paid his account by cheque
b) Raw materials being purchased on credit
c) Fixed assets being purchased on credit
d) Wages being paid in cash
12) Given the following, what is amount of capital?
Assets: Premises $ 20,000, Inventory $ 8,500, Cash $ 100
Liabilities: Payable $ 3,000, Loan from Adam $ 4,000
a) 21,100
b) 21,600
c) 32,400
d) None of them
13) Zain has just started up a business. He introduces $10,000 of his savings, equipment worth $2,500 and
obtained a bank loan of $1,000. What is the balance of Zain’s capital?
a) $12,500
b) $13,500
c) $11,000
d) $10,000
14) A business receives an accountant’s bill of $ 500, which of the following statements correctly shows the
effect upon the accounting equation of the business, assuming the bill is unpaid.
a) Assets decrease, Liabilities increase
b) Capital decrease, Liabilities increase
c) Capital increase, Liabilities decrease
d) Assets decrease, Capital decrease
B8 Page 2
