Accounting Basics

What is the accounting equation?

1. Assets = Liabilities + Capital
2. Capital = Assets + Liabilities
3. Assets = Capital − Liabilities
4. Liabilities = Assets + Capital

A business has assets of ₦500,000 and liabilities of ₦200,000. What is its capital?

1. ₦300,000
2. ₦500,000
3. ₦700,000
4. ₦200,000

An asset is:

1. A resource controlled by the business that is expected to bring future benefits
2. The owner's personal property
3. An expense
4. Money the business owes

A liability is:

1. Income from sales
2. The owner's investment
3. Something the business owns
4. An amount the business owes to others

Capital represents:

1. The owner's investment in the business
2. Cash in the bank only
3. Money owed to suppliers
4. Expenses

Drawings are:

1. Expenses of the business
2. Cash or goods taken out of the business by the owner for personal use
3. Loans from the bank
4. Pictures in the office

Revenue is:

1. Drawings
2. Income earned from the business's main activities, such as sales
3. Capital introduced
4. Money borrowed