Tag: usefulness of an accounting equation

Questions Related to usefulness of an accounting equation

Which of the following accounting equation is correct?

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Assets + Capital = Liabilities

  2. Assets + Liabilities = Capital

  3. Assets + Liabilities + Capital = Nil

  4. None of the above

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Correct Option: D

Which financial statement represents the accounting equation, Assets=Liabilities+Owner's equity.

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Income statement

  2. Statement of cash flows

  3. Balance sheet

  4. None of the above

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Correct Option: C

Which of the financial statement represents the accounting equation?

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Manufacturing account

  2. Cash flow statement

  3. Balance sheet

  4. Profit and loss account

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Correct Option: C

Which of the following, equations properly represents a derivation of the fundamental accounting equation?
(a) Assets + Liabilities = Owner Equity
(b) Asset = Owner Equity
(c) Cash = Assets
(d) Assets - Liabilities = Owner Equity

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Only (a)

  2. Both (a) & (b)

  3. All (a), (b), (c), (d)

  4. None of these

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Correct Option: D
Explanation:

Accounting is based on dual aspect which signifies that for every debit, there will be a credit and vice versa.

Accounting Equation may be defined as:

Owners Equity + Liabilities = Total Assets
i.e.
Capital + Reserves & surplus + Liabilities = Fixed Assets + Current Assets.

American accountants have derived the rules of debit and credit through ________.

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Accounting equation

  2. Convention of conservation

  3. Accounting conventions

  4. Consistency

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Correct Option: A
Explanation:

Accounting equation is the foundation of double entry system of book-keeping. It displays that all the assets are either financed by borrowing money or paying from the shareholder's equity. The balance sheet being the complex version shows explain the equation very clearly and it shows that total assets is equal to total liability plus shareholder's equity. Debit and credit are similar to accounting equation. Hence, american accountants have derived the rules of debit and credit through accounting equation.

According to accounting equation concept, every business transaction recorded in accounts has two aspects. Which are these two aspects?

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Capital and liabilities

  2. Giving of benefit and receiving of benefit

  3. Liabilities and assets

  4. Giving of profit and receiving of profit

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Correct Option: B
Explanation:

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

Hence, the two aspects are giving and receiving of benefits.

Accounting equation is as follows __________________.

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. $Capital + Liabilities$

  2. $Assets = Equities$

  3. $Capital = Liabilities$

  4. $Assets = Liabilities$

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Correct Option: B
Explanation:

Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.

The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :

Assets = Liabilities + Capital

In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity), which together are called as Equities.

Hence, option (B) is correct.

Which of the following is an accounting equation?

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Assets = Capital/Liabilities

  2. Capital = Assets - Liabilities

  3. Assets = Liabilities - Capital

  4. Liabilities = Assets + Capital

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Correct Option: B
Explanation:

Accounting equation may defined as:

Capital+Liabilities= Total assets

This can further be presented as:
Capital=Total assets-Liabilities

From the following which is according to Dual aspects.

elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

  1. Capital = Liabilities + Assets

  2. Assets = Liabilities + Capital

  3. Assets = Liabilities - Capital

  4. Liabilities = Assets + Capital

Show answer
Correct Option: B
Explanation:

As per dual concept, every transaction has two effects. One effect must be debit and the other must be credit. Dual aspect concept has been made on the basis of accounting equation. In accounting equation, there are two sides. One side represents total assets and other side represents total liabilities. The total liabilities include capital and external liabilities. Assets always equal to liabilities. 


The accounting equation is as follows:
Capital + Liabilities = Assets.