The accounting equation: Practice Questions

• a.Purchasing inventory on credit.
• b.Receiving a cheque from a trade receivable.
• c.Selling goods on credit at a profit.
• d.Paying a bank loan by cheque.

• a.Owner introduces a personal vehicle and the business purchases inventory on credit
• b.Owner introduces a personal vehicle and the business makes a cash sale of goods at a profit
• c.The business purchases equipment on credit and the owner withdraws cash for personal use
• d.A credit customer pays their account by cheque and the business makes a cash sale at cost price

• a.Assets increase and assets decrease.
• b.Liabilities increase and owner's equity decreases.
• c.Assets increase and liabilities increase.
• d.Assets increase and owner's equity increases.

• a.\( \text{Assets} + \text{Liabilities} = \text{Owner's Equity} \)
• b.\( \text{Liabilities} - \text{Assets} = \text{Owner's Equity} \)
• c.\( \text{Assets} - \text{Owner's Equity} = \text{Liabilities} \)
• d.\( \text{Owner's Equity} - \text{Liabilities} = \text{Assets} \)

• a.Assets decrease and liabilities increase.
• b.Assets increase and owner's equity decreases.
• c.Assets decrease and owner's equity decreases.
• d.Assets increase and owner's equity remains unchanged.

Write your answer out first, then check it against the worked solution.