Accounting Equation – MCQs with Answers

Accounting Equation is a formula in which a firm’s assets must be equal to the sum of its liabilities and the owners’ equity. Different expert define it differently. we define Accounting equation properly as follows:
” The expression of the equality of an entity’s assets with the claims against them is referred to as the Accounting Equation. The financial position of a business can be checked in a glance.”

Formula of Accounting Equation:

Assets =  Liabilities + Owner’s Equity

Accounting Equation – MCQs with Answers

 1.  Accounting principles are generally based on:
       A) Practicability                                                          (B) Subjectivity
      C) Conveniences in recordings                                      (D) All of the above
2. Realization concepts implies:
A) The receipts of the order                                          (B) The delivery of the goods
C) The receipt of cash from customers            (D) None of these
3.  Accounting principles are generally based on:
A) Theory                                                                           (B) Practicability
C) Subjectivity                                                                   (D) None of these
 4. Accounting principles can be classified into:
A) Two kinds                                                                      (B) Three kinds
C) Four kinds                                                                     (D) Five kinds
5.  A person or enterprise to whom a debt is owed:
A) Accounts receivable                                                          (B) Accounts Payable
C) Note Payable                                                                       (D) Note receivable
6. A business event which can be measured in terms of money and recorded in the books of accounts is called:
A) Assets (B) Equities
C) Owners equity (D) Transaction
7. The expression of the equality of an entity’s assets with the claims against them is referred to as the:
A) Accounting equations (B) Accounting transaction
C) Bookkeeping (D) None of them
8. The system of recording transactions based on dual aspect concept is called:
A) Double account system (B) Double entry system
C) Single entry system (D) Modern entry system
 9. Universally accepted customs, rules or traditions are called:
A) Accounting Principles (B) Accounting rules
C) Accounting traditions (D) Accounting conventions
10. According to the money measurement concept, the following would be recorded in the books of accounts of the business:
A) Health of director of the company (B) Quality of company’s goods
C) Value of plant & machinery (D) All of the above
11. According to this concept, it is assumed that business will exist for indefinite time period:
A) Realization concepts (B) Going Concern Concept
C) Business entity concept (D) None of them
12. According to this concept, business and owner both have separate identity:
A) Realization concepts (B) Going Concern Concept
C) Business entity concept (D) Cost Concept
13. According to this concept, expenses are matched with revenue to study the business result:
 A) Matching concepts (B) Dual Aspect Concept
C) Business entity concept (D) Cost Concept
14. According to this convention, accounting practice should remain unchanged from one period to another:
A) Conservatism (B) Materiality
C) Full Disclosure (D Consistency
15. According to this concept, “Accounting records only those transactions which can be expressed in terms of money”:
A) Matching concept (B) Dual Aspect Concept
C) Business entity concept (D Money Measurement Concept
16. Assets minus liabilities is:
A) Profit (B) Working Capital
C) Capital (D Long-term liabilities
17. The excess of assets over liabilities is:
A) Capital (B) Profit
C) Equities (D Drawings
18. The accounting equation is:
A) Liabilities = Assets + Capital (B) Assets = Liabilities + Capital
C) Liabilities = Assets – Capital (D None of these
19. If assets are Rs.8,000 and capital is Rs.6,000, liabilities will be:
A) 8,000 (B) Rs.2,000
C) 14,000 (D None of these
20. Assets must equal to:
A) Capital (B) Liabilities
C) Liabilities + Capital (D Liabilities + Bank Loan