Financial Accounting

Accounting Equation MCQs with Answers

Accounting Equation :

It is very important and beneficial tool for management. we can define it in these words “The expression of the equality of an entity’s Assets with the claim against them is referred to as the Accounting Equation. The financial position of a business can be checked in a glance.

Following are the Multiple Choice Questions (MCQs) of Accounting Equation

1) Amount invested by the proprietor in business would:

     (A)  Increase Assets and reduce liabilities.

     (B)  Reduce owner equity and increase assets

     (C)   Increase Assets and owner equity

     (D)  Increase both Assets and liabilities


Option C

2) Capital + Liabilities – Assets are equal to :

     (A)  0

     (B)  1

     (C)   2

     (D)  3


Option A


3) Assets – Liabilities is equal to:

    (A)  Liabilities

    (B)  Capital

    (C)   Profit

    (D)  Revenue


Option B

4) Assets-Capital is equal to:

      (A)  Assets

      (B)  Liabilities

      (C)  Expenses

      (D)  Capital


Option B

5) Amount or things drawn from business by the owner for personal consumption would:

       (A)  Reduce Assets and increase liabilities

       (B)  Reduce owner equity as well as liabilities

       (C)  Reduce both Assets and owner equity

       (D)  Increase Assets and liabilities


Option C

6) Assets and owner’s equity would be increased by:

       (A)  Earned profit and retained in business

       (B)  Purchase of Assets on credit

       (C)  Expenses paid

       (D)  Owner’s drawings


Option A

7) Purchase of Assets on credit will effect as:

      (A)  Increase Assets and owner’s equity

      (B)  Increase expenses and reduce Assets

      (C)   Increase Assets and Liabilities

      (D)  Decrease owner’s equity and increase Assets


Option C

8) If any old asset is sold at a price greater than purchase value would:

     (A)  Leave owner’s equity unaffected

     (B)  Increase owner equity to the extent of Profit

     (C)  Decrease owner’s equity by the amount of sale

     (D)  Decrease owner’s equity to the extent of above the purchase value


Option B


9) Collected an amount due from customer would:

       (A)  Increase one asset and reduced an other asset.

       (B)  Increase both assets

       (C)  Increase assets and reduce owner’s equity

       (D)  Increase cash and increase liabilities


Option A

10) If the assets are Rs.50000 and Capital Rs. 20000 its liabilities would be:

       (A)  70,000

       (B)  50,000

       (C)  30,000

       (D)  40,000


Option C

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