The Accounting Equation
Quick multiple-choice quiz on the core accounting equation and its implications for business records.
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Quiz Questions & Answers
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Question 1: What is the fundamental accounting equation that underpins double-entry bookkeeping?
Revenue = Assets + Liabilities
Assets = Liabilities + Equity
Expenses = Assets + Equity
Question 2: If a company takes a bank loan to buy equipment, how does the accounting equation change immediately after the transaction?
Assets increase and liabilities increase by the same amount
Liabilities decrease and equity increases
Assets increase and equity increases by the same amount
Question 3: Which mindset best prevents balance sheet errors when recording transactions?
Focus only on cash changes and ignore noncash items
Always check that every debit has a matching credit
Record income first, then reconcile assets later