Question

#1 and #2

1. The accounting equation may be expressed as: A. Assets + Stockholders= Equity = Liabilities B. Assets = Liabilities + Stockholders= Equity C. Assets = Stockholders= Equity - Liabilities D. Assets + Liabilities - Stockholders= Equity 2. Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events are known as: A. Assets B.Liabilities C.Stockholder's Equity D. Revenues

Answer 1

Q1. Option(B). Assets= Liabilities + Stockholders Equity is the correct answer.

Accounting Equation:

• · Assets = Liabilities + Stockholders’ Equity.

*Assets must equal the sum of liabilities and owner’s equity.

*Liabilities appear before owner’s equity in the basic accounting equation because they are paid first if a business is liquidated.

Account Type	Normal balance	To be increased	To be decreased
Assets	Debit	Debit	Credit
Liabilities	Credit	Credit	Debit
Equity	Credit	Credit	Debit
Revenue	Credit	Credit	Debit
Expenses	Debit	Debit	Credit

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Q2. Oprion(A). Assets is the correct answer.

Option(A)-*Assets- Probable future economic benefits obtained or controlled by an entity as a result of past transcation events. Example: Cash, Inventory, Accounts Receivable.- Correct;

Option(B). Liabilities- It claims against assets—that is, existing debts and obligations. Businesses of all sizes usually borrow money and purchase merchandise on credit. Example: Accounts Payable. - Incorrect;

Option(C). Stockholders Equity- It is equal to total assets minus total liabilities.- Incorrect;

Option(D). Revenue- Revenues are the gross increase in owner’s equity resulting from business activities entered into for the purpose of earning income. Example: Service Revenue - Incorrect.

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