Grade 11 Accounting Review
Accounting Review 1-3
Balance Sheet Review Questions
1. Asset: items of value owned by a business or person
2. Liability: the debts of a business or person
3. Owner’s Equity: the owners claim against the assets of a business
4. A debtor is a person who owes money to a business.
5. Another name for an account payable is a creditor.
6. If the assets of a business increase $20 000, and the liabilities of a business decrease $5 000, what’s happened to the equity? It increased
A = L + OE
Up down up
7. Give 2 forms of the fundamental accounting equation.
Assets= Liability + Owner’s Equity
Liability= Assets – Owner’s Equity
Case 1:
Raj’s Accountant will explain to him that you cannot take money out of your owner’s equity because doing so would be impossible since he would be taking the money out of his assets accounts.
Equity isn’t money
Only worth money if all assets are sold off
Don’t assume things will be sold for what they were originally worth
Case 2:
No S. Magbool is in any financial danger since his assets are greater than his liabilities.
Doesn’t have enough money to pay off his accounts payable because he has only $6000 cash and $14 000 accounts receivable.
Asset liquidity is poor. Cash on hand is low compared to other assets.
Liabilities are higher than capital.
Case 3:
Cash is only $5 000
He is not collecting accounts receivable
Accounts payable is really high
His equity is lower than his liabilities
He doesn’t have very many/much liquid assets
Balance Sheet Review Questions
1. Asset: items of value owned by a business or person
2. Liability: the debts of a business or person
3. Owner’s Equity: the owners claim against the assets of a business
4. A debtor is a person who owes money to a business.
5. Another name for an account payable is a creditor.
6. If the assets of a business increase $20 000, and the liabilities of a business decrease $5 000, what’s happened to the equity? It increased
A = L + OE
Up down up
7. Give 2 forms of the fundamental accounting equation.
Assets= Liability + Owner’s Equity
Liability= Assets – Owner’s Equity
Case 1:
Raj’s Accountant will explain to him that you cannot take money out of your owner’s equity because doing so would be impossible since he would be taking the money out of his assets accounts.
Equity isn’t money
Only worth money if all assets are sold off
Don’t assume things will be sold for what they were originally worth
Case 2:
No S. Magbool is in any financial danger since his assets are greater than his liabilities.
Doesn’t have enough money to pay off his accounts payable because he has only $6000 cash and $14 000 accounts receivable.
Asset liquidity is poor. Cash on hand is low compared to other assets.
Liabilities are higher than capital.
Case 3:
Cash is only $5 000
He is not collecting accounts receivable
Accounts payable is really high
His equity is lower than his liabilities
He doesn’t have very many/much liquid assets