CXC Principles of Accounts: Financial Statements 2

Question 1

The Balance Sheet shows:

Accepted Answer

Assets, liabilities, and owner's equity at a specific date

Answer

The Balance Sheet is a snapshot of a business's financial position — showing its assets, liabilities, and owner's equity at a specific point in time.

Question 2

The fundamental accounting equation is:

Accepted Answer

Assets = Liabilities + Owner's Equity

Answer

The accounting equation Assets = Liabilities + Owner's Equity must always balance, forming the basis of double-entry bookkeeping.

Question 3

Which of the following is a current asset?

Accepted Answer

Accounts receivable

Answer

Accounts receivable is a current asset because it is expected to be converted into cash within one year.

Question 4

Which of the following is a non-current (fixed) asset?

Accepted Answer

Motor vehicles

Answer

Motor vehicles are non-current (fixed) assets because they are long-term assets used in business operations for more than one accounting period.

Question 5

Owner's equity on the Balance Sheet increases when:

Accepted Answer

The business earns a net profit

Answer

Net profit increases retained earnings, which is a component of owner's equity, thereby increasing total equity on the Balance Sheet.

CXC - Caribbean Examinations Council Practice Test