eSkill Accounting and Bookkeeping Basics

Question 1

A business has total assets of $50,000 and total liabilities of $30,000. What is the owner's equity?

Accepted Answer

$20,000

Answer

Equity = Assets − Liabilities = $50,000 − $30,000 = $20,000.

Question 2

A company has revenue of $85,000 and total expenses of $62,000 for the year. What is its net income?

Accepted Answer

$23,000

Answer

Net income is revenue minus expenses: $85,000 − $62,000 = $23,000.

Question 3

What does "accounts receivable" represent?

Accepted Answer

Money customers owe the company for goods or services already delivered

Answer

Accounts receivable is an asset that records amounts customers still owe the company for credit sales.

Question 4

Which formula represents the basic accounting equation?

Accepted Answer

Assets = Liabilities + Equity

Answer

The accounting equation says that everything a business owns (assets) is financed by what it owes (liabilities) plus the owners' stake (equity).

Question 5

In double-entry bookkeeping, which type of account is increased by a debit?

Accepted Answer

Cash (an asset)

Answer

Asset and expense accounts increase with debits. Liability, equity and revenue accounts increase with credits.

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