Accounting Equation Quiz 2

Can you answer these 5 questions on the Accounting Equation?

1. Purchasing Inventory 'on credit' increases Assets and Liabilities. True or False?
2. Paying dividends to shareholders decreases Assets and Equity, if they weren't previously declared. True or False?
3. Issuing Common Stock increases Liabilities and Equity. True or False?
4. Prepaying Insurance increases one Asset account and decreases another Asset. True or False?
5. Writing off an uncollectible receivable decreases Assets and Liabilities, if no provision was made. True or False?

Let me know how you scored in comments.

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[justind]

4/5 havent studied enough for bad debts!

[kishnura]

Dr Bad debts -PL
Cr Un collectables AR - BS

[Rd_camllia-wntp]

3/4 💪
(haven’t learned uncollectible receivables so that one won’t count)

[ganeshgadekar]

Can you make video on Realised and Unrealised FX Gain and loss, where it is finally moves, like OCI etc..

[Nilxyz]

What is common stock? Can any one explain.

[whatseh]

If there was a provision for number 5, how will the entry be?

[zumiljoshi]

3/5, This one was little bit tough for me.

[vedprakashsingh]

can you explain me that in 5th why it is false?

[umatyagi]

I didnt understand the last one sir, uncollectible receivables are bad debts right? So how are they related to assets and liabilities?

[AccountingStuff]

How many did you get right?

⬇️ ANSWERS ⬇️

1. TRUE - Purchasing inventory ‘on credit’ increases Assets (Inventory) and Liabilities (Accounts Payable).
2. TRUE - Paying dividends decreases Assets (Cash) and Equity (Retained Earnings). Liabilities are not affected by the payment of dividends unless the dividends were declared but not yet paid.
3. FALSE - Issuing common stock increases Assets (Cash) and Equity (Common Stock).
4. TRUE - Prepaying insurance decreases Cash (an Asset) and increases Prepaid Expenses (another Asset), with no effect on Liabilities or Equity.
5. FALSE - Writing off an uncollectible account decreases Assets (Accounts Receivable) and Equity (Bad Debt Expense decreases Retained Earnings).

For more practice questions like this head to: accountingstuff.com

[leechdestroyerbg]

3/5 cause I didn't learn some of these use 😂