ACCOUNTING STARTER PACK

1. Assets – resources owned by the business; what the business OWNS

Example: Cash, Bank, Inventory, Equipment, Land, Premises, Trade Receivables

Non Current Assets

Non Currents assets are Long term assets. These assets bought to use in
business not for resale.

Current Assets
Currents assets are short term assets. These are the assets which are either in
the form of cash or which can be turned into cash relatively easily.

2. Liabilities – resources owed by the business; what the business OWES to

other people Example: Trade Payables, Bank Overdraft, Loan

Non Current Liabilities

Non Currents liabilities are Long term liabilities which will be repaid after one
year.

Current Liabilities
Currents liabilities are short term liabilities which will be paid by one year.

3. Owners Equity – resourced owed by the business; what the business

OWES to the owner of that business Note: Capital,Drawings, Profit.

Assets Liabilities Income Expense

Current assets Current Liabilities Sales (Revenue) Rent expense
Petty Cash Trade Payable Commission received Wages
Cash Other Payables Interest Received Commission expense
Bank Accrued Expenses Rent Received Interest expense
Trade Receivables Prepaid income Discount received Bad Debts expense
Other receivables Bank overdraft Salaries
Prepaid expense Loan Office expenses
Accrued Income Sundry expenses
Insurance expenses
Fixed/Non-current Non-current Motor vehicles
Assets Liabilities expense
Premises Long term loan Carriage inwards
Equipment Carriage outwards
Office equipment Discount allowed
Machinery General expense
Motor Vehicle Purchases

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Question 1

List the groups of account.

Group of
Account

Question 2

Match a suitable definition for the account group.

Things that is valuable or useful own Liability

by company
The amount of money that a person or Owner Equity
company owes
The money that company spend on Assets
The money that a company receives Expenses
from its activities
The investment by owner in business Revenue

Question 3

Fill the blanks with group of account.

____________: what the company owns of value (e.g. cash, equipment)

____________: what the company owes to other (e.g. loans)

____________: that portion of the total assets that the owner or stockholder fully
own

____________: money the company earns from sales, and interest and
dividends on marketable securities

____________: money the company spends to produce goods or services (e.g.

utilities, office supplies)

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Question 4

Here is a list of assets and liabilities and references to capital. Identify which
items are assets, liabilities, capital.

a) Vehicle Asset b) Inventory

c) Shop fittings d) Trade receivables

e) Cash at bank f) Bank overdraft

g) Bank loan h) Trade payables

i) Owner’s investment j) Machinery

in the business

k) Cash in hand l) Loan from a friend

m) Equipment n) Owner’s stake

business

o) Amounts owing to p) Amounts owed by

supplier customer

q) Furniture r) Cash at bank

s) Land t) Fittings

Question 5

Write a suitable group of account for the accounts below. Write

Assets, Liabilities, Owner Equity, Expenses or Revenue.

No Accounts Group
1 Premises
2 Purchases
3 Sales
4 Capital
5 Salary
Trade payable/ Trade
6 payable
7 Mortgage
8 Cash
9 Bank

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10 Loan
11 Stationery
12 Trade receivables / Trade receivable
13 Machine
14 Furniture
15 Fixtures & fittings
16 Vehicle
17 Utility bills
18 Interest received
19 Commission received
20 Wages
21 Buildings
22 Insurance
23 Rent received
24 Postage
25 Carriage inwards
26 Land
27 Carriage outwards
28 Repair and maintenances expenses
29 Office equipment
30 Overdraft bank
31 Rent expenses
32 Drawings
33 Investment
34 Fixed deposits
35 Interest on investment
36 Interest on loan
37 Service revenue
38 Delivery van
39 Commission paid
40 Bank

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Question 6
For each of the accounts below, indicate whether it is an asset, liability, expense,
revenue or owner`s equity type of account. There is only one correct answer in each
case. Mark your choice with a tick.

Account Asset Liability Expense Revenue Equity

    
Insurance
    
Bank Charges
    
Bank Loan
    
Telephones bills
    
Cleaning
    
Trade payable
    
Donations Received
    
Trade receivable
    
Depreciation
    
Electricity and Gas
    
Fixtures and Fittings at Cost
    
Fundraising Income
    
Interest Earned
    
Interest Paid
    
Motor Vehicles at Cost
    
Postage
    
Premises at Cost
    
Printing
    
Bad Debts
    
Purchases
    
Rent Received
    
Repair and Renewals
    
Salaries
    
Sales
    
Sponsorship Receipts
    
Stationery
    
Stock/ Inventory
    
Commision Received
Bank A/c     

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Question 7

a) Which of the items in the following list are liabilities and which of them are
assets?
(a) Loan from A. Sangster (d) Bank overdraft
(b) We owe a supplier (e) Inventory of goods held for sale
(c) Equipment (f ) Loan to F. Wood

b) Classify the following items into liabilities and assets:

(a) Motor vehicles (f) Owing to bank

(b) Premises (g) Cash in hand
(c) Accounts payable (h) Loan from D. Jones
(d) Inventory (i) Machinery
(e) Accounts receivable

c) State which of the following are wrongly classified:

Assets Liabilities
Loan to C. Smith Delivery van
Mortgage on office building Accounts payable
Accounts receivable Office supplies
Warehouse Computer
Our business website Cash in hand

d) Which of the following are shown under the wrong headings?

Assets Liabilities
Cash at bank Loan from J. Graham
Fixtures Machinery
Accounts payable Motor vehicles
Building
Inventory

e) A business provided the following information.

Property 125,000 a) Calculate the value of the assets
Inventory 32,500
Trade payables 8,430 b) Calculate the value of the liabilities
Bank overdraft 2,200
Cash 125 c) Use the accounting equation to
Machinery 12,600 calculate the owner`s equity
Delivery van 5,800

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 1. State the meaning of
(i) assets .................................................................................................................................
.....................................................................................................................................
(ii) liabilities .............................................................................................................................
...................................................................................................................................
(iii) capital .................................................................................................................................

......................................................................................................................................
12/O/N/18

2. State the meaning of owner’s equity.

.......................................................................................................................................

.......................................................................................................................................
11/O/N/17

3. Complete the table below using a tick (✓) to indicate if each item is an asset or a
liability. The first has been completed as an example.

Asset Liability
Inventory
Motor vehicle
Trade payables
Trade receivables
Bank loan
Cash
12/M/J/14
4. Complete the following table indicating with a tick (✓) whether each item is an asset,
liability, income or expense.

asset liability income expense

bank loan
insurance
equipment
depreciation charge

12/M/J/17

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 1. Assets (what it owns)
2. Liabilities (what it owes to other)
3. Owner's Equity (the difference between assets and liabilities) – Capital

The accounting equation (or basic accounting equation) offer us a simple way to
understand how these three amounts relate to each other. The accounting
equation for a sole proprietorship is:

ASSET LIABILITIES

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Fill the blanks

Question 1 Total Assets Total liabilities Capital

$ $ $
Business A 80 000 20 000 60 000
Business B 42 000 11 000 31 000
Business C 57 000 33 000 24 000
Business D 650 000 160 000 490 000
Business E 190 000 20 000 170 000
Business F 740 000 558 000 82 000

Question 2 Total Assets Total liabilities Capital

$ $ $
Business A 220 000 30 000 190 000
Business B 912 000 86 000 826 000
Business C 325 000 52 000 273 000
Business D 560 000 77 000 483 000
Business E 917 000 52 000 865 000
Business F 262 000 42 000 220 000

Total Assets Capital Total Liabilities

Question 3
A = C + L
$ $ $
1 Owner withdrew cheque $4000
for private use 36 000 26 000 10 000
2 Purchased new vehicle $16 000 52 000 26 000 26 000
on credit (+16 000) (+16 000)
3 Repaid $2000 of a loan from the 50 000 26 000 24 000
bank. The funds were taken from (- 2 000) (-2 000)
the business’s bank account
50 000
4 Purchased some machinery for (+7 000) 26 000 24 000
$7000 and paid by cheque
5 Paid Payable $5000 by cheque 45 000 26 000 19 000
6 Sold some equipment worth 45 000 26 000 19 000
(-3 000)
$3000 and received a cheque for (+3 000)
this amount

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 Question 4

Complete the gaps in the following table:

Assets Liabilities Capital

a) 20,000 3,400 ?
b) 23,000 8,800 ?
c) 19,200 ? 3,200
d) 8,100 ? 6,500
e) ? 7,900 17,300
f) ? 18,500 51,900

Assets Liabilities Capital

a) 55,000 16,900 ?
b) ? 17,200 34,400
c) 36,100 ? 28,500
d) 119,500 15,400 ?
e) 88,000 ? 62,000
f) ? 49,000 110,000

Answer all the questions

1) The Basic accounting equation is

A) Asset=Expense +Income
B) Assets= Cash + Capital
C) Assets= Capital + Liabilities D)
Assets= Expenses + Capital

2) Find out the value of assets if: Liabilities$5000 and Capital$1000

A) $ 4000
B) $ 6000
C) $ 7000
D)$ 3000

3) Calculate the amount of cash if: Total assets$10,000 Total liabilities$10,000 Total
Capital$5000
A) $ 6000
B) $ 10,000
C) $ 5000
D) $ 1000

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4) Capital increases if ______ increases
A) Expenses
B) Drawings
C) Interest on Drawings
D) Revenue

5) Capital of a business decreases if there is an increase in

A) Drawings
B) Income
C) Gains
D) Fresh capital

6) If the total liabilities of a business decrease by $ 5000 what will be the effect on
total asset? (assuming the amount of capital remain same)
A) Remain constant
B) Decrease by $5000
C) Increase by $5000
D) Increase by $10,000

7) If the business's owner withdraws cash for his/her private use what will be the
effect on capital?
A) Increase in capital
B) Remain the same
C) Decrease in capital
D) No effect on capital

8) Payment of expenses will ______ the assets

A) Increase
B) Reduce
C) apportion
D) Overstate

9) What is the accounting equation?

A) assets = capital – liabilities
B) capital = assets + liabilities
C) capital = assets – liabilities
D) liabilities = capital + assets

10) State the accounting equation.

..........................................................................................................................................

11/M/J/17

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Exercise 1

1st Transaction Mr. Aamir started a business with 250000 cash

2nd Transaction He Purchased a building worth of 100000. He paid 50000 cash

3rd Transaction He gives services to a customer. The customer paid 25000 cash
and balance 20000 will pay later.

4th Transaction He Purchased Machine on Cash 75000

5th Transaction. He paid 50000 to Trade payable

Exercise 2
1. Mr. Waqar started a business with cash 500000

2. He purchased a building worth of 100000 on cash

3. He drawn 30000 for his personal use

4. He purchased a machine on credit worth of 100000

5. He paid 75000 to Trade payable

Exercise 3
Complete the table to state the effect of each of the following transactions made by Chung in April
2017. Where there is no effect write ‘No effect’. The first transaction has been completed as
an example.
Transaction Assets Liabilities Capital
$ $ $
Purchased goods on credit at a +500 +500 No effect
cost of $500
Sold goods on credit for $700 (cost
$400)
Paid Yang, a credit supplier, $2050
in full settlement of a debt of $2200
Purchased goods, $130, and paid
in cash
7110_s17_qp

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Question:
Affleck`s Repair shop was started on May 1 by B. Affleck. A summary of May
transaction is presented below.
1. Invested RM10,000 cash to start the repair shop.
2. Purchased equipment for RM5,000 cash.
3. Paid RM400 cash for May office rent.
4. Paid RM500 cash for supplies.
5. Incurred RM250 of advertising cost in star paper on account.
6. Received RM4,100 in cash from customer for repair service.
7. Withdrew RM500 cash for personal use.
8. Paid part time employee salaries RM1,000
9. Paid utility bills RM140
10. Provided repair service on account to customer RM 850
11. Collected cash of RM120 for service billed in transaction (10).
Prepare a tabular analysis of the transaction, using the following column headings: Cash,
Accounts Receivable, Supplies, Equipment, Account Payable, and B. Affleck, Capital.
You may use this table to answer :-
Asset Liability Capital
cash Accounts Supplies Equipment Account B.Affleck,
No.
Receivable Payable Capital

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