Accounting 101
•What is the basic accounting equation?
•Assets = Liabilities + Equity
Give one example of an expense for a small business.
Rent, salaries, utilities, supplies, etc.
Which of the following is NOT a main component of a balance sheet?
A) Assets
B) Liabilities
C) Revenues
D) Equity
C
•What does “double-entry accounting” mean?
Every transaction affects at least two accounts – debit and credit.
If a business sells ₱5,000 of products but spends ₱3,000 on expenses, what is the profit?
₱2,000
Which of the following is considered a current asset?
A) Building
B) Equipment
C) Accounts Receivable
D) Trademark
C
•What are the two main types of financial statements used to check performance?
Income Statement & Balance Sheet
True or False: Income and profit mean the same thing.
False – income is total revenue, profit is revenue minus expenses.
Which item would typically be found in the equity section of the balance sheet?
A) Retained Earnings
B) Accounts Payable
C) Prepaid Expenses
D) Inventory
A
•True or False: Personal expenses should be recorded in business accounts.
False
Which is an example of income: a loan from the bank or selling products to customers?
Selling products to customers
If a company has total assets of P500,000 and total liabilities of P300,000, what is the equity?
A) P200,000
B) P800,000
C) P300,000
D) P500,000
A. Equity = Assets - Liabilities → P500,000 - P300,000 = P200,000
What is the main purpose of accounting in a business?
To track financial performance, ensure accuracy, and support decision-making.
If sales are ₱8,000, expenses are ₱6,500, what is the net profit?
₱1,500
•You're preparing a balance sheet. The company just purchased a delivery van for P4,000,000, which it expects to use for 5 years. How should this purchase be recorded?
A) As a current asset
B) As a long-term liability
C) As a fixed (non-current) asset
D) As an expense
C. As a fixed (non-current) asset