1) Owner’s equity is a liability of the business.” Is this statement true? Why?

2) Why are total assets in a business always equal to the total of the liabilities and owner’s equity?
3) Define assets. List 4 examples.
4) Define liabilities. List 2 examples.
5) Define owner’s equity. List 1 example.
6) Name 2 sources that can cause the owner’s equity to increase.
7) What are the 2 causes that will result in a decrease in owner’s equity?
8) Classify the following items as assets, liabilities or owner’s equity.

Assets Liabilities Equity

a) Land
b) Air conditioner
c) Drawings
d) Creditors
e) Debtors
f) Premises
g) Loan from finance company
h) Capital contributed by owner
i) Stock of goods
j) Plant and machinery
k) Cash at bank
l) Profit for the year
m) Motor vehicles
n) Prepaid expenses
o) Accrued expenses
p) Prepaid incomes
q) Accrued incomes
9) If Roy had the following assets and liabilities, what is the owner’s equity in the business?

Cash at bank RM9500

Debtors RM5200
Creditors RM3450
Stock RM3640
Fixtures and fittings RM1680
Loan from bank RM4900
Bank overdraft RM640

10 Fill in the missing amount in each of the following accounting equations. An example is given.

ASSETS (RM) CAPITAL (RM) LIABILITIES (RM) REVENUES (RM) EXPENSES (RM)
25,000 14,000 19,370 (a) 21,630 30,000
(b) 19,800 13,430 6,770 6,000
33,444 (c) 9,600 20,774 12,500
19,600 8,779 (d) 13,121 5,300
73,200 57,000 13,700 143,500 (e)
11 Uncle Rajoo has the following assets and liabilities. What is the owner’s equity in the business.

Capital RM89,500
Net Sales RM84,600
Net Purchases RM83,770
Expenses RM52,780
Other incomes RM81,960
Drawings RM9,800
Bank loan RM75,000
Assets RM180,000

2.12 Using the accounting equation, determine the owner’s equity for the following business:

a) Ahmad. A grocer:
Stock of groceries $9600, Motor van $37000, Debtors $12000, Creditors $17500, Cash at
bank $4680.

b) Ben, a stationer:
Fixtures and fittings $5580, stock of stationery $29700, Bank overdraft $15480, Premises
$150000, Cash in hand $1640, Debtors $8190, Creditors $14800.

c) Chou, a travel agent:

Office equipment $18200, Premises $456000, Mortgage loan $160000, Debtors $3500,
Creditors $35000, Fixed Deposits $14000, Cash at bank $9000, Cash in hand $2100.