HBS Financial Accounting Module 1: The Accounting Equation Study Guide Test.

HBS Financial Accounting Module 1: The
Accounting Equation Study Guide Test.

Basic Accounting Equation - CORRECT ANSWER Assets = Liabilities + Owner's Equity



Which FI Doc Can you find the Basic Accounting Equation? - CORRECT ANSWER The Balance Sheet



What is an Asset? - CORRECT ANSWER Cash, Equipment, inventory, other sources owned by a business
that will generate wealth



What are the criteria to be considered an asset? - CORRECT ANSWER - Be purchased at a measurable
cost

- Produce probable economic benefit

- Result from a past event (or transaction)

- Be owned or controlled by the entity



What are Liabilities? - CORRECT ANSWER How businesses accursed is assets, borrowing, credit, Loans,
accounts payable, wages payable.



Criteria to be considered a liability - CORRECT ANSWER - Must impose probable economic obligation on
economic resources in the future

- The obligation has to be to another entity

- The event that created the obligation must be



Owner's Equity - CORRECT ANSWER "The residual interest in the assets of an entity that remains after
deducting the liabilities" SE = A-L



How do payments to owners differ from payments for liabilities to other entities? - CORRECT ANSWER -
Owners make decisions in the business