1.

Define the following:

(a) Asset
An asset is a resource that owned or controlled by a company and will provide a benefit in
current and future periods for the business.

(b) Liability
Liabilities are any debts a business has, whether it's bank loans, mortgages, unpaid bills, or any
other sum of money that it owes someone else.

(c) Owner’s equity

Owner's Equity is defined as the proportion of the total value of a company's assets that can be
claimed by its owners or shareholders.

2. State TWO (2) types of assets

The two main types of assets are current assets and non-current assets/ fixed assets.
Current Assets: Accounts receivable, Stock inventory, Bills receivable, Prepaid expenses etc.
Fixed Assets: Cars and Trucks, Land, Furniture, Buildings, Machinery, etc.

3. List TWO (2) examples of liabilities.

Accounts Payable, Taxes Payable.

4. Show the effects of the following transactions on accounting equation:

(a) James invests RM100, 000 cash in James Trading
(A) Asset +(Cash) 100,000
(E) Equity +(Capital) 100,000

(b) James Trading pays RM2, 500 cash for supplies

(A) Inventory + 2500,
(A) Cash (-2500)

(c) James Trading pays RM26, 000 cash for equipment.

(A) Equipment +26000
(A) Cash (-26000)

(d) James Trading purchases RM7, 100 of supplies on credit from a supplier.
(A) Supplies/Inventory +7100
(L) Accounts Payable +7100

(e) Transaction: James Trading sold goods for RM4, 200 in cash.
(A) Cash +4200
(E) Revenue +4200
(f) Transaction: James Trading pays RM1, 000 cash for rental.
(A) Cash (-1000)
(E) Expense (-1000)

(A)= 100000+2500+26000+7100+4200-2500-26000-1000
=110,300

(L)= 7100
(E)= 100000+4200-1000=1,03,200

(L) +(E) = 7100+103200

=1,10,300

Assets Liabilities + Owner’s Equity

Cash Equipmen Purchases/ Accoun Revenue Expense Capital
t Inventories t s
Payable
(a) 100,000 100,000
(b) (2,500) 2,500
(c) (26,000) 26,000
(d) 7,100 7,100
(e) 4,200 4,200
(f) (1,000) (1,000)
110,300 110,300

5. Show the effects of the following transactions on accounting equation:

(a) Bought a car on account for RM20, 000.
(b) Purchased goods for RM12, 000 and paid using a cheque for RM7,000 and remaining using
cash.
(c) Loan obtained from the bank and received a cheque amounting RM15, 000.
(d) Paid rental for RM3,500 by cheque.
(e) Purchased goods on account from the supplier for RM3, 459.
(f) Loan of RM2, 000 is repaid by cheque.
(g) The owner withdraws RM500 from bank and keep in company

Assets Liabilities+ Owner’s Equity

 Cash Car Bank Purchases Loan Account Expenses
Payable
(a) 20,000 20,000
(b) (5000) (7000) 12000
(c) 15000 15000
(d) (3500) (3500)
(e) 3459 3459
(f) (2000) (2000)
(g) 500 (500)
32,959 32,959