The fundamental accounting equation is

Assets = Liabilities + Owner's Equity

Owner's equity represents

the residual interest in assets after deducting liabilities

Accounting Equation MCQs 2026

69 questions with detailed answers · 34 from past papers · 7 quiz batches available

📚 Accounting 📄 34 Past-Paper Qs ✓ Free · No Login Needed

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Page 1 of 1 Questions 1–10 of 69

Q1 medium

Equation drill 38: assets Rs 414,500, liabilities Rs 148,400. Owner's equity equals
1. A Rs 562,900
2. B Rs 266,100
3. C Rs 148,400
4. D Rs 414,500
💡 Explanation:
Equity = Assets − Liabilities.
Q2 easy

Paying a liability in cash decreases
1. A only assets leaving liabilities unchanged
2. B both assets and liabilities
3. C only equity
4. D revenue and expenses
💡 Explanation:
Cash (asset) down; payable (liability) down.
Q3 Past Paper · PPSC/FPSC/NTS easy

The fundamental accounting equation is
1. A Assets = Revenue − Expenses only
2. B Assets = Liabilities + Owner's Equity
3. C Liabilities = Assets + Equity
4. D Equity = Assets + Liabilities
💡 Explanation:
The equation must balance after every transaction.
Q4 Past Paper · PPSC/FPSC/NTS easy

Owner's equity represents
1. A total cash in the business only
2. B amount owed to suppliers only
3. C the residual interest in assets after deducting liabilities
4. D annual sales revenue
💡 Explanation:
Equity = Assets − Liabilities.
Q5 Past Paper · PPSC/FPSC/NTS medium

If assets increase by Rs 50,000 and liabilities increase by Rs 20,000, equity increases by
1. A Rs 50,000
2. B Rs 30,000
3. C Rs 70,000
4. D Rs 20,000
💡 Explanation:
ΔEquity = ΔAssets − ΔLiabilities.
Q6 Past Paper · PPSC/FPSC/NTS easy

Purchasing inventory on credit increases
1. A only equity
2. B only revenue
3. C assets and liabilities equally
4. D neither assets nor liabilities
💡 Explanation:
Inventory (asset) up; accounts payable (liability) up.
Q7 Past Paper · PPSC/FPSC/NTS easy

Owner investment of cash increases
1. A liabilities only
2. B expenses only
3. C assets and owner's equity
4. D accounts payable
💡 Explanation:
Cash in; capital contribution increases equity.
Q8 Past Paper · PPSC/FPSC/NTS medium

Revenue earned increases
1. A liabilities and decreases equity
2. B only expenses
3. C assets or reduces liabilities and increases equity
4. D fixed assets only
💡 Explanation:
Revenue flows to retained earnings (equity).
Q9 Past Paper · PPSC/FPSC/NTS medium

Paying an expense in cash decreases
1. A liabilities and increases equity
2. B only liabilities
3. C revenue
4. D assets and equity
💡 Explanation:
Expenses reduce net income and equity.
Q10 easy

Drawing by owner decreases
1. A liabilities and increases equity
2. B revenue only
3. C owner's equity and assets
4. D accounts receivable only
💡 Explanation:
Withdrawals reduce capital.
Q11 Past Paper · PPSC/FPSC/NTS medium

A transaction that affects only asset accounts
1. A always increases total assets
2. B violates the accounting equation
3. C leaves total assets unchanged if one asset increases and another decreases
4. D must increase liabilities
💡 Explanation:
Asset exchange: e.g., cash for inventory.
Q12 Past Paper · PPSC/FPSC/NTS easy

Accounts payable is classified as
1. A an asset
2. B owner's equity
3. C revenue
4. D a liability
💡 Explanation:
Amount owed to suppliers for credit purchases.
Q13 easy

Prepaid rent is classified as
1. A a liability
2. B expense immediately always
3. C an asset
4. D owner's drawing
💡 Explanation:
Prepaid items are future economic benefits.
Q14 Past Paper · PPSC/FPSC/NTS easy

Retained earnings is part of
1. A current liabilities
2. B owner's equity
3. C intangible assets
4. D operating expenses
💡 Explanation:
Accumulated profits retained in business.
Q15 Past Paper · PPSC/FPSC/NTS easy

If total assets are Rs 500,000 and liabilities Rs 200,000, equity equals
1. A Rs 300,000
2. B Rs 700,000
3. C Rs 200,000
4. D Rs 500,000
💡 Explanation:
500,000 − 200,000 = 300,000.
Q16 easy

A loan from bank increases
1. A cash (asset) and loan payable (liability)
2. B equity only
3. C revenue
4. D drawings
💡 Explanation:
Borrowing is a liability-financed asset increase.
Q17 Past Paper · PPSC/FPSC/NTS medium

Depreciation expense reduces
1. A only cash with no equity effect
2. B liabilities directly
3. C accounts payable
4. D net income and therefore equity
💡 Explanation:
Depreciation is non-cash expense reducing equity.
Q18 Past Paper · PPSC/FPSC/NTS medium

Issuing shares for cash increases
1. A liabilities only
2. B expenses
3. C accounts payable
4. D assets and share capital (equity)
💡 Explanation:
Cash in; equity capital increases.
Q19 Past Paper · PPSC/FPSC/NTS hard

The expanded accounting equation includes
1. A revenues, expenses, and drawings affecting equity
2. B only assets and liabilities without equity
3. C only cash flows
4. D tax rates exclusively
💡 Explanation:
Equity = Capital + Revenue − Expenses − Drawings.
Q20 medium

A credit purchase of equipment increases
1. A equity and decreases assets
2. B cash and revenue
3. C expenses only
4. D equipment (asset) and accounts payable (liability)
💡 Explanation:
Non-cash asset acquisition on credit.
Q21 Past Paper · PPSC/FPSC/NTS medium

Collecting cash from a credit customer increases
1. A cash and decreases accounts receivable
2. B liabilities and equity
3. C revenue again
4. D expenses
💡 Explanation:
Asset composition change; no new revenue.
Q22 easy

Salaries paid in cash decrease
1. A accounts payable only with no expense
2. B cash and equity through salary expense
3. C revenue
4. D share capital
💡 Explanation:
Expense recognition reduces equity.
Q23 Past Paper · PPSC/FPSC/NTS hard

If liabilities exceed assets, the business has
1. A strong financial position always
2. B excess retained earnings automatically
3. C no need for restructuring
4. D negative equity (insolvency risk)
💡 Explanation:
Negative equity indicates deficit.
Q24 medium

Capital expenditure increases
1. A current liabilities only
2. B revenue immediately
3. C drawings account
4. D non-current assets
💡 Explanation:
Long-term asset acquisition.
Q25 Past Paper · PPSC/FPSC/NTS hard

A dividend declared but not yet paid creates
1. A a dividend payable liability and reduces retained earnings
2. B only a cash decrease immediately
3. C an asset increase
4. D revenue recognition
💡 Explanation:
Declaration creates liability; payment reduces cash.
Q26 Past Paper · PPSC/FPSC/NTS hard

Equation drill 1: assets Rs 100,000, liabilities Rs 30,000. Owner's equity equals
1. A Rs 130,000
2. B Rs 30,000
3. C Rs 70,000
4. D Rs 100,000
💡 Explanation:
Equity = Assets − Liabilities.
Q27 medium

Equation drill 2: assets Rs 108,500, liabilities Rs 33,200. Owner's equity equals
1. A Rs 141,700
2. B Rs 33,200
3. C Rs 75,300
4. D Rs 108,500
💡 Explanation:
Equity = Assets − Liabilities.
Q28 Past Paper · PPSC/FPSC/NTS medium

Equation drill 3: assets Rs 117,000, liabilities Rs 36,400. Owner's equity equals
1. A Rs 153,400
2. B Rs 80,600
3. C Rs 36,400
4. D Rs 117,000
💡 Explanation:
Equity = Assets − Liabilities.
Q29 hard

Equation drill 4: assets Rs 125,500, liabilities Rs 39,600. Owner's equity equals
1. A Rs 165,100
2. B Rs 39,600
3. C Rs 125,500
4. D Rs 85,900
💡 Explanation:
Equity = Assets − Liabilities.
Q30 medium

Equation drill 5: assets Rs 134,000, liabilities Rs 42,800. Owner's equity equals
1. A Rs 91,200
2. B Rs 176,800
3. C Rs 42,800
4. D Rs 134,000
💡 Explanation:
Equity = Assets − Liabilities.
Q31 Past Paper · PPSC/FPSC/NTS medium

Equation drill 6: assets Rs 142,500, liabilities Rs 46,000. Owner's equity equals
1. A Rs 188,500
2. B Rs 46,000
3. C Rs 142,500
4. D Rs 96,500
💡 Explanation:
Equity = Assets − Liabilities.
Q32 hard

Equation drill 7: assets Rs 151,000, liabilities Rs 49,200. Owner's equity equals
1. A Rs 200,200
2. B Rs 49,200
3. C Rs 101,800
4. D Rs 151,000
💡 Explanation:
Equity = Assets − Liabilities.
Q33 medium

Equation drill 8: assets Rs 159,500, liabilities Rs 52,400. Owner's equity equals
1. A Rs 211,900
2. B Rs 52,400
3. C Rs 107,100
4. D Rs 159,500
💡 Explanation:
Equity = Assets − Liabilities.
Q34 Past Paper · PPSC/FPSC/NTS medium

Equation drill 9: assets Rs 168,000, liabilities Rs 55,600. Owner's equity equals
1. A Rs 223,600
2. B Rs 55,600
3. C Rs 168,000
4. D Rs 112,400
💡 Explanation:
Equity = Assets − Liabilities.
Q35 hard

Equation drill 10: assets Rs 176,500, liabilities Rs 58,800. Owner's equity equals
1. A Rs 235,300
2. B Rs 117,700
3. C Rs 58,800
4. D Rs 176,500
💡 Explanation:
Equity = Assets − Liabilities.
Q36 medium

Equation drill 11: assets Rs 185,000, liabilities Rs 62,000. Owner's equity equals
1. A Rs 123,000
2. B Rs 247,000
3. C Rs 62,000
4. D Rs 185,000
💡 Explanation:
Equity = Assets − Liabilities.
Q37 Past Paper · PPSC/FPSC/NTS medium

Equation drill 12: assets Rs 193,500, liabilities Rs 65,200. Owner's equity equals
1. A Rs 128,300
2. B Rs 258,700
3. C Rs 65,200
4. D Rs 193,500
💡 Explanation:
Equity = Assets − Liabilities.
Q38 hard

Equation drill 13: assets Rs 202,000, liabilities Rs 68,400. Owner's equity equals
1. A Rs 270,400
2. B Rs 68,400
3. C Rs 133,600
4. D Rs 202,000
💡 Explanation:
Equity = Assets − Liabilities.
Q39 medium

Equation drill 14: assets Rs 210,500, liabilities Rs 71,600. Owner's equity equals
1. A Rs 138,900
2. B Rs 282,100
3. C Rs 71,600
4. D Rs 210,500
💡 Explanation:
Equity = Assets − Liabilities.
Q40 Past Paper · PPSC/FPSC/NTS medium

Equation drill 15: assets Rs 219,000, liabilities Rs 74,800. Owner's equity equals
1. A Rs 293,800
2. B Rs 74,800
3. C Rs 219,000
4. D Rs 144,200
💡 Explanation:
Equity = Assets − Liabilities.
Q41 hard

Equation drill 16: assets Rs 227,500, liabilities Rs 78,000. Owner's equity equals
1. A Rs 305,500
2. B Rs 78,000
3. C Rs 149,500
4. D Rs 227,500
💡 Explanation:
Equity = Assets − Liabilities.
Q42 Past Paper · PPSC/FPSC/NTS medium

Equation drill 17: assets Rs 236,000, liabilities Rs 81,200. Owner's equity equals
1. A Rs 317,200
2. B Rs 154,800
3. C Rs 81,200
4. D Rs 236,000
💡 Explanation:
Equity = Assets − Liabilities.
Q43 medium

Equation drill 18: assets Rs 244,500, liabilities Rs 84,400. Owner's equity equals
1. A Rs 328,900
2. B Rs 160,100
3. C Rs 84,400
4. D Rs 244,500
💡 Explanation:
Equity = Assets − Liabilities.
Q44 hard

Equation drill 19: assets Rs 253,000, liabilities Rs 87,600. Owner's equity equals
1. A Rs 165,400
2. B Rs 340,600
3. C Rs 87,600
4. D Rs 253,000
💡 Explanation:
Equity = Assets − Liabilities.
Q45 Past Paper · PPSC/FPSC/NTS medium

Equation drill 20: assets Rs 261,500, liabilities Rs 90,800. Owner's equity equals
1. A Rs 352,300
2. B Rs 90,800
3. C Rs 261,500
4. D Rs 170,700
💡 Explanation:
Equity = Assets − Liabilities.
Q46 medium

Equation drill 21: assets Rs 270,000, liabilities Rs 94,000. Owner's equity equals
1. A Rs 364,000
2. B Rs 176,000
3. C Rs 94,000
4. D Rs 270,000
💡 Explanation:
Equity = Assets − Liabilities.
Q47 hard

Equation drill 22: assets Rs 278,500, liabilities Rs 97,200. Owner's equity equals
1. A Rs 375,700
2. B Rs 97,200
3. C Rs 181,300
4. D Rs 278,500
💡 Explanation:
Equity = Assets − Liabilities.
Q48 Past Paper · PPSC/FPSC/NTS medium

Equation drill 23: assets Rs 287,000, liabilities Rs 100,400. Owner's equity equals
1. A Rs 387,400
2. B Rs 186,600
3. C Rs 100,400
4. D Rs 287,000
💡 Explanation:
Equity = Assets − Liabilities.
Q49 medium

Equation drill 24: assets Rs 295,500, liabilities Rs 103,600. Owner's equity equals
1. A Rs 191,900
2. B Rs 399,100
3. C Rs 103,600
4. D Rs 295,500
💡 Explanation:
Equity = Assets − Liabilities.
Q50 hard

Equation drill 25: assets Rs 304,000, liabilities Rs 106,800. Owner's equity equals
1. A Rs 197,200
2. B Rs 410,800
3. C Rs 106,800
4. D Rs 304,000
💡 Explanation:
Equity = Assets − Liabilities.
Q51 Past Paper · PPSC/FPSC/NTS medium

Equation drill 26: assets Rs 312,500, liabilities Rs 110,000. Owner's equity equals
1. A Rs 422,500
2. B Rs 202,500
3. C Rs 110,000
4. D Rs 312,500
💡 Explanation:
Equity = Assets − Liabilities.
Q52 medium

Equation drill 27: assets Rs 321,000, liabilities Rs 113,200. Owner's equity equals
1. A Rs 207,800
2. B Rs 434,200
3. C Rs 113,200
4. D Rs 321,000
💡 Explanation:
Equity = Assets − Liabilities.
Q53 hard

Equation drill 28: assets Rs 329,500, liabilities Rs 116,400. Owner's equity equals
1. A Rs 445,900
2. B Rs 116,400
3. C Rs 213,100
4. D Rs 329,500
💡 Explanation:
Equity = Assets − Liabilities.
Q54 Past Paper · PPSC/FPSC/NTS medium

Equation drill 29: assets Rs 338,000, liabilities Rs 119,600. Owner's equity equals
1. A Rs 218,400
2. B Rs 457,600
3. C Rs 119,600
4. D Rs 338,000
💡 Explanation:
Equity = Assets − Liabilities.
Q55 medium

Equation drill 30: assets Rs 346,500, liabilities Rs 122,800. Owner's equity equals
1. A Rs 223,700
2. B Rs 469,300
3. C Rs 122,800
4. D Rs 346,500
💡 Explanation:
Equity = Assets − Liabilities.
Q56 Past Paper · PPSC/FPSC/NTS hard

Equation drill 31: assets Rs 355,000, liabilities Rs 126,000. Owner's equity equals
1. A Rs 481,000
2. B Rs 126,000
3. C Rs 355,000
4. D Rs 229,000
💡 Explanation:
Equity = Assets − Liabilities.
Q57 medium

Equation drill 32: assets Rs 363,500, liabilities Rs 129,200. Owner's equity equals
1. A Rs 492,700
2. B Rs 129,200
3. C Rs 363,500
4. D Rs 234,300
💡 Explanation:
Equity = Assets − Liabilities.
Q58 medium

Equation drill 33: assets Rs 372,000, liabilities Rs 132,400. Owner's equity equals
1. A Rs 504,400
2. B Rs 132,400
3. C Rs 239,600
4. D Rs 372,000
💡 Explanation:
Equity = Assets − Liabilities.
Q59 Past Paper · PPSC/FPSC/NTS hard

Equation drill 34: assets Rs 380,500, liabilities Rs 135,600. Owner's equity equals
1. A Rs 516,100
2. B Rs 135,600
3. C Rs 380,500
4. D Rs 244,900
💡 Explanation:
Equity = Assets − Liabilities.
Q60 medium

Equation drill 35: assets Rs 389,000, liabilities Rs 138,800. Owner's equity equals
1. A Rs 527,800
2. B Rs 250,200
3. C Rs 138,800
4. D Rs 389,000
💡 Explanation:
Equity = Assets − Liabilities.
Q61 medium

Equation drill 36: assets Rs 397,500, liabilities Rs 142,000. Owner's equity equals
1. A Rs 539,500
2. B Rs 255,500
3. C Rs 142,000
4. D Rs 397,500
💡 Explanation:
Equity = Assets − Liabilities.
Q62 Past Paper · PPSC/FPSC/NTS hard

Equation drill 37: assets Rs 406,000, liabilities Rs 145,200. Owner's equity equals
1. A Rs 551,200
2. B Rs 145,200
3. C Rs 406,000
4. D Rs 260,800
💡 Explanation:
Equity = Assets − Liabilities.
Q63 medium

Equation drill 39: assets Rs 423,000, liabilities Rs 151,600. Owner's equity equals
1. A Rs 574,600
2. B Rs 271,400
3. C Rs 151,600
4. D Rs 423,000
💡 Explanation:
Equity = Assets − Liabilities.
Q64 Past Paper · PPSC/FPSC/NTS hard

Equation drill 40: assets Rs 431,500, liabilities Rs 154,800. Owner's equity equals
1. A Rs 586,300
2. B Rs 154,800
3. C Rs 431,500
4. D Rs 276,700
💡 Explanation:
Equity = Assets − Liabilities.
Q65 medium

Equation drill 41: assets Rs 440,000, liabilities Rs 158,000. Owner's equity equals
1. A Rs 598,000
2. B Rs 158,000
3. C Rs 282,000
4. D Rs 440,000
💡 Explanation:
Equity = Assets − Liabilities.
Q66 medium

Equation drill 42: assets Rs 448,500, liabilities Rs 161,200. Owner's equity equals
1. A Rs 609,700
2. B Rs 287,300
3. C Rs 161,200
4. D Rs 448,500
💡 Explanation:
Equity = Assets − Liabilities.
Q67 Past Paper · PPSC/FPSC/NTS hard

Equation drill 43: assets Rs 457,000, liabilities Rs 164,400. Owner's equity equals
1. A Rs 292,600
2. B Rs 621,400
3. C Rs 164,400
4. D Rs 457,000
💡 Explanation:
Equity = Assets − Liabilities.
Q68 medium

Equation drill 44: assets Rs 465,500, liabilities Rs 167,600. Owner's equity equals
1. A Rs 297,900
2. B Rs 633,100
3. C Rs 167,600
4. D Rs 465,500
💡 Explanation:
Equity = Assets − Liabilities.
Q69 Past Paper · PPSC/FPSC/NTS medium

Equation drill 45: assets Rs 474,000, liabilities Rs 170,800. Owner's equity equals
1. A Rs 303,200
2. B Rs 644,800
3. C Rs 170,800
4. D Rs 474,000
💡 Explanation:
Equity = Assets − Liabilities.

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Accounting Equation MCQs 2026

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