Tax Consultant 1 Interview Questions and Answers

The accounting equation is derived from the fundamental principle that assets must equal liabilities plus equity.

• The accounting equation is Assets = Liabilities + Equity

• It shows the relationship between a company's resources (assets) and the claims against those resources (liabilities and equity)

• It is the foundation of double-entry accounting

• The equation must always balance, meaning that the total assets must equal the total liabilities and equity

The three golden rules of accounting are the rules of debit and credit, which are: 1. Debit what comes in, credit what goes out. 2. Debit the receiver, credit the giver. 3. Debit expenses and losses, credit income and gains.

• Debit what comes in, credit what goes out

• Debit the receiver, credit the giver

• Debit expenses and losses, credit income and gains

Equity is not a liability, it represents the ownership interest in a company.

• Equity represents the ownership interest in a company, not a liability.

• Liabilities are obligations or debts that a company owes to external parties.

• Equity is shown on the balance sheet as the difference between assets and liabilities.

• Common examples of equity include common stock, preferred stock, and retained earnings.