Accounting Multiple Choice Question – 23 January 2024

Alex Trading sells goods for cash for £1,000, which had cost them £500 to purchase.

Which elements of the accounting equation for Alex Trading will change due to this transaction?

Select ONE answer:

1. Assets and liabilities
2. Assets and capital
3. Capital and liabilities
4. Assets only

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – Assets will increase as there is an increase in cash of £1,000 and a decrease in inventory of only £500, and Alex’s capital will increase due to the profit made of £500 (£1,000 – £500).
3. Not correct
4. Not correct

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