State BPA Fundamental Accounting Practice Exam

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Prepare for the State BPA Fundamental Accounting Exam with interactive flashcards and multiple choice questions. Each question comes with hints and explanations. Ace your exam with confidence!

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What type of account is 'Owner’s Capital'?

Asset
Liability
Equity
Revenue

The correct answer is: Equity

Owner’s Capital is classified as an equity account. Equity represents the owner’s claim on the assets of the business after all liabilities have been deducted. In other words, it reflects the residual interest that the owner has in the business. Owner’s Capital specifically reflects the contributions made by the owner into the business and includes any retained earnings that have not been withdrawn by the owner. This contrasts with asset accounts, which represent resources owned by the business, and liability accounts, which represent obligations to outside parties. Revenue accounts measure income generated from operations but do not reflect ownership interest in the same way equity does. Understanding this classification is essential for accurately preparing financial statements and assessing the financial health of a business.