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JAIIB · Accounting & Financial Management · Module B — Preparation of Financial Statements

JAIIB AFM Unit 12 — Balance Sheet Equation: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 12 — Balance Sheet Equation (Module B — Preparation of Financial Statements). The Mock Centre holds 29 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module B29 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Assets = Capital + Outside Liabilities — always in balance; rearrangements: Capital = A − OL; OL = A − C.
  2. Net worth = paid-up capital + reserves & surplus = owners' claim = a LIABILITY of the business.
  3. Business entity concept: books kept from the business's viewpoint — owner's capital is owed to him.

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
The Balance Sheet Equation is:
Why (b): Assets = Capital + Outside Liabilities — total claims (owners' + outsiders') always equal total assets, kept in balance by the double effect of every transaction.
Question 2 of 5
Outside Liabilities = ?
Why (b): Outside Liabilities = Assets − Capital — what remains of the asset pool after the owners' claim.
Question 3 of 5
A business starts with capital of ₹20,000. The position is:
Why (a): Cash (asset) ₹20,000 comes in and capital (owners' claim) ₹20,000 arises simultaneously — both sides equal from the first entry.
Question 4 of 5
The total claims against a business consist of:
Why (b): Assets = Total Claims = claims of owners (net worth) + claims of outsiders (creditors etc.) — the two-family structure behind the equation.
Question 5 of 5
In the balance sheet equation layout, 'Outstanding expenses' appear on the:
Why (b): Outstanding expenses are amounts the business OWES — an outsiders' claim on the liabilities side (with capital & reserves, creditors, bills payable, bank overdraft).
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
Owners' claimOutsiders' claimNet worth (capital + R&S) vs creditors/BP/OD/outstanding expenses
Cash purchaseCredit purchaseIntra-asset shift (totals same) vs both sides rise
Practise all 29 questions on Unit 12. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.