Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

If a company has an increase in total expenses of \$10,000, which of the following is possible?

Net income decreases by \$10,000, assuming revenues remain unchanged.

Liabilities decrease by \$10,000, assuming all other factors remain constant.

Owner's equity increases by \$10,000, assuming no other changes.

Total assets increase by \$10,000, assuming all other factors remain constant.

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Verified step by step guidance

Understand the relationship between expenses, net income, and the accounting equation. The accounting equation is: Assets = Liabilities + Owner's Equity. An increase in expenses directly reduces net income, which in turn affects owner's equity.

Analyze the first option: 'Net income decreases by $10,000, assuming revenues remain unchanged.' Since net income is calculated as Revenues - Expenses, an increase in expenses by $10,000 (with revenues unchanged) will reduce net income by $10,000. This option is plausible.

Analyze the second option: 'Liabilities decrease by $10,000, assuming all other factors remain constant.' An increase in expenses does not directly affect liabilities unless the expense is paid by reducing liabilities (e.g., accounts payable). However, this is not explicitly stated, so this option is less likely.

Analyze the third option: 'Owner's equity increases by $10,000, assuming no other changes.' An increase in expenses reduces net income, which decreases retained earnings, a component of owner's equity. Therefore, this option is incorrect as owner's equity would decrease, not increase.

Analyze the fourth option: 'Total assets increase by $10,000, assuming all other factors remain constant.' An increase in expenses typically reduces assets (e.g., cash) if the expense is paid immediately. Therefore, this option is also incorrect as total assets would not increase.