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

Which of the following best describes capital in accounting?

The total amount of cash held by a business at any given time.

The sum of all revenues earned during an accounting period.

The total value of all assets owned by a business.

The owner's investment in the business, representing the residual interest in the assets after deducting liabilities.

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Verified step by step guidance

Understand the concept of 'capital' in accounting: Capital refers to the owner's equity or investment in the business. It represents the residual interest in the assets of the business after deducting liabilities.

Clarify why the other options are incorrect: The total amount of cash held by a business is not capital; it is a part of the assets. Similarly, the sum of all revenues earned during an accounting period refers to income, not capital. The total value of all assets owned by a business is the asset value, not capital.

Focus on the correct definition: Capital is the owner's investment in the business, which is calculated as Assets - Liabilities. This is the equity portion of the accounting equation.

Relate the concept to the accounting equation: The accounting equation is Assets = Liabilities + Equity. Capital (or equity) is the portion of the equation that remains after liabilities are subtracted from assets.

Summarize the importance of capital: Capital is a key component in understanding the financial position of a business, as it reflects the owner's stake and the net worth of the business.