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

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

Which of the following best represents the most fundamental relationship in financial accounting?

Assets = Liabilities + Equity

Equity = Assets + Liabilities

Revenue = Expenses + Liabilities

Assets = Revenue - Expenses

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Verified step by step guidance

Understand the fundamental accounting equation, which is the foundation of financial accounting. It states that the resources of a company (Assets) are financed by either borrowing (Liabilities) or by the owners' contributions and retained earnings (Equity). This is expressed as:

Assets = Liabilities + Equity

Analyze the options provided in the problem. The correct equation must align with the fundamental accounting equation.

Option 1:

Assets = Liabilities + Equity

. This matches the fundamental accounting equation and is correct.

Option 2:

Equity = Assets + Liabilities

. This is incorrect because it does not represent the fundamental relationship; equity is derived by subtracting liabilities from assets.

Option 3 and Option 4 involve revenue and expenses, which are part of the income statement and not directly related to the fundamental accounting equation. Therefore, they are incorrect.