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

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Which of the following items is initially recorded as an expense on the income statement?

Purchase of equipment

Rent paid for the current month

Inventory purchased but not yet sold

Prepaid insurance for the next year

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Verified step by step guidance

Understand the concept of expenses: Expenses are costs that are incurred and consumed during the current accounting period to generate revenue. They are recorded on the income statement when they are used up or incurred.

Analyze each option: Determine whether the item is an expense or an asset based on its nature and timing of consumption.

Option 1: 'Purchase of equipment' - This is not an expense. Equipment is a long-term asset and is recorded on the balance sheet. Its cost is allocated over time through depreciation.

Option 2: 'Rent paid for the current month' - This is an expense because the rent is consumed during the current period. It is recorded on the income statement as an expense for the current month.

Option 3: 'Inventory purchased but not yet sold' - This is not an expense. Inventory is an asset until it is sold, at which point it becomes part of the cost of goods sold (COGS) on the income statement.

Option 4: 'Prepaid insurance for the next year' - This is not an expense. Prepaid insurance is an asset because it represents a payment for future benefits. It is expensed over time as the insurance coverage is used.