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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which one of the following best states the fundamental accounting equation?

Assets = Liabilities + Equity

Liabilities = Assets + Equity

Assets = Revenues - Expenses

Equity = Assets - Revenues

Previous problemNext problem

Verified step by step guidance

Understand the fundamental accounting equation, which is the foundation of double-entry bookkeeping. It represents the relationship between a company's assets, liabilities, and equity.

Recall that the fundamental accounting equation is expressed as: Assets = Liabilities + Equity. This equation ensures that the balance sheet remains balanced.

Analyze why the other options are incorrect: 'Liabilities = Assets + Equity' is incorrect because liabilities and equity together make up the total assets, not the other way around.

Evaluate the option 'Assets = Revenues - Expenses': This is incorrect because revenues and expenses are part of the income statement, not the balance sheet. They do not directly define the fundamental accounting equation.

Consider the option 'Equity = Assets - Revenues': This is incorrect because equity is derived from the fundamental equation as Assets - Liabilities, not Assets - Revenues.