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 fundamental accounting equation?

Assets = Liabilities + Equity

Liabilities = Assets + Equity

Equity = Assets + Liabilities

Assets = Revenues - Expenses

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Verified step by step guidance

Understand the fundamental accounting equation, which is the foundation of financial accounting. It represents the relationship between a company's resources (assets), obligations (liabilities), and ownership interest (equity).

Recall that the fundamental accounting equation is expressed as:

A = L + E

, where

A

stands for Assets,

L

stands for Liabilities, and

E

stands for Equity.

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

A = L + E

. This equation ensures that the company's resources are balanced with its obligations and ownership interest.

Eliminate incorrect options by checking their alignment with the fundamental accounting equation. For example, 'Liabilities = Assets + Equity' and 'Equity = Assets + Liabilities' do not represent the correct relationship. Similarly, 'Assets = Revenues - Expenses' is related to the income statement, not the balance sheet equation.

Confirm that the correct answer is 'Assets = Liabilities + Equity,' as it accurately represents the fundamental accounting equation used in financial accounting.