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 the two sources of stockholders' equity?

Amounts earned through profitable operations and amounts borrowed from banks

Amounts received from issuing bonds and amounts paid as dividends

Amounts invested by stockholders and amounts earned through profitable operations

Amounts borrowed from creditors and amounts invested by stockholders

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Verified step by step guidance

Step 1: Understand the concept of stockholders' equity. Stockholders' equity represents the owners' claim on the assets of a corporation after all liabilities have been deducted. It is a key component of the balance sheet and is derived from two primary sources.

Step 2: Identify the two sources of stockholders' equity. The first source is amounts invested by stockholders, which includes capital contributions such as proceeds from issuing common or preferred stock. The second source is amounts earned through profitable operations, which are retained earnings accumulated over time from net income.

Step 3: Eliminate incorrect options. For example, amounts borrowed from banks or creditors are liabilities, not stockholders' equity. Similarly, amounts received from issuing bonds are considered liabilities, not equity.

Step 4: Focus on the correct answer. The correct description of stockholders' equity is 'Amounts invested by stockholders and amounts earned through profitable operations,' as these are the two legitimate sources of equity.

Step 5: Reinforce the understanding by linking this concept to the accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Stockholders' Equity} \). Stockholders' equity is the residual interest after liabilities are subtracted from assets.