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

If debits equal credits in a company's accounting records, which of the following statements is true according to the fundamental accounting equation?

Equity is always zero

Assets equal the sum of liabilities and equity ($\text{Assets} = \text{Liabilities} + \text{Equity}$)

Assets are greater than liabilities and equity combined

Liabilities exceed assets

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Equity. This equation is the foundation of double-entry accounting and ensures that the accounting records are balanced.

Recognize that in double-entry accounting, every transaction affects at least two accounts, and the total debits must equal the total credits. This ensures the accounting equation remains balanced.

Analyze the scenario where debits equal credits. If debits equal credits, it implies that the accounting records are balanced, and the fundamental accounting equation holds true.

Apply the fundamental accounting equation to the options provided. If debits equal credits, it means that Assets = Liabilities + Equity, and this is the correct interpretation of the accounting equation.

Eliminate incorrect options based on the equation: Equity is not always zero, Assets cannot be greater than Liabilities + Equity, and Liabilities cannot exceed Assets. The correct statement is that Assets equal the sum of Liabilities and Equity.