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 how a credit card works from an accounting perspective?

A credit card immediately deducts funds from the user's bank account at the time of purchase.

A credit card allows users to borrow funds up to a certain limit, creating a liability that must be repaid to the issuing bank.

A credit card is used only for recording business expenses and does not involve any borrowing.

A credit card is a type of asset that increases the owner's equity with each use.

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Verified step by step guidance

Understand the nature of a credit card: A credit card is a financial tool that allows users to borrow money up to a pre-approved limit. This borrowing creates a liability for the user, as the borrowed funds must be repaid to the issuing bank.

Analyze the options provided: Evaluate each statement to determine its accuracy based on the accounting perspective of how credit cards function.

Option 1: 'A credit card immediately deducts funds from the user's bank account at the time of purchase.' This describes a debit card, not a credit card, as credit cards do not directly deduct funds from a bank account.

Option 3: 'A credit card is used only for recording business expenses and does not involve any borrowing.' This is incorrect because credit cards are not limited to business expenses and involve borrowing funds.

Option 4: 'A credit card is a type of asset that increases the owner's equity with each use.' This is incorrect because a credit card creates a liability, not an asset, and does not increase owner's equity. The correct answer is the second option, which accurately describes the borrowing and liability aspect of credit cards.