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 of the following transactions will increase both assets and liabilities in the fundamental accounting equation ($\text{Assets} = \text{Liabilities} + \text{Equity}$)?

Paying off an accounts payable with cash

Borrowing cash from a bank by signing a note payable

Receiving cash from a customer for a service already performed

Purchasing equipment by paying cash

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the fundamental accounting equation, which is expressed as:

Assets = Liabilities + Equity

. This equation must always remain balanced, meaning any change in one component must be offset by a change in another.

Step 2: Analyze each transaction to determine its impact on assets and liabilities. For example, paying off accounts payable with cash decreases both assets (cash) and liabilities (accounts payable), so it does not increase both assets and liabilities.

Step 3: Consider the transaction 'Borrowing cash from a bank by signing a note payable.' This increases assets (cash received) and liabilities (note payable created), satisfying the condition of increasing both assets and liabilities.

Step 4: Evaluate the transaction 'Receiving cash from a customer for a service already performed.' This increases assets (cash received) but decreases liabilities (unearned revenue, if previously recorded), so it does not increase both assets and liabilities.

Step 5: Examine the transaction 'Purchasing equipment by paying cash.' This decreases one asset (cash) while increasing another asset (equipment), but it does not affect liabilities, so it does not increase both assets and liabilities.