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

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following terms refers to the process of paying off loans by regularly reducing the principal?

Amortization

Depreciation

Capitalization

Accrual

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Understand the concept of amortization: Amortization refers to the process of gradually paying off a loan over time through scheduled payments. These payments typically consist of both principal and interest components, with the principal being the original amount borrowed.

Differentiate amortization from other terms: Depreciation refers to the allocation of the cost of tangible assets over their useful life, capitalization involves recording an expense as an asset, and accrual refers to recognizing revenues and expenses when they are incurred, regardless of cash flow.

Identify the key characteristic of amortization: The focus is on reducing the principal amount of the loan over time, which distinguishes it from the other terms provided.

Relate amortization to financial accounting: In accounting, amortization schedules are used to track the reduction of the loan principal and interest payments over time, ensuring accurate financial reporting.

Confirm the correct term: Based on the definitions and distinctions, the term that refers to the process of paying off loans by regularly reducing the principal is 'Amortization'.