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

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

In the context of journal entries, what does the written listing agreement between the broker and the seller create from an accounting perspective?

An expense for the seller

Revenue for the seller

A liability for the broker

A receivable (asset) for the broker

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Verified step by step guidance

Understand the nature of the written listing agreement: It is a contract between the broker and the seller, where the broker agrees to provide services (e.g., selling the property) in exchange for compensation.

From an accounting perspective, analyze the broker's position: The broker has performed or agreed to perform services, which creates a right to receive payment. This right is classified as a receivable (an asset).

Consider the seller's perspective: The seller does not immediately incur an expense or generate revenue simply by signing the agreement. The seller's obligation to pay arises only after the broker fulfills their part of the agreement.

Evaluate why the agreement creates a receivable for the broker: The broker's right to payment is an asset because it represents future economic benefits that the broker expects to receive as a result of the agreement.

Conclude that the correct accounting treatment for the broker is to record the receivable (asset) once the agreement is signed and services are performed, aligning with the accrual basis of accounting.