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

Which statement below best describes the fundamental accounting equation?

Assets = Liabilities + Owner's Equity

Assets = Revenues - Expenses

Liabilities = Assets + Owner's Equity

Owner's Equity = Assets - Revenues

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Verified step by step guidance

Understand the fundamental accounting equation: The equation is a foundational concept in financial accounting that represents the relationship between a company's assets, liabilities, and owner's equity.

Recall the correct formula: The fundamental accounting equation is expressed as Assets = Liabilities + Owner's Equity. This equation ensures that a company's financial position is balanced.

Analyze why the other options are incorrect: For example, 'Assets = Revenues - Expenses' is not correct because revenues and expenses are part of the income statement, not the balance sheet. Similarly, 'Liabilities = Assets + Owner's Equity' and 'Owner's Equity = Assets - Revenues' do not align with the fundamental accounting equation.

Relate the equation to the balance sheet: The balance sheet is structured based on the fundamental accounting equation, where assets are listed on one side and liabilities and owner's equity are listed on the other side to ensure balance.

Apply the equation in practice: Use the equation to analyze transactions, ensuring that any changes in assets, liabilities, or owner's equity maintain the balance of the equation.