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 of the following best defines profit in the context of the fundamental accounting equation?

Profit is the difference between assets and liabilities.

Profit is the total amount of assets owned by a business.

Profit is the excess of revenues over expenses during a specific period.

Profit is the sum of liabilities and equity.

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Verified step by step guidance

Step 1: Begin by recalling the fundamental accounting equation: Assets = Liabilities + Equity. This equation is the foundation of financial accounting and helps in understanding the relationship between a company's financial components.

Step 2: Understand that profit is not directly defined by the fundamental accounting equation itself but is derived from the income statement, which measures the performance of a business over a specific period.

Step 3: Recognize that profit is calculated as the excess of revenues over expenses during a specific period. This is a key concept in financial accounting and is used to assess the financial success of a business.

Step 4: Eliminate incorrect options by analyzing their definitions: (a) Profit is not the difference between assets and liabilities, as this would represent equity, not profit. (b) Profit is not the total amount of assets owned by a business, as assets are a balance sheet component. (d) Profit is not the sum of liabilities and equity, as this represents total assets.

Step 5: Conclude that the correct definition of profit in this context is: Profit is the excess of revenues over expenses during a specific period. This aligns with the principles of financial accounting and the income statement.