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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which one of the following transactions will increase the liquidity of a firm?

Paying off a short-term loan

Issuing shares for land

Collecting cash from accounts receivable

Purchasing equipment with cash

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Verified step by step guidance

Step 1: Understand the concept of liquidity. Liquidity refers to a firm's ability to meet its short-term obligations and is typically measured by the availability of cash or assets that can be quickly converted into cash.

Step 2: Analyze each transaction in terms of its impact on cash or liquid assets. For example, paying off a short-term loan reduces cash, issuing shares for land does not directly affect cash, and purchasing equipment with cash decreases cash.

Step 3: Focus on the transaction 'Collecting cash from accounts receivable.' Accounts receivable represents money owed to the firm by customers. When cash is collected, it increases the firm's liquid assets (cash).

Step 4: Compare the liquidity impact of 'Collecting cash from accounts receivable' with the other transactions. This transaction directly increases cash, which is the most liquid asset, while the other transactions either reduce cash or involve non-liquid assets.

Step 5: Conclude that 'Collecting cash from accounts receivable' is the transaction that increases the liquidity of the firm because it converts a less liquid asset (accounts receivable) into cash, enhancing the firm's ability to meet short-term obligations.