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 is true about the relationship between total assets and total liabilities according to the fundamental accounting equation?

Total assets are always greater than total liabilities.

Total liabilities equal total assets minus owner's equity.

Total assets equal the sum of total liabilities and owner's equity.

Total assets are calculated by subtracting owner's equity from total liabilities.

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Verified step by step guidance

Step 1: Begin by recalling the fundamental accounting equation, which is: Total Assets = Total Liabilities + Owner's Equity. This equation is the foundation of financial accounting and represents the balance sheet structure.

Step 2: Analyze the options provided in the problem. The first option, 'Total assets are always greater than total liabilities,' is incorrect because total assets can be equal to or greater than total liabilities depending on the owner's equity.

Step 3: Evaluate the second option, 'Total liabilities equal total assets minus owner's equity.' This is correct because rearranging the fundamental accounting equation gives: Total Liabilities = Total Assets - Owner's Equity.

Step 4: Assess the third option, 'Total assets equal the sum of total liabilities and owner's equity.' This is correct and directly aligns with the fundamental accounting equation: Total Assets = Total Liabilities + Owner's Equity.

Step 5: Review the fourth option, 'Total assets are calculated by subtracting owner's equity from total liabilities.' This is incorrect because it contradicts the fundamental accounting equation. Total assets are calculated by adding total liabilities and owner's equity, not subtracting owner's equity from liabilities.