Table of contents

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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 statements about the fundamental accounting equation is correct regarding a transaction for the sale of goods or services?

It results in a decrease in owner's equity.

It results in an increase in owner's equity.

It only affects liabilities.

It has no effect on owner's equity.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation must always remain balanced after any transaction.

Analyze the transaction: The sale of goods or services typically generates revenue, which increases the owner's equity through retained earnings.

Recognize the impact of revenue: Revenue increases the owner's equity because it contributes to the net income, which is part of retained earnings in the equity section of the balance sheet.

Consider the other components: The transaction may also affect assets (e.g., cash or accounts receivable) but does not directly affect liabilities unless specified otherwise.

Conclude that the correct statement is: 'It results in an increase in owner's equity,' as revenue from sales directly contributes to the owner's equity.