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

Business Organization

Financial Accounting

1. Introduction to Accounting

Business Organization

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Multiple Choice

When a company produces and sells multiple products, which costing method is most appropriate for allocating indirect costs among the products?

Specific Identification Method

Cash Basis Accounting

First-In, First-Out (FIFO)

Activity-Based Costing (ABC)

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Verified step by step guidance

Understand the concept of indirect costs: Indirect costs are expenses that cannot be directly traced to a specific product, such as factory rent, utilities, or administrative salaries. These costs need to be allocated among multiple products produced by the company.

Learn about Activity-Based Costing (ABC): ABC is a costing method that allocates indirect costs based on activities that drive those costs. It identifies cost drivers (e.g., machine hours, labor hours) and assigns costs to products based on their usage of these activities.

Compare ABC with other methods: Specific Identification Method is used for direct costs and is not suitable for indirect cost allocation. Cash Basis Accounting is a method of recording transactions, not a costing method. FIFO is an inventory valuation method, not a cost allocation method.

Understand why ABC is appropriate: ABC provides a more accurate allocation of indirect costs because it considers the actual activities and resources consumed by each product, rather than using broad averages or assumptions.

Apply ABC in practice: To use ABC, identify all activities involved in production, determine the cost drivers for each activity, calculate the cost per unit of activity, and allocate costs to products based on their consumption of these activities.