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

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

Start-up costs such as legal fees and state filings to incorporate should be treated as:

Intangible assets subject to annual impairment testing

Expenses incurred as incurred

Capital expenditures added to the value of fixed assets

Prepaid expenses to be amortized over time

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Verified step by step guidance

Understand the nature of start-up costs: These are initial costs incurred to establish a business, such as legal fees and state filings. They are not directly tied to the acquisition of tangible or intangible assets.

Review the accounting treatment for start-up costs: According to generally accepted accounting principles (GAAP), start-up costs are typically expensed as incurred because they do not provide future economic benefits that can be capitalized.

Clarify why start-up costs are not intangible assets: Intangible assets are identifiable non-physical assets that provide future economic benefits, such as patents or trademarks. Start-up costs do not meet this criterion.

Explain why start-up costs are not capital expenditures: Capital expenditures are costs incurred to acquire or improve fixed assets, such as machinery or buildings. Start-up costs do not enhance or acquire fixed assets.

Discuss why start-up costs are not prepaid expenses: Prepaid expenses are payments made for goods or services to be received in the future. Start-up costs are not tied to future services but are one-time expenses incurred during the business formation process.