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 of the following is true about a lease agreement in accounting?

Lease agreements are only recorded as expenses and never affect the balance sheet.

Only the lessor records any assets or liabilities related to a lease agreement.

Lease agreements are not governed by any accounting standards.

A lease agreement can result in the recognition of a right-of-use asset and a lease liability on the lessee's balance sheet.

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Verified step by step guidance

Understand the concept of lease accounting: A lease agreement is a contract where one party (the lessee) obtains the right to use an asset owned by another party (the lessor) for a specified period in exchange for payment.

Learn the accounting standards governing leases: Lease agreements are governed by accounting standards such as IFRS 16 (International Financial Reporting Standards) or ASC 842 (Accounting Standards Codification) in the U.S., which require specific treatment of leases on financial statements.

Recognize the impact on the lessee's balance sheet: Under these standards, a lease agreement can result in the recognition of a right-of-use asset (representing the lessee's right to use the leased asset) and a lease liability (representing the obligation to make lease payments).

Understand the distinction between operating and finance leases: While older standards treated operating leases as off-balance-sheet items, current standards require most leases to be recorded on the balance sheet, except for short-term leases or leases of low-value assets.

Clarify misconceptions: Lease agreements are not only recorded as expenses; they affect both the income statement (lease expense) and the balance sheet (right-of-use asset and lease liability). Both the lessee and lessor may record assets and liabilities depending on the lease type, and lease accounting is governed by established standards.