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

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Which of the following statements is correct regarding how the financial statements are linked?

Net income from the income statement is added to retained earnings on the statement of retained earnings, which then appears in the equity section of the balance sheet.

Dividends declared on the statement of retained earnings are reported as liabilities on the balance sheet.

Total assets from the balance sheet are reported as revenue on the income statement.

The ending cash balance from the balance sheet is used as the starting point for the statement of cash flows.

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Verified step by step guidance

Step 1: Understand the relationship between the financial statements. Financial statements are interconnected, and each statement provides information that flows into another. For example, net income from the income statement impacts retained earnings on the statement of retained earnings.

Step 2: Analyze the first statement: 'Net income from the income statement is added to retained earnings on the statement of retained earnings, which then appears in the equity section of the balance sheet.' This is correct because net income increases retained earnings, which is part of equity on the balance sheet.

Step 3: Evaluate the second statement: 'Dividends declared on the statement of retained earnings are reported as liabilities on the balance sheet.' This is incorrect because dividends declared reduce retained earnings but are not reported as liabilities unless they are unpaid at the end of the period.

Step 4: Assess the third statement: 'Total assets from the balance sheet are reported as revenue on the income statement.' This is incorrect because total assets are not revenue; they represent resources owned by the company, while revenue is earned from operations.

Step 5: Examine the fourth statement: 'The ending cash balance from the balance sheet is used as the starting point for the statement of cash flows.' This is correct because the cash balance at the end of the period on the balance sheet is the starting point for preparing the statement of cash flows.