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

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes the fundamental accounting equation?

Assets = Revenues - Expenses

Liabilities = Assets + Owner's Equity

Assets = Liabilities + Owner's Equity

Owner's Equity = Assets - Revenues

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the fundamental accounting equation, which is the foundation of double-entry bookkeeping. It states that the total assets of a business are equal to the sum of its liabilities and owner's equity.

Step 2: Break down the equation: Assets = Liabilities + Owner's Equity. Assets represent what the company owns, liabilities represent what the company owes, and owner's equity represents the residual interest in the assets after deducting liabilities.

Step 3: Compare the given options to the fundamental accounting equation. The correct equation is Assets = Liabilities + Owner's Equity, which matches the third option provided.

Step 4: Eliminate incorrect options by analyzing their structure. For example, 'Assets = Revenues - Expenses' is incorrect because revenues and expenses are part of the income statement, not the balance sheet. Similarly, 'Liabilities = Assets + Owner's Equity' is incorrect because it reverses the equation.

Step 5: Confirm that the correct answer is 'Assets = Liabilities + Owner's Equity,' as it aligns with the fundamental accounting equation used in financial accounting.