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

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Multiple Choice

Which of the following statements best represents the fundamental accounting equation?

Assets = Revenues - Expenses

Equity = Assets + Liabilities

Liabilities = Assets + Equity

Assets = Liabilities + Equity

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Verified step by step guidance

Understand the fundamental accounting equation: The equation is a cornerstone of financial accounting and represents the relationship between a company's assets, liabilities, and equity.

Recall the formula: The fundamental accounting equation is expressed as \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation ensures that a company's financial position is balanced.

Break down the components: Assets are resources owned by the company, liabilities are obligations owed to external parties, and equity represents the owner's residual interest in the company after liabilities are subtracted.

Analyze the incorrect options: \( \text{Assets} = \text{Revenues} - \text{Expenses} \) is incorrect because revenues and expenses are part of the income statement, not the balance sheet. \( \text{Equity} = \text{Assets} + \text{Liabilities} \) is incorrect because equity is derived from \( \text{Assets} - \text{Liabilities} \). \( \text{Liabilities} = \text{Assets} + \text{Equity} \) is incorrect because liabilities are part of the equation, not the sum of assets and equity.

Conclude with the correct statement: The correct representation of the fundamental accounting equation is \( \text{Assets} = \text{Liabilities} + \text{Equity} \), which reflects the balance sheet structure and ensures that all financial transactions are accounted for.