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

2. Transaction Analysis

Accounting Flow Intuition: BASE Formula

Financial Accounting

2. Transaction Analysis

Accounting Flow Intuition: BASE Formula

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Multiple Choice

Which of the following best describes the BASE formula in accounting?

It is a process for reconciling cash flows from operating, investing, and financing activities.

It is used to analyze changes in account balances by relating Beginning balance, Additions, Subtractions, and Ending balance.

It is a formula for calculating depreciation expense over the useful life of an asset.

It is a method for preparing financial statements at the end of the accounting cycle.

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Verified step by step guidance

Understand the BASE formula: The BASE formula is a tool used in accounting to analyze changes in account balances. It relates the Beginning balance, Additions, Subtractions, and Ending balance of an account.

Break down the components: The formula can be expressed as: Beginning Balance + Additions - Subtractions = Ending Balance. This helps track how an account's balance changes over a period.

Identify its purpose: The BASE formula is not used for reconciling cash flows, calculating depreciation, or preparing financial statements. Instead, it is specifically used for analyzing account balances.

Apply the formula: To use the BASE formula, start with the beginning balance of an account, add any increases (additions), subtract any decreases (subtractions), and calculate the ending balance.

Clarify its relevance: The BASE formula is particularly useful for understanding changes in accounts such as inventory, accounts receivable, or accounts payable during a specific period.