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 about the fundamental accounting equation is correct?

Assets are claims (by creditors) against the company.

Owner's equity is the same as liabilities.

Assets equal liabilities minus owner's equity.

Liabilities are claims (by creditors) against the company.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation represents the relationship between a company's resources (assets) and the claims against those resources (liabilities and owner's equity).

Clarify the concept of liabilities: Liabilities are obligations or debts owed by the company to external parties, such as creditors. These are claims against the company's assets by external entities.

Clarify the concept of owner's equity: Owner's equity represents the residual interest in the assets of the company after deducting liabilities. It is the claim of the owners on the company's assets.

Analyze the incorrect statements: 'Assets are claims (by creditors) against the company' is incorrect because assets are resources owned by the company, not claims. 'Owner's equity is the same as liabilities' is incorrect because owner's equity and liabilities are distinct components of the accounting equation. 'Assets equal liabilities minus owner's equity' is incorrect because it contradicts the fundamental accounting equation.

Conclude with the correct statement: 'Liabilities are claims (by creditors) against the company' is correct because liabilities represent the obligations owed to creditors, which are claims against the company's assets.