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 represents the basic accounting equation?

Assets = Revenues - Expenses

Liabilities = Assets + Owner's Equity

Owner's Equity = Assets - Revenues

Assets = Liabilities + Owner's Equity

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Verified step by step guidance

Understand the basic accounting equation: The fundamental principle of accounting is that a company's assets are financed by liabilities and owner's equity. This is expressed as Assets = Liabilities + Owner's Equity.

Break down the components: Assets represent resources owned by the company, liabilities are obligations owed to outsiders, and owner's equity is the residual interest in the assets after deducting liabilities.

Analyze the incorrect options: The equation '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 liabilities are not the sum of assets and owner's equity. Lastly, 'Owner's Equity = Assets - Revenues' is incorrect because owner's equity is derived from assets minus liabilities, not revenues.

Confirm the correct equation: The correct equation is 'Assets = Liabilities + Owner's Equity,' which aligns with the balance sheet structure and ensures the accounting equation remains balanced.

Apply the equation: Use this equation as the foundation for recording and analyzing financial transactions, ensuring that every transaction maintains the balance between assets, liabilities, and owner's equity.