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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 best explains how making payments on a car affects the fundamental accounting equation?

Paying for a car reduces assets (cash) and increases liabilities (car loan), keeping the equation balanced.

Car payments increase both assets and owner's equity.

Paying for a car only affects owner's equity and not assets or liabilities.

Making payments on a car reduces liabilities (car loan) and reduces assets (cash), with no effect on owner's equity.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation must always remain balanced.

Identify the components involved in the transaction: Making payments on a car involves reducing cash (an asset) and reducing the car loan (a liability).

Analyze the impact on assets: When cash is used to make a payment, the cash balance decreases, which reduces the total assets.

Analyze the impact on liabilities: The car loan balance decreases as payments are made, which reduces the total liabilities.

Confirm there is no effect on owner's equity: Since the transaction only affects assets and liabilities, owner's equity remains unchanged, keeping the accounting equation balanced.