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

Trial Balance

Financial Accounting

2. Transaction Analysis

Trial Balance

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Multiple Choice

Which of the following best describes the purpose of preparing a trial balance in financial accounting?

To record all business transactions in chronological order.

To verify that total debits equal total credits in the ledger accounts.

To prepare the statement of cash flows.

To calculate the net income for the period.

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Verified step by step guidance

Understand the concept of a trial balance: A trial balance is a bookkeeping worksheet in which the balances of all ledger accounts are compiled into debit and credit columns to ensure the accounting equation is balanced.

Recognize the purpose of a trial balance: The primary purpose is to verify that the total debits equal the total credits in the ledger accounts, ensuring the accuracy of the double-entry accounting system.

Eliminate incorrect options: Recording business transactions in chronological order is done in the journal, not the trial balance. Preparing the statement of cash flows and calculating net income are separate processes that use financial statements, not the trial balance.

Focus on the correct option: The trial balance is specifically designed to check the equality of debits and credits, which is a fundamental principle in financial accounting.

Conclude the reasoning: By verifying that debits equal credits, the trial balance helps identify errors in the ledger accounts before preparing financial statements.