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 correctly represents the fundamental accounting equation?

Liabilities = Assets + Equity

Assets = Revenues - Expenses

Assets = Liabilities + Equity

Equity = Assets + Liabilities

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Verified step by step guidance

Step 1: Understand the fundamental accounting equation, which is the foundation of financial accounting. It states that Assets = Liabilities + Equity. This equation ensures that a company's financial position is balanced.

Step 2: Analyze the options provided in the problem. The correct representation of the fundamental accounting equation is 'Assets = Liabilities + Equity'. This equation reflects the relationship between what a company owns (assets), owes (liabilities), and the owner's residual interest (equity).

Step 3: Eliminate incorrect options by comparing them to the fundamental accounting equation. For example, 'Liabilities = Assets + Equity' is incorrect because liabilities are not the sum of assets and equity. Similarly, 'Assets = Revenues - Expenses' is incorrect because revenues and expenses are part of the income statement, not the balance sheet.

Step 4: Confirm that 'Equity = Assets + Liabilities' is also incorrect because equity is calculated as the residual interest after subtracting liabilities from assets, not the sum of assets and liabilities.

Step 5: Conclude that the correct representation of the fundamental accounting equation is 'Assets = Liabilities + Equity', which aligns with the principles of double-entry accounting and ensures the balance sheet remains balanced.