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 should be considered to maximize owner's equity value according to the fundamental accounting equation?

Increase assets while keeping liabilities constant or decreasing liabilities.

Decrease both assets and liabilities by the same amount.

Increase expenses to reduce net income.

Increase liabilities while keeping assets constant.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation shows the relationship between a company's resources (assets), obligations (liabilities), and the residual interest of the owners (owner's equity).

To maximize owner's equity, focus on increasing the difference between assets and liabilities. Owner's equity increases when assets grow or liabilities decrease, as per the equation.

Evaluate the first option: Increasing assets while keeping liabilities constant or decreasing liabilities will increase owner's equity because the net difference (Assets - Liabilities) grows.

Evaluate the second option: Decreasing both assets and liabilities by the same amount does not change owner's equity because the net difference remains the same.

Evaluate the remaining options: Increasing expenses reduces net income, which ultimately decreases owner's equity. Similarly, increasing liabilities while keeping assets constant reduces owner's equity because liabilities grow without a corresponding increase in assets.