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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

In the context of accounting, what does it mean to have primary liability on a negotiable instrument?

The party is unconditionally responsible for payment when the instrument is due.

The party is responsible for recording the instrument in the accounting records.

The party is only responsible for payment if the primary party defaults.

The party is responsible for endorsing the instrument to another party.

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Verified step by step guidance

Understand the concept of a negotiable instrument: A negotiable instrument is a written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document. Examples include checks, promissory notes, and bills of exchange.

Define primary liability: In accounting and legal terms, primary liability refers to the unconditional responsibility of a party to fulfill the payment obligation associated with a negotiable instrument when it becomes due.

Differentiate primary liability from secondary liability: Primary liability means the party is directly responsible for payment without conditions, whereas secondary liability applies to parties who are responsible only if the primary liable party defaults.

Analyze the options provided in the problem: The correct answer aligns with the definition of primary liability, which is 'The party is unconditionally responsible for payment when the instrument is due.' The other options describe different roles or responsibilities that do not match the definition of primary liability.

Conclude the explanation: The party with primary liability is the one who must pay the amount stated on the negotiable instrument when it is due, regardless of any other circumstances or conditions.