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

Paying cash for supplies previously purchased on account would have what effect on the fundamental accounting equation?

Assets decrease and equity decreases; liabilities remain unchanged.

Assets increase and liabilities decrease; equity remains unchanged.

Assets increase and equity increases; liabilities remain unchanged.

Assets decrease and liabilities decrease; equity remains unchanged.

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Verified step by step guidance

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

Identify the transaction: Paying cash for supplies previously purchased on account. This means cash (an asset) is being used to settle a liability (accounts payable).

Analyze the impact on assets: Cash decreases because it is being used to pay off the liability. Supplies were already recorded as an asset when purchased, so there is no additional increase in assets.

Analyze the impact on liabilities: Accounts payable (a liability) decreases because the debt is being settled with cash.

Conclude the effect on equity: Equity remains unchanged because this transaction does not involve revenue, expenses, or owner contributions/distributions.