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 best represents the Fundamental Accounting Equation?

Assets = Revenues - Expenses

Assets = Liabilities + Equity

Liabilities = Assets + Equity

Equity = Assets - Revenues

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Verified step by step guidance

Understand that the Fundamental Accounting Equation is the foundation of financial accounting and represents the relationship between a company's assets, liabilities, and equity.

Recall the correct formula for the Fundamental Accounting Equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation ensures that a company's financial position is balanced.

Analyze why the other options are incorrect: \( \text{Assets} = \text{Revenues} - \text{Expenses} \) is not correct because revenues and expenses are part of the income statement, not the balance sheet. \( \text{Liabilities} = \text{Assets} + \text{Equity} \) is incorrect because liabilities are not the sum of assets and equity. \( \text{Equity} = \text{Assets} - \text{Revenues} \) is incorrect because equity is derived from assets minus liabilities, not revenues.

Recognize that the equation \( \text{Assets} = \text{Liabilities} + \text{Equity} \) reflects the balance sheet structure, where assets are funded by liabilities (debts) and equity (owner's investment).

Conclude that the correct representation of the Fundamental Accounting Equation is \( \text{Assets} = \text{Liabilities} + \text{Equity} \), which is essential for preparing accurate financial statements.