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

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following best defines revenues in financial accounting?

Revenues are increases in owners' equity resulting from investments by owners.

Revenues are cash received from any source, including loans and owner contributions.

Revenues are inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations.

Revenues are decreases in liabilities due to payment of expenses.

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Verified step by step guidance

Step 1: Understand the concept of revenues in financial accounting. Revenues are defined as inflows of assets or settlements of liabilities that arise from delivering goods, rendering services, or conducting activities that are part of the entity's primary operations.

Step 2: Analyze the options provided in the problem. Each option represents a different interpretation of revenues, and you need to evaluate which aligns with the definition of revenues in financial accounting.

Step 3: Eliminate incorrect options. For example, 'Revenues are increases in owners' equity resulting from investments by owners' is incorrect because investments by owners are classified as contributions to equity, not revenues.

Step 4: Further eliminate options that misrepresent revenues. For instance, 'Revenues are cash received from any source, including loans and owner contributions' is incorrect because revenues are specifically tied to the entity's primary operations, not all cash inflows.

Step 5: Identify the correct definition. The correct answer is: 'Revenues are inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations.' This aligns with the financial accounting definition of revenues.