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 is the balance sheet equation?

Assets = Liabilities + Equity

Assets = Revenues - Expenses

Equity = Assets - Revenues

Liabilities = Assets + Equity

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Verified step by step guidance

Step 1: Begin by understanding the purpose of the balance sheet equation. The balance sheet equation represents the fundamental accounting principle that a company's assets are financed by liabilities and equity.

Step 2: Recall the basic accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation ensures that the balance sheet remains balanced, as every asset is funded by either debt (liabilities) or ownership (equity).

Step 3: Analyze the other options provided in the problem. For example, \( \text{Assets} = \text{Revenues} - \text{Expenses} \) is incorrect because revenues and expenses are part of the income statement, not the balance sheet.

Step 4: Similarly, \( \text{Equity} = \text{Assets} - \text{Revenues} \) is incorrect because equity is derived from the balance sheet equation, not by subtracting revenues from assets.

Step 5: Finally, \( \text{Liabilities} = \text{Assets} + \text{Equity} \) is incorrect because liabilities are not calculated by adding assets and equity; instead, liabilities and equity together fund the assets.