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 correctly represents the fundamental accounting equation?

Assets = Liabilities + Equity

Equity = Assets - Revenues

Assets = Revenues - Expenses

Liabilities = Assets + Equity

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Verified step by step guidance

Understand the fundamental accounting equation, which is the foundation of financial accounting. It states that a company's assets are financed by liabilities and equity.

The equation is expressed as:

Assets = Liabilities + Equity

. This means that all resources owned by the company (assets) are either owed to creditors (liabilities) or belong to the owners (equity).

Analyze the options provided in the problem. The correct representation of the fundamental accounting equation is

Assets = Liabilities + Equity

. The other options do not align with the fundamental accounting principle.

Option 2,

Equity = Assets - Revenues

, is incorrect because equity is not calculated by subtracting revenues from assets. Equity is derived from the fundamental equation and includes contributions from owners and retained earnings.

Option 3 and Option 4 are also incorrect because they misrepresent the relationship between assets, revenues, expenses, and liabilities. Always refer back to the fundamental accounting equation to verify the accuracy of such statements.