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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following is the typical risk equation used in accounting and finance?

Risk = Assets − Liabilities

Risk = Revenue ÷ Expenses

Risk = Net Income × Tax Rate

Risk = Probability of Event × Impact of Event

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Verified step by step guidance

Understand the concept of risk in accounting and finance: Risk is typically defined as the potential for loss or uncertainty in outcomes, often quantified to assess its impact on financial decisions.

Recognize that the typical risk equation in accounting and finance is not directly related to standard financial metrics like assets, liabilities, revenue, or expenses. Instead, it involves assessing the likelihood and impact of uncertain events.

Break down the correct equation: Risk = Probability of Event × Impact of Event. This equation combines two key components: (1) the probability or likelihood of an event occurring, and (2) the financial impact or consequence if the event occurs.

Understand the components: Probability of Event is expressed as a percentage or decimal representing the chance of occurrence, while Impact of Event is quantified in monetary terms or other measurable units.

Apply the equation conceptually: To calculate risk, multiply the probability of an event by its potential impact. This helps businesses and accountants evaluate and manage risks effectively in decision-making processes.