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

2. Transaction Analysis

Trial Balance

Financial Accounting

2. Transaction Analysis

Trial Balance

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Multiple Choice

When a company makes a periodic payment on an installment note, what is the effect on the financial statements?

Only liabilities decrease; assets and expenses are unaffected.

Assets increase and liabilities decrease by the payment amount.

Both assets and liabilities decrease by the payment amount.

Assets decrease, liabilities decrease, and expenses increase by the interest portion of the payment.

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Verified step by step guidance

Understand the nature of an installment note: An installment note is a type of loan where the borrower makes periodic payments that include both principal repayment and interest expense.

Break down the payment components: Each payment consists of two parts: (1) the principal portion, which reduces the liability (loan balance), and (2) the interest portion, which is recorded as an expense.

Analyze the effect on assets: The payment is made using cash, which is an asset. Therefore, the company's assets decrease by the total payment amount.

Analyze the effect on liabilities: The principal portion of the payment reduces the loan balance, which decreases liabilities.

Analyze the effect on expenses: The interest portion of the payment is recorded as an expense, increasing the company's total expenses for the period.