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

Your greatest tool to building wealth, according to the fundamental accounting equation, is _____________.

Liabilities

Owner's Equity

Expenses

Revenue

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation represents the relationship between a company's resources (assets), obligations (liabilities), and the owner's residual interest (owner's equity).

Recognize that building wealth is directly tied to increasing Owner's Equity. Owner's Equity represents the net worth of the business after liabilities are subtracted from assets.

Consider how Owner's Equity can grow. It increases through profits generated by the business, which are retained rather than distributed, and through additional investments made by the owner.

Analyze the role of Revenue and Expenses in affecting Owner's Equity. Revenue increases Owner's Equity, while Expenses decrease it. Therefore, generating higher revenue and controlling expenses are key strategies for building wealth.

Conclude that Owner's Equity is the correct answer because it directly reflects the wealth-building potential of the business, as opposed to Liabilities (which are obligations) or Expenses (which reduce equity).