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

A financial manager's functions must be carried out while also balancing which of the following equations?

Revenue = Expenses + Net Income

Assets = Liabilities - Equity

Assets = Liabilities + Equity

Cash Flow = Revenue - Expenses

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Verified step by step guidance

Step 1: Understand the fundamental accounting equation, which is 'Assets = Liabilities + Equity'. This equation represents the balance sheet and is the cornerstone of financial accounting.

Step 2: Break down the equation: 'Assets' are resources owned by the company, 'Liabilities' are obligations owed to external parties, and 'Equity' represents the owner's residual interest in the company after liabilities are subtracted.

Step 3: Recognize that this equation must always balance because it reflects the double-entry accounting system, where every transaction affects at least two accounts to maintain equilibrium.

Step 4: Compare the given equations in the problem. While 'Revenue = Expenses + Net Income' and 'Cash Flow = Revenue - Expenses' are valid financial relationships, they do not represent the fundamental accounting equation that balances the balance sheet.

Step 5: Conclude that the correct equation balancing the financial manager's functions is 'Assets = Liabilities + Equity', as it ensures the integrity of the financial statements and reflects the company's financial position.