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 statements is the correct definition of owner's equity?

Owner's equity is the sum of all revenues earned by the business during a period.

Owner's equity is the residual interest in the assets of the entity after deducting liabilities.

Owner's equity is the total value of the company's liabilities.

Owner's equity is the total amount of cash held by the business at any given time.

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Verified step by step guidance

Step 1: Begin by understanding the concept of owner's equity. Owner's equity represents the residual interest in the assets of an entity after deducting liabilities. It is essentially what remains for the owners once all debts are paid.

Step 2: Analyze the options provided in the problem. The first option states that owner's equity is the sum of all revenues earned during a period. This is incorrect because revenues are part of the income statement and do not directly define owner's equity.

Step 3: Evaluate the second option, which states that owner's equity is the residual interest in the assets of the entity after deducting liabilities. This is the correct definition of owner's equity, as it aligns with the accounting equation: Assets = Liabilities + Owner's Equity.

Step 4: Review the third option, which claims that owner's equity is the total value of the company's liabilities. This is incorrect because liabilities are obligations owed to creditors, not the owner's interest in the business.

Step 5: Assess the fourth option, which states that owner's equity is the total amount of cash held by the business. This is incorrect because cash is just one component of assets, and owner's equity encompasses the net value of all assets after liabilities are deducted.