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 correctly expresses the fundamental accounting equation?

Assets = Revenues - Expenses

Equity = Assets + Liabilities

Liabilities = Assets + Equity

Assets = Liabilities + Equity

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Verified step by step guidance

Understand the fundamental accounting equation, which is the foundation of financial accounting. It states that the resources owned by a company (Assets) are financed either by debts (Liabilities) or by the owners' claims (Equity).

Break down the equation: Assets = Liabilities + Equity. This means that the total value of a company's assets is equal to the sum of its liabilities and equity.

Analyze why the other options are incorrect: 'Assets = Revenues - Expenses' is not correct because revenues and expenses are part of the income statement, not the balance sheet. 'Equity = Assets + Liabilities' is incorrect because equity is derived from assets minus liabilities. 'Liabilities = Assets + Equity' is incorrect because liabilities are not the sum of assets and equity.

Relate the equation to the balance sheet: The balance sheet is structured based on the fundamental accounting equation, showing assets on one side and liabilities and equity on the other side, ensuring they balance.

Apply this equation in practice: When solving accounting problems, always ensure that the equation holds true. For example, if a company acquires a new asset, it must be financed either by increasing liabilities or equity.