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

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Recognizing an expense may be accompanied by which of the following?

An increase in owner's equity

A decrease in revenue

An increase in liabilities, such as accounts receivable

A decrease in assets, such as cash or inventory

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Verified step by step guidance

Step 1: Understand the concept of recognizing an expense. In financial accounting, recognizing an expense means recording it in the financial statements when it is incurred, regardless of when payment is made.

Step 2: Recall the accounting equation: Assets = Liabilities + Owner's Equity. Recognizing an expense typically affects this equation by decreasing assets or increasing liabilities, which in turn reduces owner's equity.

Step 3: Analyze the options provided. An increase in owner's equity is incorrect because expenses reduce owner's equity. A decrease in revenue is also incorrect because expenses are recorded separately from revenue. An increase in liabilities, such as accounts receivable, is incorrect because accounts receivable is an asset, not a liability.

Step 4: Focus on the correct answer: A decrease in assets, such as cash or inventory. When an expense is recognized, it often results in a reduction of assets. For example, paying for supplies decreases cash, or using inventory decreases the inventory asset.

Step 5: Conclude that recognizing an expense is accompanied by a decrease in assets, as this aligns with the principles of financial accounting and the impact on the accounting equation.