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 is NOT true about the fundamental accounting equation?

It must always remain in balance for accurate financial reporting.

It can be rearranged as Equity = Assets - Liabilities.

It states that Assets = Liabilities + Equity.

It allows assets to exceed the sum of liabilities and equity.

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Equity. This equation is the foundation of double-entry accounting and ensures that a company's financial statements are balanced.

Recognize that the equation can be rearranged algebraically to express Equity as Equity = Assets - Liabilities. This rearrangement is valid and commonly used to analyze the financial position of a company.

Note that the equation must always remain in balance for accurate financial reporting. This is a key principle of accounting and ensures that every transaction is properly recorded.

Evaluate the statement 'It allows assets to exceed the sum of liabilities and equity.' This is NOT true because the fundamental accounting equation inherently requires that the sum of liabilities and equity equals assets. Any deviation would indicate an error in the accounting records.

Conclude that the correct answer is the statement that contradicts the fundamental accounting equation, which is 'It allows assets to exceed the sum of liabilities and equity.'