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

Recognition of tax benefits in the loss year due to a loss carryforward requires:

Immediate realization of the tax benefit regardless of future income

Recognition only when the loss carryforward is actually used in a future year

No disclosure or recognition until the carryforward expires

Evidence that future taxable income will be available to utilize the loss carryforward

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Verified step by step guidance

Understand the concept of a loss carryforward: A loss carryforward allows a company to apply a net operating loss (NOL) to future taxable income, reducing future tax liabilities. This is an important tax strategy for companies experiencing losses.

Recognize the accounting principle involved: Tax benefits from a loss carryforward can only be recognized if there is sufficient evidence that future taxable income will be available to utilize the carryforward. This aligns with the principle of conservatism in accounting, which avoids overstating assets or income.

Evaluate the evidence for future taxable income: The company must assess whether it is probable that future taxable income will be generated. This evidence could include projections of future earnings, historical performance, or other relevant factors.

Understand the timing of recognition: The tax benefit is not immediately realized in the loss year unless there is evidence of future taxable income. It is also not deferred until the carryforward is used or expires. Instead, it is recognized when there is reasonable assurance of future taxable income.

Ensure proper disclosure: If the tax benefit is recognized, it must be disclosed in the financial statements, including the assumptions and evidence supporting the recognition. This ensures transparency and compliance with accounting standards.