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

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Which of the following factors does the accounting treatment for a lawsuit depend on?

The personal opinion of the company's management

The company's annual revenue

The likelihood of loss and the ability to reasonably estimate the amount

The number of lawsuits filed in the industry

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Verified step by step guidance

Understand the concept of contingent liabilities: In financial accounting, a contingent liability is a potential obligation that may arise depending on the outcome of a future event, such as a lawsuit.

Identify the criteria for recognizing a contingent liability: According to accounting standards (e.g., GAAP or IFRS), a contingent liability is recognized if two conditions are met: (1) The likelihood of the loss is probable, and (2) The amount of the loss can be reasonably estimated.

Evaluate the likelihood of loss: Determine whether the loss is probable, possible, or remote. Probable means the event is likely to occur, possible means it may occur, and remote means it is unlikely to occur.

Assess the ability to estimate the amount: If the loss is probable, check whether the company can reasonably estimate the amount of the liability. If the amount cannot be estimated, disclosure in the financial statements may be required instead of recognition.

Exclude irrelevant factors: Factors such as the personal opinion of management, the company's annual revenue, or the number of lawsuits filed in the industry are not relevant to the accounting treatment of a lawsuit. Focus solely on the likelihood of loss and the ability to estimate the amount.