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

Which statement best describes the concept of realization as it applies to gain or loss?

A gain or loss is realized when an asset is exchanged or sold, and the transaction is completed.

A gain or loss is realized only when cash is received from the sale of an asset.

A gain or loss is realized when the fair value of an asset increases or decreases, regardless of a transaction.

A gain or loss is realized when revenue is recognized, even if no transaction has occurred.

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Verified step by step guidance

Step 1: Understand the concept of realization in financial accounting. Realization refers to the point at which a gain or loss is recognized in the financial statements, typically when a transaction involving an asset is completed.

Step 2: Analyze the options provided in the problem. Each option describes a different scenario for when a gain or loss might be realized.

Step 3: Eliminate incorrect options based on the definition of realization. For example, gains or losses are not realized simply due to changes in fair value or without a completed transaction.

Step 4: Focus on the correct scenario: A gain or loss is realized when an asset is exchanged or sold, and the transaction is completed. This aligns with the principle that realization requires a completed transaction.

Step 5: Confirm your understanding by reviewing the concept of realization in accounting standards, which emphasize the importance of a completed transaction for recognizing gains or losses.