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 term refers to recording an expenditure as an asset in the context of the fundamental accounting equation?

Depreciation

Capitalization

Amortization

Expensing

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Equity. Recording an expenditure as an asset means it is added to the 'Assets' section of the equation.

Learn the definition of 'Capitalization': It refers to recording an expenditure as an asset rather than an expense, with the expectation that the asset will provide future economic benefits.

Differentiate between the terms: 'Depreciation' refers to the allocation of the cost of a tangible asset over its useful life, 'Amortization' refers to the allocation of the cost of an intangible asset over its useful life, and 'Expensing' refers to immediately recognizing an expenditure as an expense in the income statement.

Recognize that 'Capitalization' is the correct term for recording an expenditure as an asset, as it aligns with the principle of matching costs with future benefits.

Apply this concept in practice: When a company purchases equipment, for example, it capitalizes the cost by recording it as an asset on the balance sheet, rather than expensing it immediately.