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

According to the fundamental accounting equation, which of the following best represents the equation?

Assets = Liabilities + Owner's Equity

Liabilities = Assets + Owner's Equity

Assets = Revenues - Expenses

Owner's Equity = Assets - Revenues

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Verified step by step guidance

Understand the fundamental accounting equation, which is the cornerstone of financial accounting. It states that the resources owned by a business (Assets) are financed either by obligations (Liabilities) or by the owner's contributions (Owner's Equity).

The equation is expressed as:

Assets = Liabilities + Owner's Equity

. This equation ensures that the balance sheet remains balanced.

Analyze the options provided in the problem. The correct representation of the fundamental accounting equation is:

Assets = Liabilities + Owner's Equity

. Other options do not align with the fundamental accounting principle.

Option 2,

Liabilities = Assets + Owner's Equity

, is incorrect because liabilities are not calculated by adding assets and owner's equity.

Option 3 and Option 4, which involve revenues and expenses, are also incorrect because they pertain to the income statement, not the balance sheet. The fundamental accounting equation is strictly related to the balance sheet.