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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is a criterion for outlays that may be capitalized as part of a capital asset under the fundamental accounting equation?

The outlay is less than $500.

The outlay is expensed immediately regardless of its nature.

The outlay is incurred for routine maintenance and repairs.

The outlay provides future economic benefits beyond the current period.

Previous problemNext problem

Verified step by step guidance

Understand the concept of capitalization: Capitalization refers to recording an expenditure as an asset rather than an expense. This is done when the expenditure provides future economic benefits beyond the current accounting period.

Review the fundamental accounting equation: Assets = Liabilities + Equity. Capitalized outlays are recorded as assets because they contribute to the company's future economic value.

Identify the criteria for capitalization: For an outlay to be capitalized, it must meet specific criteria, such as providing future economic benefits, being material in amount, and not being routine maintenance or repairs.

Analyze the options provided: Evaluate each option against the criteria for capitalization. For example, routine maintenance and repairs are typically expensed immediately because they do not provide future economic benefits beyond the current period.

Select the correct criterion: The correct answer is the option that aligns with the definition of capitalization, which is 'The outlay provides future economic benefits beyond the current period.'