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

In the context of the fundamental accounting equation, which costs are included in the numerator when calculating the accounting profit break-even point?

Contribution margin

Fixed costs only

Total costs (fixed plus variable)

Variable costs only

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Verified step by step guidance

Understand the fundamental accounting equation: Assets = Liabilities + Equity. This equation is the foundation of financial accounting and helps in analyzing the financial position of a business.

Recognize that the accounting profit break-even point is the level of sales at which total revenue equals total costs, resulting in zero profit. This is a critical concept in cost-volume-profit analysis.

Identify the components of total costs: Fixed costs (costs that do not change with the level of production, such as rent and salaries) and variable costs (costs that vary directly with production, such as raw materials).

Focus on the numerator in the calculation of the accounting profit break-even point. The numerator includes fixed costs only because these are the costs that must be covered to achieve break-even, regardless of production levels.

Understand that contribution margin (sales revenue minus variable costs) is used to cover fixed costs. Once fixed costs are covered, any additional contribution margin contributes to profit.