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, the sum of accounts with debit balances must equal the sum of accounts with credit balances. Which of the following best represents this equation?

Assets = Liabilities - Equity

Assets + Liabilities = Equity

Assets = Liabilities + Equity

Assets - Liabilities = Revenue

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Verified step by step guidance

Understand the fundamental accounting equation, which states that the sum of accounts with debit balances (Assets) must equal the sum of accounts with credit balances (Liabilities and Equity). This ensures the accounting system remains balanced.

Recall the correct form of the fundamental accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation represents the relationship between a company's resources (assets) and the claims against those resources (liabilities and equity).

Analyze the options provided in the problem. Compare each option to the correct form of the fundamental accounting equation to determine which one matches.

Option 1 (\( \text{Assets} = \text{Liabilities} - \text{Equity} \)) is incorrect because it does not balance the equation properly. Subtracting equity from liabilities does not represent the relationship accurately.

Option 3 (\( \text{Assets} = \text{Liabilities} + \text{Equity} \)) is correct because it aligns with the fundamental accounting equation, ensuring the balance between debit and credit accounts.