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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Under which type of accounting would a company that owns a life insurance policy most likely record the cash surrender value as an asset on its balance sheet?

Tax accounting

Financial accounting

Managerial accounting

Cost accounting

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Verified step by step guidance

Understand the concept of 'cash surrender value': This refers to the amount a policyholder would receive if they voluntarily terminate a life insurance policy before its maturity or the insured event occurs. It is considered an asset because it represents a tangible value that the company can access.

Identify the purpose of financial accounting: Financial accounting focuses on recording, summarizing, and reporting a company's financial transactions to external stakeholders, such as investors, creditors, and regulators. It ensures that assets, liabilities, and equity are accurately represented on the balance sheet.

Determine why the cash surrender value is recorded as an asset in financial accounting: Since the cash surrender value represents a tangible benefit that the company can access, it qualifies as an asset under financial accounting principles. Assets are resources controlled by the company that provide future economic benefits.

Contrast financial accounting with other types of accounting: Tax accounting focuses on compliance with tax laws and regulations, managerial accounting is used for internal decision-making, and cost accounting deals with analyzing costs for production and operations. None of these other types of accounting would typically record the cash surrender value as an asset on the balance sheet.

Conclude that financial accounting is the correct type of accounting for recording the cash surrender value as an asset: This is because financial accounting adheres to standardized principles (such as GAAP or IFRS) that require the accurate representation of all assets, including the cash surrender value of life insurance policies, on the balance sheet.