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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

In financial accounting, what is the effect on the accounting equation when a company goes into debt by taking out a loan?

Assets increase and liabilities increase.

Equity decreases and liabilities decrease.

Assets decrease and equity increases.

Liabilities decrease and assets increase.

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Verified step by step guidance

Understand the accounting equation: Assets = Liabilities + Equity. This equation must always remain balanced.

Analyze the transaction: When a company takes out a loan, it receives cash (an asset), and simultaneously incurs a liability (the obligation to repay the loan).

Determine the effect on assets: The cash received from the loan increases the company's assets.

Determine the effect on liabilities: The loan creates a liability, increasing the company's total liabilities.

Conclude the impact: Since the loan does not directly affect equity, the accounting equation remains balanced with an increase in both assets and liabilities.