Table of contents

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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

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

How does the payment of rent for equipment affect the fundamental accounting equation?

Assets increase and liabilities increase.

Liabilities decrease and owner's equity increases.

Assets increase and owner's equity decreases.

Assets decrease and owner's equity decreases.

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Verified step by step guidance

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

Identify the nature of the transaction: Payment of rent for equipment is an expense, which reduces cash (an asset) and impacts owner's equity by decreasing it due to the expense incurred.

Analyze the impact on assets: Since cash is used to pay rent, the cash account (an asset) decreases.

Analyze the impact on owner's equity: Rent payment is recorded as an expense, which reduces net income. A decrease in net income leads to a decrease in owner's equity.

Conclude the effect: The payment of rent for equipment results in a decrease in assets (cash) and a decrease in owner's equity (due to the expense).