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

Which of the following is the most accurate depiction of the fundamental accounting equation?

Assets = Liabilities + Owner's Equity

Liabilities = Assets + Owner's Equity

Assets = Revenues - Expenses

Owner's Equity = Assets - Revenues

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Verified step by step guidance

Understand the fundamental accounting equation, which is the cornerstone of financial accounting. It states that the resources owned by a business (Assets) are financed either by borrowing (Liabilities) or by contributions from the owners (Owner's Equity).

The equation is expressed as: Assets = Liabilities + Owner's Equity. This equation ensures that the balance sheet remains balanced, as every transaction affects at least two accounts.

Review the incorrect options: 'Liabilities = Assets + Owner's Equity' is incorrect because liabilities are not the sum of assets and owner's equity; they are part of the financing of assets. 'Assets = Revenues - Expenses' is incorrect because revenues and expenses are part of the income statement, not the balance sheet. 'Owner's Equity = Assets - Revenues' is incorrect because owner's equity is derived from assets minus liabilities, not revenues.

Recognize that the correct depiction of the fundamental accounting equation is 'Assets = Liabilities + Owner's Equity,' as it accurately represents the relationship between a company's resources and its financing sources.

Apply this equation in practice by ensuring that every financial transaction recorded in the accounting system adheres to this balance, maintaining the integrity of the financial statements.