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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

To create a balanced budget, one must make sure to:

Record all revenues as owner's equity

Add expenses to assets to balance the equation

Ensure that total assets equal the sum of liabilities and owner's equity ($\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$)

Subtract liabilities from owner's equity to determine assets

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the fundamental accounting equation, which states that Assets = Liabilities + Owner's Equity. This equation is the cornerstone of creating a balanced budget and ensures that the financial statements are accurate.

Step 2: Record all revenues appropriately. Revenues are not directly recorded as owner's equity; instead, they increase net income, which subsequently increases retained earnings, a component of owner's equity.

Step 3: Recognize that expenses are not added to assets. Expenses reduce net income, which decreases retained earnings and owner's equity. Ensure proper classification of expenses in the income statement.

Step 4: To determine assets, use the accounting equation. Rearrange the formula if needed: Assets = Liabilities + Owner's Equity. Subtract liabilities from the total assets to verify the owner's equity, not the other way around.

Step 5: Ensure that all financial transactions are accurately recorded and classified to maintain the balance in the accounting equation. Regularly review and reconcile accounts to confirm that Assets = Liabilities + Owner's Equity.