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 best describes the principle of double-entry accounting as it relates to the fundamental accounting equation?

Every transaction affects at least two accounts, ensuring that Assets = Liabilities + Equity remains balanced.

Each transaction is recorded only once, either as a debit or a credit.

Double-entry accounting only applies to revenue and expense accounts.

It allows for the omission of certain transactions if they do not affect cash.

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Verified step by step guidance

Understand the principle of double-entry accounting: Double-entry accounting ensures that every financial transaction affects at least two accounts, maintaining the balance of the fundamental accounting equation: Assets = Liabilities + Equity.

Analyze the fundamental accounting equation: The equation represents the relationship between a company's resources (assets), obligations (liabilities), and ownership interest (equity). Double-entry accounting ensures this equation remains balanced after every transaction.

Recognize the mechanics of double-entry accounting: Each transaction is recorded as both a debit and a credit in two separate accounts. Debits and credits must always equal each other to maintain balance.

Evaluate the incorrect options: Double-entry accounting does not apply only to revenue and expense accounts; it applies to all accounts. Transactions are not recorded only once, and omission of transactions is not allowed, even if they do not affect cash.

Conclude the correct description: The correct answer is that every transaction affects at least two accounts, ensuring that the fundamental accounting equation remains balanced.