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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following is the most common way to transfer risk in financial accounting?

Issuing common stock

Revaluing fixed assets

Increasing retained earnings

Purchasing insurance

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Verified step by step guidance

Understand the concept of risk transfer in financial accounting. Risk transfer involves shifting the financial impact of potential losses to another party, typically through a contractual agreement.

Review the options provided: Issuing common stock, revaluing fixed assets, increasing retained earnings, and purchasing insurance. Consider how each option relates to the concept of risk transfer.

Analyze why purchasing insurance is the most common way to transfer risk. Insurance contracts allow an entity to pay a premium to an insurer, who assumes the financial burden of specific risks, such as property damage or liability claims.

Compare purchasing insurance to the other options: Issuing common stock raises capital but does not transfer risk; revaluing fixed assets adjusts asset values but does not mitigate risk; increasing retained earnings strengthens financial reserves but does not shift risk to another party.

Conclude that purchasing insurance is the correct answer because it directly involves transferring the financial impact of risks to an insurance company, which is a widely used and effective method in financial accounting.