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

What is the impact on the fundamental accounting equation when a company issues common stock for cash?

Equity increases and liabilities decrease by the amount of cash received.

Assets and equity both increase by the amount of cash received.

Assets increase and equity decreases by the amount of cash received.

Assets increase and liabilities increase by the amount of cash received.

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Verified step by step guidance

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

Recognize that issuing common stock for cash involves two key components: the company receives cash (an asset) and increases its equity (ownership interest).

Determine the impact on assets: When cash is received, the company's assets increase by the amount of cash received.

Determine the impact on equity: Issuing common stock increases the company's equity by the same amount as the cash received, as it represents ownership contributions.

Conclude that there is no impact on liabilities in this transaction, as the company is not borrowing or incurring any obligations. Therefore, both assets and equity increase by the amount of cash received.