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

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Ordinary and necessary business expenses are deductible only to the extent they are _____ in amount.

reasonable

arbitrary

excessive

unlimited

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Verified step by step guidance

Understand the concept of 'ordinary and necessary business expenses' in financial accounting. These are expenses that are common, accepted, and helpful for the operation of a business.

Recognize that the deductibility of these expenses is subject to certain limitations to ensure fairness and prevent abuse of tax deductions.

Learn that the term 'reasonable' is used to describe the extent to which these expenses can be deducted. This means the expense must be appropriate and not excessive in relation to the business activity.

Eliminate incorrect options such as 'arbitrary,' 'excessive,' and 'unlimited,' as they do not align with the principle of reasonableness in financial accounting.

Conclude that the correct answer is 'reasonable,' as it reflects the standard applied to determine the deductibility of ordinary and necessary business expenses.