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 transactions increases total liabilities?

Issuing common stock for cash

Paying off a bank loan

Purchasing inventory on credit

Collecting cash from a customer for a previous sale

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Verified step by step guidance

Step 1: Understand the concept of liabilities. Liabilities represent obligations that a company owes to external parties, such as loans, accounts payable, or other debts.

Step 2: Analyze each transaction to determine its impact on liabilities. For example, issuing common stock for cash increases equity, not liabilities. Paying off a bank loan decreases liabilities. Collecting cash from a customer for a previous sale affects cash and accounts receivable but does not impact liabilities.

Step 3: Focus on the transaction 'Purchasing inventory on credit.' When inventory is purchased on credit, the company acquires goods without immediate payment, creating an obligation to pay later. This obligation is recorded as accounts payable, which is a liability.

Step 4: Recognize that purchasing inventory on credit increases total liabilities because it adds to accounts payable, which is part of the liabilities section on the balance sheet.

Step 5: Conclude that among the given transactions, 'Purchasing inventory on credit' is the one that increases total liabilities, as it directly creates a new obligation for the company.