Table of contents

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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

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

If total assets decrease and liabilities remain unchanged, what must happen to equity according to the accounting equation?

Equity remains unchanged.

Equity must decrease by the same amount as the decrease in assets.

Liabilities must increase to offset the decrease in assets.

Equity must increase by the same amount as the decrease in assets.

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Verified step by step guidance

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

If total assets decrease and liabilities remain unchanged, the decrease in assets must be offset by a corresponding change in equity to maintain the balance of the equation.

Since liabilities are not changing, the only way to balance the equation is for equity to decrease by the same amount as the decrease in assets.

This is because equity represents the residual interest in the assets of the entity after deducting liabilities. A decrease in assets without a change in liabilities directly reduces equity.

Conclude that when total assets decrease and liabilities remain unchanged, equity must decrease by the same amount as the decrease in assets to maintain the balance of the accounting equation.