reading and writing

• assets are the economic resources you control that have resulted from past events and can provide you with economic benefits
• Control means that you have the exclusive right to enjoy those benefits and the ability to prevent others from enjoying those benefits.
• Some examples of assets are the following: 1. Cash 2. Accounts Receivable 3. Inventories 4. Equipment 5. Land and Building 6. Intangible Assets
• Liabilities are your present obligations that have resulted from past events and can require you to give up economic resources when settling them.
• Assets = Liabilities + Equity
• Legal obligation – an obligation that results from a contract, legislation, or other operation of law;
• Constructive Obligation – an obligation that results from your past actions (e.g., past practices or published policies) that have created a valid expectation on others that you will accept and discharge certain responsibilities.
• obligation means a duty or responsibility
• Some examples of liabilities are the following: 1. Accounts Payable 2. Unearned Revenue
• Equity reflects the residual claim or net assets of the owners of an entity.
• Revenues – Expenses = Net Income / (Net Loss)
• A business earns revenue when it sells its products or its services.
• Expenses = Matching principle states that no revenue can be earned without incurring corresponding expenditures
• The capital account of the equity represents the net investments of the business
• business will have net income if its revenues exceed expenses and will have a net loss if its revenues are less than its expenses.
• Liabilities


  Obligations of the firm arising from past events which are settled in the future. These are the debts and obligations of the company to another entity.
• Current Liabilities


  Liabilities that fall due (paid, recognized as revenue) within one year after year-end date
• Non-Current Liabilities


  Liabilities that do not fall due (paid, recognized as revenue) within one year after year-end date
• Current Liabilities


  • Expected to be settled or paid out by the entity within 12 months
  • Paying out does not necessarily mean payment through cash, but can also include conversion and/or refinancing
• Accounts Payable


  Amounts due, or payable to, suppliers for goods purchased on account or for services received on account. Accounts payable contemplate only about borrowings involved in the company's production process (e.g. purchase of raw materials).
• Notes Payable


  Amounts due to third parties supported by promissory notes. These are written promises of the entity to pay a sum certain in a future determinable time.
• Accrued Expenses


  Expenses that are incurred but not yet paid (examples: salaries payable, taxes payable)
• Unearned Revenue


  Cash collected in advance; This is a form accrued liability related to goods or services that the entity has yet to deliver, but has already received payments from a customer
• Current Portion of Long-Term Debts


  Long-term debts payable within the coming year. The current portion of long-term debts is considered a current liability notwithstanding the fact that the remaining debt may be due many years from now.
• Other payables


  Payables due from the entity outside normal course of its business. These include common items such as dividends payable and interest payable, and unusual items such as payables arising from law suits. As long as they are payable within the year but do not enter into the other previous current classifications, they can be included in this catch-all classification.
• Assets


  The resources owned and controlled by the firm
• Asset types

  • Current Assets
  • Non-Current Assets
• Current Assets


  • Assets that can be realized (collected, sold, used up) one year after year-end date
• Non-Current Assets


  • Assets that cannot be realized (collected, sold, used up) one year after year-end date
• Non-Current Assets


  • Property, Plant and Equipment (equipment, furniture, building, land)
  • Long-term investments
• Asset types

  • Tangible Assets
  • Intangible Assets
• Tangible Assets


  Physical assets such as cash, supplies, and furniture and fixtures
• Intangible Assets


  Non-physical assets such as patents and trademarks
• Current Assets


  • Assets expected to be realized within the ordinary course of business, or a span of 12 months, whichever is longer
• Cash


  Money on hand, or in banks, and other items considered as medium of exchange in business transactions
• Accounts Receivable


  Amounts due from customers arising from credit sales or credit services
• Notes Receivable


  Amounts due from clients supported by promissory notes
• Inventories


  Assets held for resale
• Supplies


  Items purchased by an enterprise which are unused as of the reporting date
• Prepaid Expenses


  Expenses paid in advance. They are assets at the time of payment and become expenses through the passage of time