Basic Accounting Concept (Week 02)

• Personal Financial Statement


  are planning tools that provided an up to evaluation of your financial well being
• Budgets


  allows you to monitor and control spending, because they are based on expected income and expenses
• Accounting


  a system identifies, records and communicates relevant economic events to interested users
• Recording, Classifying, Summarizing, Interpreting


  4 phases of Accounting
• Recording


  also called “Bookkeeping”
• Recording


  A systematic and chronological recording business transactions
• Chronological


  transactions should be recorded in accordance with the date of the business transactions, from the first day of the month to the last day of the month
• Classifying


  sorting of the business transactions to their specific accounts
• Summarizing


  After each period accounting period, data recorded are summarized through financial statements
• Interpreting 


  These are the accountants interpretation the Financial Statement
• Interpreting 


  also called “Analysis Report”
• Balance Sheets, Income Statement, Statement of Retained Earnings, Statement of Cash Flows 


  Types of Financial Statements
• Basic Finance


  can be defined as the art and science of managing money
• Income Statement 


  sometimes called (Statements of Operations/Statement of Comprehensive Income)
• Income Statement 


  provides financial summary of the firm's operating results during a specific period
• Balance Sheet


  also called “Statement of Financial Position”
• Balance Sheet


  summary statement of the firm's financial position at a given in time
• Current Assets


  Short term assets expected to be converted into cash within a 1 year
• Current Liabilities 


  Short term liabilities expected to be paid within 1 year
• Cash 


  Most basic and familiar of all sets
• Accounts Receivable 


  are oral promise to the entity to receive cash at a lated date
• Short Term Investment 


  Marketable securities are very liquid short-term investments
• Notes Receivable 


  represents promises to the entity to receive cash at a later date
• Notes Receivable 


  also called “promisory notes”
• Prepayments


  is an amount simply paid in advance for goods or service anticipated to be received by the entity in the future
• Cash, Accounts Receivable, Short Term Investment, Notes Receivable, Merchandise Inventories, Prepayments 


  Current Assets
• Fixed Assets 


  are what we called as the most tangible, longest servings assets a company have. example: Land, buildings, furniture
• Land


  owned by the company being used in business
• Building


  The infrastructure owned by the company that is being used in business
• Intangible Assets


  Lack Lack of physical substance and yet are similarly realizable over long periods of time. Example: Patents, Copyrights, Franchises, Goodwill
• Fixed Assets, Land, Building, Intangible Assets 


  Non Current Assets
• Current Liabilities, Non-Current Liabilities


  Liabilities
• Current Liabilities 


  short term liability is a financial obligation that is to be paid within one year
• Non-Current Liabilities 


  which are entity expects to settle after more than a year
• Accounts Payable


  represents the liability accountants of the company, arising form purchase of merchandise that is intended for sale
• Notes Payable


  the main distinction that notes payable are all written hence, more formal than accounts receivable
• Accrued Liability 


  is an obligation that an entity has assumed, usually in the absence of a confirming document, such as supplier invoice
• Accounts Payable, Notes Payable, Accured Liabilitity


  Non-current Liabilities
• Equity


  is the residual interest of the owners in the assets of the business after considering all liabilities
• Capital Stock


  is comprised of all types of shares issued by a corporation