Accounting
- Service activity
- Provides quantitative information about economic entities that is intended to be useful in making
economic decisions.
Asset
An asset is a resource with economic value that an individual, corporation, or country owns or
controls with the expectation that it will provide a future benefit. (Google)
Should be classified only into two:
- Current asset
- Non-Current asset
Current Asset
Cash – any medium that a bank will accept at face value. It includes coins, currency, checks,
money orders, bank deposits and drafts.
Cash Equivalents – short term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Notes receivable – written pledge that the customer will pay the business a fixed amount of
money on a certain date
Accounts Receivable – claims against customer arising from sale of services or goods on credit.
This type of receivable offers less security than a promissory note.
Inventories – assets which are held for sale in the ordinary course of a business; the process of
production for sale; or in the form of material and supplies to be consumed in the process of
production or in the rendering of service.
Prepaid Expenses – expenses paid by the business in advance. It is an asset because the business
avoids having to pay cash in the future for a specific expense. These include insurance and rent.
Non-Current Asset
Property, Plant and Equipment – these are tangible asset that are held by an enterprise for use in
the production or supply of goods and services, or for rental to others. It can also be for
administrative purposes which are expected to be used during more than one period.
Included in these items are; land, building, machinery and equipment, furniture and fixtures, motor
vehicles and equipment.
Accumulated Depreciation – a contra account that contains the sum of the periodic depreciation
charges. The balance in this account is deducted from the cost of the related asset – equipment or
buildings – to obtain book value.
Intangible Asset – these are identifiable non-monetary assets without the physical substance held
for use in the production of supply or goods or services.
These include goodwill, patents, copyright, licenses, franchises, trademarks, brand names, secret
processes, subscription list and non-competition agreements.
Liability
A liability is something a person or company owes, usually a sum of money. Liabilities are settled
over time through the transfer of economic benefits including money, goods, or services.
, A. Expects to settle the liability in its normal operating cycle.
B. It holds the liability primarily for the purpose of trading
C. A liability is due to be settled within twelve months after the reporting period.
D. The entity does not have an unconditional right to defer settlement of the liability at least 12
months after the reporting period.
All other liabilities should be classified non-current liabilities
Current liabilities
Accounts Payable - the buyer agrees to pay for them in the near future.
Notes Payable – the business entity is the maker of the note; that is, the business entity is the party
who promises to pay the other party a specified amount of money on a specified future date.
Accrued liabilities – amounts owed to others for unpaid expenses. This account includes
- Salaries payable, utilities payable, interest payable and taxes payable.
Unearned Revenues – when the business entity receives payment before providing its customers
with goods or services.
Current portion of Long-term debt – portions of mortgage notes, bonds and other long-term
indebtedness which are to be paid within one year from the balance sheet date.
Non-Current Liabilities
Mortgage payable – this account records long term debt of the business entity in which the
business entity has pledged certain assets as security to the creditor.
Bonds payable – contract between the issuer and the lender specifying the terms of repayment
and the interest to be changed.
Forms of Business Organizations
Sole Proprietorship
- Single owner called the proprietor,
- Tend to be small service type businesses and retail establishments
Partnership
- Business owned and operated by two or more persons who bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profit
among themselves.
- Each partner is liable for any debt incurred in the partnership
Corporation
- Owned by its stockholders
- The stockholders are not personally liable for the corporation’s debt
- Corporation is a separate legal entity
Activities in Business Organization
Financing Activities
- Service activity
- Provides quantitative information about economic entities that is intended to be useful in making
economic decisions.
Asset
An asset is a resource with economic value that an individual, corporation, or country owns or
controls with the expectation that it will provide a future benefit. (Google)
Should be classified only into two:
- Current asset
- Non-Current asset
Current Asset
Cash – any medium that a bank will accept at face value. It includes coins, currency, checks,
money orders, bank deposits and drafts.
Cash Equivalents – short term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Notes receivable – written pledge that the customer will pay the business a fixed amount of
money on a certain date
Accounts Receivable – claims against customer arising from sale of services or goods on credit.
This type of receivable offers less security than a promissory note.
Inventories – assets which are held for sale in the ordinary course of a business; the process of
production for sale; or in the form of material and supplies to be consumed in the process of
production or in the rendering of service.
Prepaid Expenses – expenses paid by the business in advance. It is an asset because the business
avoids having to pay cash in the future for a specific expense. These include insurance and rent.
Non-Current Asset
Property, Plant and Equipment – these are tangible asset that are held by an enterprise for use in
the production or supply of goods and services, or for rental to others. It can also be for
administrative purposes which are expected to be used during more than one period.
Included in these items are; land, building, machinery and equipment, furniture and fixtures, motor
vehicles and equipment.
Accumulated Depreciation – a contra account that contains the sum of the periodic depreciation
charges. The balance in this account is deducted from the cost of the related asset – equipment or
buildings – to obtain book value.
Intangible Asset – these are identifiable non-monetary assets without the physical substance held
for use in the production of supply or goods or services.
These include goodwill, patents, copyright, licenses, franchises, trademarks, brand names, secret
processes, subscription list and non-competition agreements.
Liability
A liability is something a person or company owes, usually a sum of money. Liabilities are settled
over time through the transfer of economic benefits including money, goods, or services.
, A. Expects to settle the liability in its normal operating cycle.
B. It holds the liability primarily for the purpose of trading
C. A liability is due to be settled within twelve months after the reporting period.
D. The entity does not have an unconditional right to defer settlement of the liability at least 12
months after the reporting period.
All other liabilities should be classified non-current liabilities
Current liabilities
Accounts Payable - the buyer agrees to pay for them in the near future.
Notes Payable – the business entity is the maker of the note; that is, the business entity is the party
who promises to pay the other party a specified amount of money on a specified future date.
Accrued liabilities – amounts owed to others for unpaid expenses. This account includes
- Salaries payable, utilities payable, interest payable and taxes payable.
Unearned Revenues – when the business entity receives payment before providing its customers
with goods or services.
Current portion of Long-term debt – portions of mortgage notes, bonds and other long-term
indebtedness which are to be paid within one year from the balance sheet date.
Non-Current Liabilities
Mortgage payable – this account records long term debt of the business entity in which the
business entity has pledged certain assets as security to the creditor.
Bonds payable – contract between the issuer and the lender specifying the terms of repayment
and the interest to be changed.
Forms of Business Organizations
Sole Proprietorship
- Single owner called the proprietor,
- Tend to be small service type businesses and retail establishments
Partnership
- Business owned and operated by two or more persons who bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profit
among themselves.
- Each partner is liable for any debt incurred in the partnership
Corporation
- Owned by its stockholders
- The stockholders are not personally liable for the corporation’s debt
- Corporation is a separate legal entity
Activities in Business Organization
Financing Activities
