These are the Snapshots from the book Financial & Managerial Accounting 17th Edittion
Define each of the following shortly and also provide at least 2 examples for each from the above book mentioned
- Asset
- Liability
- Capital or Owners Equity
- Revenue
- Expense
ASSETS Accesat are owned by busiresen Tea pe to be per la most cases, the benefit to future operation comes in the form of por The positiefsture cash flows may come directly as the asset is couverte can fealleries of a neuvable) e indirectly as the asset is used in operating te hale e she sets that result in ptive future .sh flows (buidu.zs and landmade waaraanut a product for sale). Asses ay hu e definite pysical characteristics , wing machinery, es an inventory of merchandise. On the other hand, some as a na mpyutal at tangibe form, but in the form of valuable legal claims or rights: e due imm customers, investments in g vernment bords, and patent nights heid De of the most hesis and the time most controversial roblems in acting Leermining the correct dollar amount for the various stics of a business. Al present, dy pad wanting principles call for the valuation of some assets in a balanced mather than it their current value. T. specific accounting principles supporting cards fies we discussed below. INTERNA My courses experience prolonged and serious inflation. Inflation can under bung sumphon Accounting rules have been designed in some for the cum purchasing power using indexes provided by the government. Beca ran soporte bow requires Mexican companies to adjust their ance to add the impact of inflation on a company's financial position.com te provide a more transparent representation of the company's linercial condition in is gnificant, the indexes are used to devalue the Mexican Currency Ach research into this problem, at one time the FASB renuired on a thai corporations annually disclose financial data adjusted for the effects of inflatione proti me, this disclosure is optional as judged appropriate by the accountant who fancial statements LIABILITIES Elabilities art financial obligations or debts. They represer: --gative future cash flowing apie The person organization to whom the debt is owed is called a creditar. All businesses have liabilities, even the largest and most successful companies after chat merchandise, supplies, and services on account." The liabilities arising from such dass alled accounts payuhle. Many businesses borrow money to finance expenses the purchase of high-cost assets and pay for them over time. When obtaining a loan, tre wally mustriga a formal note payable. A nore payable is a written promise 1977 he amount owed by a maticular date and usually calls for the paymen: of interest as we Abatement of Pation www in cotes payable, inele noites primes and genie sens, o para w but they are similar in that both the compte the Loslities are ways in the order in which alexperted to the repaid is tut are similar muy be cummed to wed by detail in the mancial For me if a company had openses payable the end of the year for ampli was interesul, it might come these into a single line called accredente The word accredis in cong term communicating that the payment of certain experts be delayed referred Liabilities reenchime in the borrower's As we shall see the own have claims on the company's but in the set of the law, teda claims to prove those of the own. This means that creditors are to be po Nill even if such pwynt would has the set of the business and leave nothing Bowen OWNERS' EQUITY Owner'equity is the name on the sin Because liabilities of credo claims he legal prily ever those of the owner owners equity is a at if you are the owner of his entitled to assets that we left after the claims of creditors have been said in full. Therefore, we quity is always equal to Rotallite For ruample wing the data from the strated hilance sheet of Vagabond Temel Agency (Exhibit 2-1) $300.000 Vagabond hluta And tutub the owners must be Owen equity does no represent a specific chim to cash or any other particular net Rather, it is the owner overall fiscal interest in the elite comparty Increases in Owners' Equity The owners' equity in a bien comes from two 2. Earnings from profitable operation of the bus. Decreases in Owner' Eculty Deere in REVENUE Lowe'equity to increase. When a bus tendens SWE En prior and addened during bande tout, wally receive cash or acquires account se fute customer. The info of cash and receivables from customers increases the estas la total niets. Thus, revenue is the gross increase in one ing from operation of the busi Various second titles are wed to describe different types of revenue. For example, a beni new that sella merchandise rather that service, such as Walmart or General Motors, De term les describe its ment in the professional practices of physicians, CPA mes mentally is called Fees Earned A real estate office, however, might calling Overnight Auto Service income statement reveals that the company records its rythu separate account (1) Recir Service Revenue and (2) Rent Reche Eure A profes sional sport team might also have separate the accounts for Ticket Sales Conso Rund Roere from Telation Contacts Arte ype of revenue common tomaty bis net Roewe (or Interest Farnedtemming from the rest can Bank deposreivable, and interest-begimestments The Realization Principle: When to Record Revenue When should meetod in most cases, the maintien principle indicates that revenue should be roghand at the prodare sold or services are rendered At this point, the business Mas sentially completed the earnings process, and the sales value of the goods or services be memured objectively. At any time por to the sale, the ultimate value of the goods of rice wild can only be estimated. After the sale, the only step that remains is to collect from the newly relatively certain event. mune that on July 25 a radio station contracts with a car dealership to at dvertisements during August. If all of the agreed-upon ads are aired Ampuh, but payment for the ade is met received til September, in which month should the the sense that cand a avertising revenue. In other words, revenue is recognition wned it and he contract is signed or when cash payment for pre EXPENSES Each in the profumi amples include the comployees salaries, advertising, rent, utilities, and the what income depreciation of buildings, automobiles, and office equipment. All these comes we neces wary stract and serve customers and thereby en tevenue Expenses are often called the costs of doing business that is, the cost of the new activities necessary to carry on As expense ascus decrease in any The related changes in the account ing equation can be cite () a decrease in assor () an increase in abilities. An expense Test if payment on at the time that the expense is incurred. If the expense will not be paid until later, for example, the purchase of advertising services on sccount, the recording of the expense will be accompanied by an increase in labilities The Matching Principle:Wher to Record Expenses A significant relo tionship betwee and expenses Erpes are curred for the purpose of pro during in the masurement of income for a period, revenue should be offset by all the red i prodother. This concept of offsetting expert Avenue basis of came and effect is called the matching principle. Times an important factor in matching offsetting) revenue with the related expenses for cumple in the preparation of monthly income statement, it is important to set this month expenses grimst this month revenue. We should not offer this m) expenses against last month revenue because there is no cause and effect rela to ship between the two Anume that the saints earned by a company marketing team for serving custo in July are paid until early Auger in which month should these were beregada pens July or August The answer is July, because July is the month in which the marting a service held te wees as me and cash receipts not one and the same expenses and cash payments are not incl. In fact, the cash per mert of an upenat may occur before her er in the same period that revenue is comed Ia deciding when to report an expense is the income statement, the entical questions." shpened does the cathependine help to producere ment of cash court Expenditures Benefiting More Than One Accounting Period Mary medamadiely business heeft two or more conting periode France thes for sample rally cover a period of 12 months of a compara prepares monthly income meni ponion of the cost of the picy should be allocate ince expense that the policy is in fore. In this compartiment or the cost of de policy by amanet e 13 non policy cost 13,400, for cumple, the insurance
