Introduction Introduction toto

Accounting Accounting 120120

Mr. Binet Mr. Binet

Moncton High SchoolMoncton High School

Class #15: Claims Against the Assets

1. We will learn about what happens when a business closes down and the concept of claims against the assets.

2. You will have a chance to practice setting up claims against assets in a spreadsheet.

In Today’s Class…In Today’s Class…

Who owns the assets of a business?

Those persons who provided the funds used to acquire the assets.

These people have a claim against the assets of the business.

Claims Against the Claims Against the AssetsAssets

If those persons who provided the funds are not the owners, they are creditors.

Refer to figure 2.8 on page 29 to see how creditors and debtors are shown on a spreadsheet.

Claims Against the Claims Against the AssetsAssets

As shown on the left side of the balance sheet, Janet’s business assets are $43 763.10.

The right side of the balance sheet shows that these assets or the funds to obtain them, were provided by the bank, $9 000; the other creditors, $1 905; $750 and Janet herself, $32 108.10

Claims Against the Claims Against the AssetsAssets

Expressed in another way, the fundamental accounting equation is:

$43 763.10 = $9 000 + $1 095 + $750 + $32 108.10

Claims Against the Claims Against the AssetsAssets

Assets Creditors’ claims against the assets

Owner’s claim agaibnst the

assets

If a business is closed down, to whom do the assets belong?

They still belong to the owners and creditors.

However, the claims of the creditors are settled first, followed by the claim of the owner.

Creditors’ Claims FirstCreditors’ Claims First

This means that the owner has to accept any losses that might occur from selling off any assets.

Or, the owner may benefit from any profits that may occur.

The owner always gets what is left after the claims of the creditors have been paid!

Creditors’ Claims FirstCreditors’ Claims First

Suppose Janet’s business clsoed and in the process she suffered a loss of $7 200.

$36 564.10 = $9 000 + $1 095 + $750 + $32 108.10

Claims Against the Claims Against the AssetsAssets

Assets (now all cash, down

$7 2000)

Creditors’ claims remain the same against Janet

Owner’s claim down $7 200.

Complete Section Exercises 1 and 2 on page 31 and 32.

Open the Excel file “Section 2-3, Exercises 1-2.xls” on the O:\Binet drive and immediately save-as to your U: drive.

Complete the two questions within the Excel file INDIVIDUALLY and e-mail to me, adam.binet@nbed.nb.ca

Quick CheckQuick Check

Chapter 1 textbook questions.

Assignments Due Thus Assignments Due Thus FarFar