BASIC ACCOUNTING PART 1

PROF. NITSIS BUSTAMANTE

ACCOUNTING:

Is the process of measuring, recording, classifying, and summarizing financial information that is used in making economic decisions.

CONCEPTS

ASSETS:

Anything of value that is owned is called an assets. Are the cash and noncash resources owned by a business.

REAL ACCOUNT

ACCOUNTING EQUATION:

ASSETS = LIABILITIES + OWNER’S EQUITY

ASSETS ACCOUNTS: + -

1. Current Assets: Cash or other assets that are reasonbaly

expected to be realized in cash business or with one year.

The assets of a company are often divided into four categories:

2. Investments:The investments category include assets,

generally of a long term nature, that are not used in the normal operation of a business and that management does not plant to convert to cash within the next year.

The assets of a company are often divided into four categories

3. Property , plant and equipment or Fixed Assets:

Property plant and equipment includes long term assets or tangible assets, that are used in the continuing operation of the business

The assets of a company areoften divided into four categories:

Other Assets or intangible assets:

Intangible assets are long term assets that have no physical substance but have a value based on rights or priviligies that belong to the owner.

The assets of a company areoften divided into four categories:

CASH, INVESTMENTS, ACCOUNTS RECEIVABLE, INVENTORY, SUPPLIES, LAND BUILDING, EQUIPMENT AND VEHICLES.

INSURANCE PAID IN ADVANCE, PREPAID INTEREST, COST OF ORGANIZATION, UNEMPLOYMENT FUND, TRADEMARK, PATENTS, FRANCHISE, ROLLING EQUIPMENT, OFFICE FURNITURE.

EXAMPLES: ASSETS

An amount owed is called liability.

LIABILITIES

LIABILITIES

+-

Liabilities are divided into two categories:

1. Current liabilities: The category called current liabilities is made up of obligations due whithin the normal operating cycle of the business or within a year.

LIABILITIES

2. Long term liabilities:

Debts of a business for more than one year.

LIABILITIES

LONG TERM BANK LOAN, BANK OVERDRAFT, SHORT TERM BANK LOAN, TRADE PAYABLES, TAX PAYABLE.

INCOME TAX PAYABLE, ITBMS PAYABLE, PAYABLE DOCUMENTS, BONDS PAYABLE, MORTAGE PAYABLE, RESERVE ANTIQUE PREMIUMS, RESERVE FOR COMPENSATION

EXAMPLES: LIABILITY

The terms owner´s equity, propiertoship, capital and net worth. They all stand for the owner´s interest in the company. Cash or goods useds to generate income either by investing in a business or a different income prooperty.

CAPITAL

OWNER ´S EQUITY Or CAPITAL

+-

PERSONAL CAPITAL, WORKING CAPITAL, COMMON STUCKS, AND PREFERED STUCKS,.

PERSONAL OR RETIREMENT, RETAINED EARNING , SUMMARY OF REVENUES AND EXPENSES.

EXAMPLES: OWNER S EQUITY OR CAPITAL

Classifying the next accounts:

1. Cash2. Amount owed to creditor3. Offce machines4. Delivery equipment5. Amount a business worth6. Factory building7. Unpaid electric bill8. Office furniture9. Any amount owned10. Any amount owed11. Difference between total assets and total liabilities.

WORKSHOP

12. Accounts receivable, supplies, inventory, land, buildings, equipment and vehicles, long term bank loan, short term bank loan, trade payables, tax payable, personal capital, working capital, nominal stucks,

The accounting equation is true of all balance sheets. This drill gives you practice in using the accounting equation.

Instructions: Find the missing amount in the accounting for each of the business listed below. Enter this amount in the answers column.

Using the accounting equation:

No. Assets = Liabilities

+Capital Answes

1 4,000 =1,000 +__________ 3.0002 20,000 =4,000 +-------- -------3 9,500 =_--?_______ + 5,500 ________4 5,495.95 = 1,345.30 +____?

____________

5 __________ =6,780 +6220.00 ________6 364,777.50 =110,107.50 +_____?__ ________

WORKSHOP