Professional Documents
Culture Documents
Accounting Notes
Accounting Notes
Management Accounting
Management accounting provides
economic information for internal
users
Core activities include
formulating plans and budgets
Information used in monitoring
and control within the entity
Ethics in Accounting
Conceptual Framework
CF is a set of concepts defining the nature, purpose and content of generapurpose financial reporting
Users of Accounting
Partnership
Accounting all partners
and businesses
Legally the same entity
unlimited liability
Company
Accounting
shareholders separate
from business
Legal also separate,
thats why limited
liability for shareholders
responsible for
the businesss
debts
Different costs
Historical cost what you first pay when you buy an item
Market value what is it worth now in the market
Replacement cost cost of replacing the item at this moment
Capital: the owners claim to the net assets of the business (total assets total
liabilities = capital)
Drawings: money taken out e.g. for personal use (decreases OE)
Revenue: the income from providing G&S, interest, dividends
Revenue either increases assets or decreases liabilities
-
Buy a book
o Cash goes down 50
o Book goes up 50
o Finish using
o Book goes down 50
You buy a book for $50, sell for $30
o Cash goes down $50, Book goes up $50
o Sell, cash up $30, Revenue up $30, OE up $30
o Book down $50, Expense $50 (finished using)
o Revenue Expense = -$20
o A financial transaction that would have no effect on owners equity
and liabilities would be using the current asset of cash within a
Example
Smart Touch Learning Business
1. Sheena invests $30,000 into business
EQUAL
Assets
S
30,000
Liabilities
0
PLUS
Owners Equity
(owner
30,000 investment)
Total
Assets
30,000
Total Liabilities
and OE
30,000
EQUAL
S
Assets
(1
(2
Cash
+
Land
30,000
-20,000
20,000
Liabilities
0
PLUS
Owners Equity
30,000
Total
Assets
30,000
Assets
Cash
Land
EQUAL
S
10,000
20,000
Total Liabilities
and OE
30,000
Liabilities
0
PLUS
Owners Equity
Total Liabilities
and OE
30,000
(3
EQUAL
Assets
S
Cash
Office
+
supplies +
Land
10,000
500 20,000
Owners
Liabilities
+
Equity
Accts. Payable
Sheena,
+
Capital
500
30,000
Total Liabilities
and OE
30,500
Total Assets
30,500
4. Earn service revenue ($5,500 in cash)
(3
(4
EQUAL
Assets
S
Cash
Office
+
supplies +
Land
10,000
500 20,000
5,500
Total Assets
36,000
Owners
Liabilities
+
Equity
Accts. Payable
Sheena,
+
Capital
500
30,000
Service
revenue
5,500
Total Liabilities
and OE
36,000
Cash
Assets
Office
EQUA
LS
Land
Accts
Liabilities
+
Accts. Payable
Owners
Equity
Sheena,
+
(3
10,000
(4
5,500
supplies +
+
Receive
20,0
500
00
(5
Capital
500
3,000
30,000
Service
revenue
5,500
3,000
Total Liabilities
and OE
39,000
Total Assets
39,000
Cash
+
(3
(4
(6
EQUA
LS
Assets
Office
supplies +
Land Accts
+
Receive
20,0
500
00
3,000
10,000
5,500
-3300
Liabilities
+
Accts. Payable
+
500
Total Liabilities
and OE
35,700
Income Statement
Expenses
Salary
Rent
Computer
Electricity
Total
expenses
Profit
38,500
Expenses
600
1100
1,200
400
Total Assets
35,700
Revenue
Service
revenue
Owners
Equity
Sheena,
Capital
(5500 + 3000)
8500
1200
1100
600
400
3300
5200
EQUA
LS
Assets
Office
supplies +
Cash
+
Land Accts
+
Receive
20,0
500
00
3,000
12,200
-300
Total Assets
35,400
Liabilities
+
Accts. Payable
+
Owners
Equity
Sheena,
Capital
500
-300
Total Liabilities
and OE
35,400
38,500
8)
Cash
+
11,90
0
1,000
Assets
Office
supplies +
EQUA
LS
Land Accts
+
Receive
20,0
500
00
3,000
-1000
Liabilities
+
Accts. Payable
+
200
Total
Assets
35,700
Owners
Equity
Sheena,
Capital
38,500
Total Liabilities
and OE
35,400
Cash
+
12,90
0
9)
9,000
Assets
Office
supplies +
Land Accts
+
Receive
20,0
500
00
3,000
9000
-1000
Total
Assets
35,400
EQUA
LS
Liabilities
+
Accts. Payable
+
200
Total Liabilities
and OE
35,400
Owners
Equity
Sheena,
Capital
38,500
9)
10
)
Assets
Cash
Office
Land Accts
+
supplies + +
Receive
12,90
20,0
0
500
00
3,000
9,000
9000
-1000
EQUA
LS
Liabilities
+
Accts. Payable
+
200
Owners
Equity
Sheena,
Capital
38,500
Drawings
-2000
2,000
Total
Assets
33,400
Total Liabilities
and OE
33,400