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  • XYZ Trading Exercise: Balance Sheet Class Notes Business Transactions

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    Misu Nguyen
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    This document provides an overview of balance sheets, including the key elements, types of assets and liabilities, and accounting equation. It discusses how assets are resources controlled by the entity that are expected to provide future economic benefits, and liabilities are obligations arising from past events. Current assets are expected to be used within one year, while non-current assets provide benefits over longer periods. Similarly, current liabilities are due within one year, and non-current liabilities are due after one year. Owner's equity on the balance sheet is equal to total assets minus total liabilities.

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    Notes.chapter 3

    Original Title

    Notes.chapter 3

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    This document provides an overview of balance sheets, including the key elements, types of assets and liabilities, and accounting equation. It discusses how assets are resources controlled by the entity that are expected to provide future economic benefits, and liabilities are obligations arising from past events. Current assets are expected to be used within one year, while non-current assets provide benefits over longer periods. Similarly, current liabilities are due within one year, and non-current liabilities are due after one year. Owner's equity on the balance sheet is equal to total assets minus total liabilities.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    67 views3 pages

    XYZ Trading Exercise: Balance Sheet Class Notes Business Transactions

    Uploaded by

    Misu Nguyen
    This document provides an overview of balance sheets, including the key elements, types of assets and liabilities, and accounting equation. It discusses how assets are resources controlled by the entity that are expected to provide future economic benefits, and liabilities are obligations arising from past events. Current assets are expected to be used within one year, while non-current assets provide benefits over longer periods. Similarly, current liabilities are due within one year, and non-current liabilities are due after one year. Owner's equity on the balance sheet is equal to total assets minus total liabilities.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 3

    CHAPTER 3

    Balance Sheet
    CLASS NOTES

    BUSINESS TRANSACTIONS

    XYZ Trading Exercise

    The Balance Sheet

    Elements of the Balance

    ASSETS

    An expected future economic benefits

    Controlled by entity

    Resulting from past transaction

    Can be reliably measured

    TYPES OF ASSETS

    Current Assets
    Include cash or other assets which are expected to be consumed over
    short period of time (less than 1 year)
    Held as part of the day to day trading activities of the business
    most liquid
    quickly converted to cash
    Examples: Cash, Inventory, Trade Debtors (Accounts Receivable), Prepayments

    Non-current (Fixed) Assets


    consumed over longer period of time (more than 1 year)
    used to generate revenue
    illiquid
    cannot be easily converted to cash
    Examples: Freehold premises( land, building), Machinery & equipment,
    Fixtures & Fittings

    Intangible Assets

    ACCT 2105 Introductory Accounting Chapter 3 - CLASS NOTES 1


    - Examples are trademarks, brand names, patents, rights, agreements,
    development expenditure, mastheads and licenses

    Goodwill

    LIABILITIES

    Probability of occurrence obligation

    Past event

    Reliability of measurement

    Outflow of resources embodying economic benefits

    TYPES OF LIABILITY

    Current Liabilities:
    to be repaid in a short period of time (usually <1 year)
    Examples: trade creditors(Accounts Payable), bank overdraft, short term
    loans

    Long term liabilities:


    repaid over longer period of time
    Examples: Mortgages, Long term loans

    OWNERS EQUITY

    Definition:

    Consists of:
    - Shareholders capital (Contributed capital)
    - Reserves
    o Retained Profit
    o Other reserves

    ACCOUNTING EQUATION

    Owners Equity = Assets - Liabilities

    Format of Balance Sheet

    ACCT 2105 Introductory Accounting Chapter 3 - CLASS NOTES 2


    Can be presented in either the T format or narrative format

    ASSETS AND LIABILITIES ACCOUNTS

    Current Assets:
    Cash
    Accounts Receivable
    Inventory
    Prepayments
    Short term investments

    Non Current Assets:


    Fixtures and Fittings
    Equipment (Machines)
    Motor Vehicles
    Property or Freehold Premises or Building
    Land

    Intangible Assets:
    Patents
    Trademarks
    Copyright
    Franchise
    Brand names
    Mastheads
    Goodwill

    Current Liabilities:
    Accounts Payable
    Notes Payable
    Bank overdraft
    Accrued Expenses
    Bank loan (short term)
    Revenue received in advance (e.g. subscriptions)

    Non Current Liabilities


    Mortgage Loan (payable after 1 year)
    Debentures (payable after 1 year)

    ACCT 2105 Introductory Accounting Chapter 3 - CLASS NOTES 3

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