Accounting

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Information about Accounting

Published on February 16, 2014

Author: lunadionson

Source: slideshare.net

Celinmar Briones Montes MA EPM 1

How you handle money is a reflection of your soul. Money is the great magnifier. It simply magnifies that which is within you. If you’re a broken person, money will make you more broken. If you’re a selfish person, money will make you more selfish. But if deep within you, you’re good and humble and kind and generous and selfless and disciplined, money will magnify all that fantastic stuff in you. If you’re already rich on the inside—God doesn’t mind you being rich on the outside. Because the Bible says, Let the Lord be magnified, who has pleasure in the prosperity of His servant (Psalms 35:27). May this presentation enlighten us how to control our finances by learning some basic terms in accounting..

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Capital Quiz

• Balance Sheet Accounts - used to track the changes in value of things you own or owe. • Assets– group of things that you own. • Tangible– clear enough or definite enough to be easily seen, felt, or noticed • Intangible – abstract or is hard to define or measure • Patent – an official right to be the only person or company allowed to make or sell a new product for a certain period of time • Liquidity - speed at which something can be converted into cash. • Appreciate – increase of value

• Depreciate – lose of original value • Liability – debt • Debenture – type of savings bond which offers a fixed rate of interest over a long period. • Overdraft – spending money more than you have in a bank • Equity - what is left over after you subtract your liabilities from your assets • Income – something that is earned or received • Dividend – part of a company’s profits shared by its shareholders • Expenses – money that something costs you

Unlocking of Difficult Terms Accounting Equation Assets, Liabilities, Equity, Income and Expenses Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ Accounting Equation (Assets - Liabilities = Equity + (Income - Expenses)

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts - are used to track the changes in value of things you own or owe. What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ The three so-called Balance Sheet Accounts are Assets, Liabilities, and Equity.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts • possession of something that will bring benefits in the future. What is Asset? • group of things that you own What is Liability? • anything that will add value to your business. What is Equity? Income and Expenses QUIZ future

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ What is the test of whether something is considered an asset for your business? Well, one asks, ―Is the _______ something I own will bring me benefits in the future?‖

If you owned the land, would it be an asset for your business? Not sure? Well, do you expect to receive benefits for your business in the future from the land? Of course. So what are the benefits it will bring? Well, you can construct a building on it that you can use for business. Even selling it would bring benefits, in the form of cash.

How about a computer that you own – is this an asset? Will it bring you benefits in the future? Well, amongst other things, you can store and retrieve large amounts of information and use it to communicate with suppliers and customers. So yes, a computer is certainly an asset.

What about a motor vehicle – is this an asset? Does it have benefits for your business, and if so, what are they? Yes, there are benefits for your business... You can use the motor vehicle to pick up and deliver goods. So yes, this is also an asset.

What about cash? Is cash an asset? Cash is certainly an asset. What are the benefits of having cash? Simple: you can pay for things! That is certainly useful (and indeed essential) for a business.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ Assets can be tangible or intangible. Tangible assets are physical entities such as land, buildings, vehicles, equipment, and inventory. Intangible assets include Accounts Receivables, patents, and contracts.

Unlocking of Difficult Terms Accounting Equation Assets are also grouped according to their liquidity, or the speed at which they can be converted into cash. Balance Sheet Accounts Current assets can be converted into cash in 12 months or less. What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ Non-Current/Fixed assets are tangible assets with a life span of at least one year and usually longer. High-cost fixed assets such as machinery and computer systems are not expensed, but their value is depreciated, or "written off," over a number of years according to one of several depreciation schedules.

Asset Type of Asset Benefits Machine Non-current Used for the production of goods for sale to customer. Office Building Non-current Provides space to employees for administering company affairs. Vehicle Non-current Used in the transportation of company products and also for commuting. Inventory Current Cash is generated from the sale of inventory. Cash Current Used to pay any expenses Receivables Current Will eventually result in inflow of cash.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • A present from past expected enterprise benefits. obligation of the enterprise arising events, the settlement of which is to result in an outflow from the of resources embodying economic • A debt of the business.

YOU ------------> OWE ------------> BANK

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ TYPES OF LIABILITIES • Current liabilities are debts that are paid in 12 months or less, and consist mainly of monthly operating debts. Current liabilities are usually paid with current assets, i.e. Cash. A company's working capital is the difference between its current assets and current liabilities. Managing short-term debt and having adequate working capital is vital to a company's long-term success. • Long-term liabilities are typically mortgages or loans used to purchase fixed assets, and are paid off in years instead of months.

Liability Long Term Bank Loan Bank Overdraft Short Term Bank Loan Debenture Tax Payable Classification Non-current Current Current Non-current Current

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • is the same as "net worth." It represents what is left over after you subtract your liabilities from your assets. It can be thought of as the portion of your assets that you own outright, without any debt.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • is of utmost importance to the business owner because it is the owner's financial share of the company. Worded another way, Equity is that portion of the total assets of the company that the owner fully owns. Equity may be in assets such as buildings and equipment, or cash.

Unlocking of Difficult Terms Accounting Equation For example, if you purchase a $30,000 vehicle with a $25,000 loan and $5,000 in cash, you have acquired an asset of $30,000, but have only $5,000 of equity. Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • We can see how this equation works with our example: $30,000 Asset = $25,000 Liability + $5,000 Owner Equity.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ A ―net worth‖ statement or ―balance sheet‖ is designed to provide you with a picture of the financial soundness of your business at a specific point in time. Net worth statements are often prepared at the beginning and ending of the accounting period (i.e. January 1), but can be done at any time.

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • is the payment you receive for your time, services you provide, or the use of your money. • will always increase the value of your Assets and thus your Equity. Examples: Commissions, tips, dividend income from stocks, and interest income from bank accounts

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts • The term Capital has several meanings and it is used in many business contexts. In general, capital is accumulated assets or ownership. More specifically, What is Asset? • Capital is the amount of cash and other assets owned by a business. These business assets include accounts receivable, equipment, and land/buildings of the business. What is Liability? • Capital can also represent the accumulated wealth of a business, represented by its assets less liabilities. What is Equity? Income and Expenses QUIZ • Capital can also mean stock or ownership in a company.

Unlocking of Difficult Terms Accounting Equation It is a possession of something that will bring benefits in the future. Balance Sheet Accounts What is Asset? Assets Liability What is Liability? What is Equity? Income and Expenses QUIZ Equity Income

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What do you call the present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits? Assets Liabilities What is Liability? What is Equity? Income and Expenses QUIZ Net worth Expenses

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? It is the same as "net worth." It represents what is left over after you subtract your liabilities from your assets. It can be thought of as the portion of your assets that you own outright, without any debt. Expenses Equity Income What is Equity? Liability Income and Expenses QUIZ

Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ It is the payment you receive for your time, services you provide, or the use of your money. Income Expenses Asset Liability

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Unlocking of Difficult Terms Accounting Equation Balance Sheet Accounts What is Asset? What is Liability? What is Equity? Income and Expenses QUIZ • • • • • • • • Created by: Celinmar B. Montes www. gnucash.org www. accounting-simplified.com www.keynotesupport.com http://www.accounting-basics-for-students.com http://accesstocapital.com/what-is-capital/ http://biztaxlaw.about.com/od/glossaryc/g/capital.htm NGAS Manual for Local Government Units and National Government Agencies www.coa.gov.ph • www.youtube.com

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