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ACCOUNTING CLASSIFICATION AND ACCOUNTING EQUATION, five elements., Non…
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Non Current Assets
Current Assets
- Assets either cash or those that can be converted into cash within one year.
- Constantly change their from during accounting period.
- Assets acquired/ bought not for sale but to be used in the operations of business with
useful lives of more than one year.
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- Owner's supplied fund to the business for the acquisition of assets for the business.
- Capital refers to what is left to the owners after all liabilities are settled. Simply stated, capital is equal to total assets minus total liabilities.
- Owner contributions and income increase capital. Withdrawals and expenses decrease it.
Non- current liabilities
Current Liabilities
- Amounts owning by the business that are to be paid within one year.
- Amounts owed by the business that are not repaid within one year.
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- Represents the gross increase in owner's equity resulting from business activities entered into for the purpose of earning income.
- Trading business derive their main form of revenues from the sale of good.
- Example: commission received, interest received, dividends received.
- Expenses are decreases in economic benefit during the accounting period in the form of a decrease in asset or an increase in liability that result in decrease in equity, other than distribution to owners.
- Example : salary, rent expenses, interest expenses, discount allowed.
- Assets = Capital + Liabilities
- Assets + Expenses = Capital + Income + Liabilities.
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