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Group of Things That You Own Car, Cash, A House, Stocks,: 7. Non-Current Assets Are Basically

Basic accounting concepts include assets, liabilities, equity, income, and expenses. Accounts are grouped into balance sheets and income/expense statements. Balance sheets summarize assets owned and debts owed (liabilities) at a point in time using the accounting equation of assets - liabilities = equity. Income/expense statements track changes in value over a period through income, which increases assets/equity, and expenses, which decrease equity and can increase liabilities. Common assets include cash, property, and inventory while common expenses are costs of goods, services, and wages.

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41 views2 pages

Group of Things That You Own Car, Cash, A House, Stocks,: 7. Non-Current Assets Are Basically

Basic accounting concepts include assets, liabilities, equity, income, and expenses. Accounts are grouped into balance sheets and income/expense statements. Balance sheets summarize assets owned and debts owed (liabilities) at a point in time using the accounting equation of assets - liabilities = equity. Income/expense statements track changes in value over a period through income, which increases assets/equity, and expenses, which decrease equity and can increase liabilities. Common assets include cash, property, and inventory while common expenses are costs of goods, services, and wages.

Uploaded by

Harshith Gariga
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1.

Basic Accounting concepts  Assets, Liabilities, Equity, Income and Expenses

2. Two Groups  Balance Sheet and Income and Expenditure

3. Balance Sheet  As the name says the balance sheet accounts can be summarized in the
balance of what you own and owe at a point in the time

4. Income and Expenditure  Income and expense accounts can be summarized in the Profit &
Loss report, which shows the change of values in a period of time like the economic year

5. Accounting Equation  (Assets - Liabilities = Equity + (Income - Expenses)) again as a


reminder, before we go deeper into each account type.

6. Assets  is the group of things that you own. Your assets could include a car, cash, a house,
stocks, or anything else that has convertible value. Convertible value means that theoretically you
could sell the item for cash.

7. Non-Current Assets are basically long-term assets having bought with the intention of using
them in the business and their benefits are likely to accrue for a number of years.

8. Current assets are expected to be consumed, sold, or converted into cash either in one year or in
the operating cycle, whichever is longer. They include cash and cash equivalents, accounts
receivables and inventory. Therefore the stock of a factory is obviously a current asset.

9. Liabilities  Is the group of things on which you owe money. Your liabilities could include a
car loan, a student loan, a mortgage, your investment margin account, or anything else which you
must pay back at some time.

10. Equity  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.

11. The two Income and Expense Accounts are used to increase or decrease the value of your
accounts. Thus, while the balance sheet accounts simply track the value of the things you own or
owe, income and expense accounts allow you to change the value of these accounts.
12. Income  is the payment you receive for your time, services you provide, or the use of your
money. Sales are income. For example the rent you receive for an apartment or when you
receive a pay check, for example, that check is a payment for labour you provided to an employer.
Other examples of income include commissions, tips, dividend income from stocks, and interest
income from bank accounts. Income will always increase the value of your Assets and thus your
Equity.

13. Expense  refers to money you spend to purchase goods or services provided by someone
else for early consumption. Examples of expenses are a meal at a restaurant, rent, groceries,
gas for your car, or tickets to see a play or even the wages of the people who work for the
company. Expenses will always decrease your Equity. If you pay for the expense immediately, you
will decrease your Assets, whereas if you pay for the expense on credit you increase your
Liabilities.

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