BUSINESS Flashcards
(26 cards)
Major parts of balance sheet:
Heading and Body
name of the business, title of the statement, and the dates (starts with the word “as of,”
Heading
3 accounting elements of balance sheet
Asset
Liabilities
Capital
3 major sections
asset section
the liability section
owner’s equity section
Assets of the business be fixed (current or non current) or movable, it may also be intangible or tangible
TRUE
The assets is divided into 2 categories:
Current assets and Non current assets
includes those assets that are consumed, realized, or utilized within one year or within a normal operating cycle of the business which is longer with the balance sheet
Example of current assets: Oh hand cash or bank, accounts receivable, notes receivable, inventories, work in process, raw materials, supplies on hand, office or factory supplies, prepaid items/insurance, prepaid advertising
Current assets
it includes assets whole usefulness usually beyond 1 year or normal operating cycle of the business from the date of the balance sheet
Example of non-current assets: building, machinery, investments, furnitures
Non current assets
it refers to the period covered from the time cash has been used to buy goods or raw materials until the raw materials have been processed and converted to finish products. The products have been sold to the customer on account and receivables have been collected and converted back to cash.
Normal operating cycle
Business have been operating cycle
Small convenience store have a short term of operating cycle of manufacturing business.
The sum of the current and non current assets of the business, this is the total assets as of date indicated in the balance sheet.
TRUE
it refers to the financial obligations of the businesses as the date indicated in the balance sheet.
LIABILITY SECTION
the liability of the business is divided into 2 categories:
current and non current liabilities
it includes financial obligations of the business that are payable or will mature within one year from the date of the financial statements notwithstanding the normal operating cycle of the business
E.g. accounts payable, notes payable, salaries payable, SSS, PhilHealth, Pag-Ibig contributions, advances from customers, approved expenses
Current liability
whose maturity period is beyond one year from the date of the balance sheets
E.g. mortgage, bank and loan payable, long term bank payables
Non-current liabilities
it represents in the balance sheet the residual interest of the owner or owners on the properties of the business. This indicates whatever is left of the asset of the business after all the financial obligations are finally settled and represents the interest of the owners.
OWNER’S EQUITY SECTION
Assets - liabilities = equity
Simple accounting
use to describes the owners of the business of the_____________, where there is only one owner, the equity of the owner is labeled or designated as the owner’s capital
TITLE, sole proprietorship
where there are at least 2 partners, the equity of the partners labeled as the partner’s capital.
partnership
the equity of the partners labeled as the partner’s capital
Corporate entity
the equity of the owners or stockholders,
shareholders equity
is a structured financial statement that presents the income, the expense, and the net income or net loss realize during a certain period
Income statement
the excess of the gross income or revenue against the expense
net income
refers to the excess of the expenses against the revenue or income during the period.
net loss
