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XYZ Trading Exercise: Balance Sheet Class Notes Business Transactions

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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117 views3 pages

XYZ Trading Exercise: Balance Sheet Class Notes Business Transactions

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.

Uploaded by

Misu Nguyen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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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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