week 1 lesson 2

7/24/2019 week 1 lesson 2

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ROPEAN INTERNATIONAL COLL

tr!"u#ti! t! A##!uti$

Dr% Lu&i#a 'erma



Dr% Lu&i#a 'erma

(ee) 1* Le#ture 2Out+ie

• The accounting procedure and system

• Meaning of Some terms

assumption of Business Entity

Historical costObjectivity

Continuity

Measuring Units

Matching rincipal

• !orm of Business and their Business



Leari$ Out#!me

• "ill a clear concept accounting procedure

• "ill have idea about some important terms of

#ccounting

• Understand di$erent types of Business



Leari$ !b-e#ti&e

U"erta"i$ S!me a##!uti$ term

assumption of Business Entity

Historical cost

Objectivity

ContinuityMeasuring Units

Matching rincipal



.ai# A##!uti$ Term

Transactions: Transactions are those activities of a business, which involve

transfer of money or goods or services between two persons or two

accounts. For example , purchase of goods, sale of goods, borrowing from

bank, lending of money, salaries paid , rent paid, commission received and

dividend received.

Transactions are of two types, namely,

Cash Transaction is one where cash receipt or payment is involved in the

transaction.

For example, When Ram buys goods from Kanha paying the price of goods by

cash immediately, it is a cash transaction.Credit Transaction is one where cash is not involved immediately but will be

paid or received later.

In the above example, if Ram, does not pay cash immediately but promises to

pay later, it is credit transaction.



.ai# A##!uti$ Term

Proprietor

A person who owns a business is called its proprietor. Hecontributes

capital to the business with the intention of earning profit.

Capital: It is the amount invested by the proprietors in the business.

• This amount is increased by the amount of profits earned and the

amount of additional capital introduced.

• It is decreased by the amount of losses incurred and the amountswithdrawn.

For example, if Mr.Anand starts business with !s.",##,###, his

capital would be !s.",##,###.



.ai# A##!uti$ TermAet/ #ssets are the properties of every description

belonging to the

business% Cash in hand& plant and machinery& furnitureand 'ttings& ban( balance& debtors& bills receivable&stoc( of goods& investments& )ood*ill%

#ssets can be classi'ed into+

,% Tangible Assets: These assets are those having physical

e-istence% .t can be seen and touched% !or e-ample&plant / machinery& cash& etc%

2. Intangible Assets: Intangible assets are thoseassets having no

physical e-istence but their possession gives rise tosome rights and

bene'ts to the o*ner% .t cannot be seen and touched%

IPORTANT



.ai# A##!uti$ Term

Debtors

A person $individual or firm% who

receives a benefit without giving

money or money&s worth

immediately, but liable to pay in

future or in due course of time is a

debtor.

The debtors are shown as an asset in

the balance sheet.

For example, Mr. Arun bought

goods on credit from 'r.(abu for

!s.)#,###.

'r. Arun is a debtor to 'r.(abu

till he pays the value of the goods.

Creditors

A person who gives a benefit

without receiving money or

money&s worth immediately

but to claim in future, is acreditor.

The creditors are shown as a

liability in the balance sheet.

In the above example 'r.(abu

is a creditor to 'r.Arun till he

receive the value of the goods.

IPORTANT

IPORTANT



.ai# A##!uti$ Term

Liabilities

• *iabilities refer to the

financial obligations of a

business.

• These denote the amounts

which a business owes to

others,

• e.g., loans from banks or

other persons, creditors forgoods supplied, bills payable,

outstanding expenses, bank

overdraft etc.

Drawings

It is the amount of cash

or value of goods

withdrawn from the business by the

proprietor for his

personal use.

It is deducted from the

capital.



.ai# A##!uti$ Term

Purchases

• +urchases refers to the

amount of goods bought by a

business for resale or for use

in the production.

• oods purchased for cash are

called cash purchases.

• If it is purchased on credit, it

is called as credit purchases.• Total purchases include both

cash and credit purchases.

Purchases Return or

Returns Outward

• -hen goods are returned to

the suppliers due to

defective uality or not as

per the terms of purchase, it

is called as purchases

return.

• To find net purchases,

purchases return is deducted

from the total purchases.



.ai# A##!uti$ Term

Sales

• /ales refers to the amount of

goods sold that are already

bought or manufactured by

the business.

• -hen goods are sold for cash,

they are cash sales

• (ut if goods are sold and

payment is not received at thetime of sale, it is credit sales.

• Total sales includes both cash

and credit sales.

Sales Return or Returns

Inward

• -hen goods are returned

from the customers due todefective uality or not as

per the terms of sale, it is

called sales return or

returns inward.

• To find out net sales, sales

return is deducted from

total sales.



• Re&eue means the amount receivable or reali0ed

from sale of goods and earnings from interest&dividend& commission& etc%

• Epee

.t is the amount spent in order to produce and sellthe goods and services%

!or e-ample& purchase of ra* materials& payment ofsalaries& *ages& etc%

• I#!me

.ncome is the di$erence bet*een revenue ande-pense%

.ai# A##!uti$ Term



.ai# A##!uti$ Term

'!u#her

• .t is a *ritten document insupport of a transaction%

• .t is a proof that a

particular transaction hasta(en place for the valuestated in the voucher%

• .t may be in the form ofcash receipt& invoice& cash

memo& ban( pay1in1slipetc%

• 2oucher is necessary toaudit the accounts%

I&!i#e

• .nvoice is a businessdocument *hich is prepared*hen one sell goods toanother%

• The statement is preparedby the seller of goods%

• .t contains the informationrelating to name andaddress of the seller and thebuyer& the date of sale andthe clear description ofgoods

• *ith 3uantity and price%



.ai# A##!uti$ Term

Receipt

• !eceipt is an

acknowledgement forcash received.

• It is issued to the party

paying cash.

• !eceipts form the basis

for entries in cash book.

Account

• Account is a summary of

relevant business transactions

at one place relating to a

person, asset, expense orrevenue named in the heading.

• An account is a brief history

of financial transactions of a

particular person or item.• An account has two sides

called debit side and credit

side.



)##



,4

)enerally #ccepted #ccounting

rinciples

rofessionals in the 'eld of accounting have *or(edhard to develop and consistently follo* generally

accepted accounting principles 5)##6& in order todescribe the best method of recording any 'nancialtransaction and to ensure that readers of 'nancialstatements can immediately depend upon their

accuracy%



,7

Geera++ A##epte"A##!uti$ Pri#ip+e

• Eleven of the most critical generally acceptedaccounting principles all managers simply must

recogni0e include+

– 8istinct business entity principle – )oing concern principle – Monetary unit principle – Time period principle – Cost principle – Consistency principle

– Matching principle – Materiality principle – Objectivity principle – Conservatism principle – !ull disclosure principle

IPORTANT



,9

The Diti#t .uie EtitPri#ip+e

• The distinct business entity principlestates that a business:s 'nancialtransactions should be (ept completely

separate from those of its o*ners%• There are three basic types of business

o*nership in the United States%

– Corporation – artnership

– roprietorship



,;

The G!i$ C!#erPri#ip+e

• The going concern principle means thataccountants ma(e the assumption that thebusiness *ill be ongoing 5continue to e-ist6inde'nitely and that there is no intention to

li3uidate 5sell6 all of the assets of the business%

• The going concern principle clearly directsaccountants to record the value of a business:s

assets only at the price paid for them& so thatreaders of a 'nancial statement (no* that assetvalues represent a business:s true cost& and notthe cost of li3uidation or replacement%



<=

The !etar UitPri#ip+e

• The monetary unit principle means that 'nancialstatements must be prepared in a speci'ccurrency denomination% .n the United States& theU%S% dollar is the monetary unit used for preparing

'nancial statements%

• !ul'lling the monetary unit principle can be 3uitecomplicated& since companies often operate in

more than one country& and use more than onecurrency in their operating transactions%



<,

The Time Peri!"Pri#ip+e

• The time period principle re3uires a business toidentify the time period for *hich its 'nancialtransactions are reported%

• # 'scal year consists of ,< consecutive months 5butnot necessarily beginning in >anuary and ending in8ecember li(e a calendar year6%

• The amount of time included in any summary of'nancial information is called an accounting period%

• The managers of a business may be most

interested in monthly& *ee(ly& or even daily'nancial summary reports%



<<

The C!t Pri#ip+e

• The cost principle re3uires accountants to recordall business transactions at their cash cost%

• 0or example, if a piece of land is purchased for !s.",##,###and its market value is !s.1,##,### at the time of preparing

final accounts the land value is recorded only for !s.",##,###.

• Thus, the balance sheet does not indicate the price at which theasset could be sold for.



<?

The C!ite#Pri#ip+e

• The consistency principle of accounting statesthat a business must select and consistentlyreport 'nancial information under the rules of thespeci'c reporting system it elects to use%

• .n an accrual accounting system& revenue isrecorded *hen it is earned& regardless of *hen itis collected& and e-penses are recorded *henthey are incurred& regardless of *hen they arepaid%

• # cash accounting system records revenue asbeing earned *hen it is actually received andrecords e-penditures *hen they are actually paid&regardless of *hen they *ere incurred%



<@

The at#hi$ Pri#ip+e

• The matching principle is designed to closelymatch e-penses incurred to the actual revenuethose e-penses helped generate%

• This principle applies to those organi0ations thatelect to use an accrual system of accounting%



<A

The ateria+it Pri#ip+e

• The consistency and matching principles re3uireaccountants to e-pense the cost of certain long1life assets li(e furniture and e3uipment over thetime period in *hich they *ill help a business

generate revenue%• The materiality principle& ho*ever& allo*s

accountants& under very strict circumstances& tovary from these t*o important principles%

• The materiality principle means that if the value ofan item is deemed to be not signi'cant& then otheraccounting principles may be ignored if it is notpractical to use them%



<4

The Ob-e#ti&it Pri#ip+e

• The objectivity principle states that 'nancialtransactions must have a con'rmable 5objective6basis in fact%

• Sales should have substantiating evidence toprove that they actually occurred& such as guestchec(s& ban( card statements& or various salesrecords maintained in an electronic cash registeror computer%

• Before they can be recorded as having beenincurred or paid& e-penses must be veri'ed *ithevidence such as delivery slips or original

invoices supplied by vendors& cancelled chec(s&or documented electronic funds transfers 5E!Ts6%



<7

The Conservatism rinciple

• The conservatism principle re3uires theaccountants of a business to be conservative*hen reporting its revenue 5and thus not toreport it until it is actually earned6 and realistic

*hen reporting its e-penses and other liabilities%



<9

The u++ Di#+!urePri#ip+e

• The full disclosure principle re3uires that any past oreven future event *hich could materially a$ect the'nancial standing of the business and that cannot beeasily discerned from reading the business:s'nancial statements must be separately reported%

• These reports& prepared in the form of footnotes&must be attached to the 'nancial statementsprepared by the business:s accountants%

• E-amples of such events include signi'cant la*suits&

changing from a cash to an accrual accountingsystem& signi'cant ta- disputes& modifyingdepreciation schedules& or unusual events%



Leari$ !b-e#ti&e

U"erta"i$ "ieret !rm !5.uie a" their .uie



!rm !5 .uie

• Sole roprietorSole Trader

• artnership

•Companies

Short Assignment ,%Briey e-plain for all stated form ofbusiness%



Sole roprietor or Sole Trader

• Business o*nership is a single business carriedon by individuals and o*ned by individual full%

• Business o*ner have a po*er to control thebusiness operations%

• O*ners and business is referred to as one of thesame entity% Do separation bet*een them%

• O*ners *ill received all the pro'ts and bear forall losses from business%

• Unlimited liabilities



A"&ata$e

• Easy to set up%

• The o*ner has absolute po*er to control thebusiness%

• !ast decision ma(e by the o*ner of the business%

• .ndividual Ta-%

• Do need the comple- 'nancial reports%



Dia"&ata$e

• 8icult to gro* because of the limited capacityof capital

• 8icult to get capital 'nancing from the 'nancialinstitution because they need a strong assurance

from the business%

• Fiability is unlimited%

• Business *ill disband itself if the o*ner died%



Parterhip

• # partnership is de'ned as the relationship thate-ist bet*een person carrying on business%

These person agree to combine some or all theirproperty& labor and s(ill% This relationship is

based on contract%• Business o*ned by minimum of t*o persons andma-imum of <= persons%

• rofessional service partnerships consist ofma-imum A= persons%

• There are t*o types of partnerships+

1#ctive partner

1Sleeping partner



Parterhip

• Strictly follo* the artnerships #ct ,;4, andpartnerships contract of agreement for pro't andloss distribution%

• Fiability for partnerships is unlimited e-cept for

the limited partnerships%

• )eneral partners have unlimited liability forpartnerships debts& and the partnershipsterminates *hen a general partner *ishes to sell

out or dies%



A"&ata$e

• artnerships allo* for a greater amount ofmoney& s(ill and other resources to be pooled%

• They are relatively easy to organi0e%

• They are subject to limited governmentregulations and do not face high ta- rates%



Dia"&ata$e

• artnerships have a limited life%

• Each partner is subject to unlimited liability% Thismeans that if the company fails& creditors canta(e action against both the partnership and the

persons *ho are in it%

• artners have mutual agency% This means thatone partner can ma(e decisions *ithoutconsulting to other5s6%



C!rp!rati!

• # business created as a distinct legal entitycomposed of one or more individuals or entities%

• .n Malaysia& corporations are follo* strictly underCompany #ct ,;4A%

• Corporation are divide into t*o1rivate Fimited

1ublic Fimited



C!rp!rati!

• rivate limited can be held by minimum of < andma-imum of A= shareholders%

• There is no ma-imum shareholders for ubliclimited company%

• Shareholders *ill received their pro't in the formof dividend%• Corporation managed by Board of 8irector that

appointed by shareholders in #)M%• Fiability of shareholders is limited base on the

paid up capital%• Ta- is paid& base on company pro't%• Eg+ Tenaga Dasional Berhad& Safeguard Securicor

Sdn Bhd%



Corporation# #!rp!rati! 5sometimes referred to as a C

#!rp!rati!6 is an independent legal entity o*nedby shareholders% This means that the#!rp!rati! itself& not the shareholders that o*nit& is held legally liable for the actions and debtsthe business incurs%

• #dvantages

– Unlimited life – Easy transfer of o*nership – Fimited liability – Ease of raising capital

• 8isadvantages

– 8ouble ta-ation – Cost of set1up

and report 'ling



Suggestion

• #ccounting Cycle

• )##

• !orms of Business



6UESTION7



(ee) 1 8 Le#ture 2 Out+ie

• Basic #ccounting e3uation

• #sset

• Fiabilities

• O*ners e3uity

• evenue and e-penses

• Business Transaction

• #nalysis the e$ect of businesstransaction on the basic accountinge3uation



Leari$ Out#!me

#fter completing this chapter you *ill beable to

• Understand the accounting e3uation• )et an idea about the components of

accounting system

• .nterpret the e$ect of businesstransaction on the basic accountinge3uation



Leari$ !b-e#ti&e

.ai# A##!uti$ e9uati!



• A##!uti$ a a :h!+e i bae"! a i$+e e9uati!/

ASSETS ; E6UIT< =LIA.ILITIES

The #ccounting e3uation



DOU.LE*ENTR< S<STEDOU.LE*ENTR< S<STE

I a "!ub+e*etr tem, e9ua+"ebit a" #re"it are ma"e ithe a##!ut 5!r ea#htraa#ti!%

Thu, the t!ta+ "ebit :i++ a+:ae9ua+ the t!ta+ #re"it a" thea##!uti$ e9uati! :i++ a+:a

ta i ba+a#e%

Assets Liabilities Equity



• "ell& in order to ans*er that 3uestion*e need to loo( at *hat each of theterms in the e3uation meanI

,% #ssets

<% Fiabilities

?%O*ner:s E3uity

So *hat does the

accounting e3uation meanJ



• Ofcial Denition: A resourcecontrolled by the enterprise as aresult o past events and rom which

uture economic benets areexpected to ow to the enterprise

"hat is an assetJ



• Fand

• Computer

• 2ehicle

• Cash

e-amples



1%DOES <OUR .USINESSO(N>CONTROL IT7

2%(ILL IT .RING <OUR .USINESS

.ENEITS IN T?E UTURE7

3%CAN <OU 'ALUE IT ACCURATEL<7

So the ull test of *hether

something is an asset is+



De#reae Aet I#reae Aet

urchasing Supplies 5The assetaccount !ash decreases6

urchasing Supplies 5The assetaccount Supplies increases6

O*ner 8ra*s O*ner Contributions

epaying ban( loans eceiving ban( loansCredit purchases

Changes in assets



ASSETS ; E6UIT< = LIA.ILITIES

• The a##!uti$ e9uati! i"i#ateh!: mu#h !5 the aet !5 a buie

belong t!, !r are owned , b :h!m% • #ssets can only Kbelong: to t*o types of

people+ – people outside the business *ho are o*ed

money 5liabilities6

– the owner himsel 5owner"s e#uity 6%

The accounting e3uation



De#reae O:er@ E9uit I#reae O:er@ E9uit

E-penses evenues

Fosses )ains

O*ner *ithdra*s O*ner investments

Beginning Capital

Changes in o*ner:s e3uity



• .ncome

• E-ample+ a service company earnsrevenue *hen it provides services to

its clients

• ecorded as an increases in o*ner:se3uity and an increase in assets

evenues



• The costs the company incurs incarrying on operations in its e$ort tocreate revenue

• De#reae !:er@ e9uit

• Can be paid for *ith cash 5decreasesassets6

• Or charged 5increase liabilities6

E-penses



o*ner:s e3uity

Beginning

CapitalFUS

#dditional.nvestment

Det .ncomeL

evenues11 E-penses

"ithdra*s 11

.f e-penses are greater than revenues& then a net loss *ould result% This loss *ould be subtracted from capital because it *ould be a

negative number%



A9

E6UIT< is the O(NER@S CLAI ONASSETS

.n a business ENU.T is composed offour parts that either increase ordecrease e3uity+

CAPITAL/(hat the

!:erput it!

thebuie

−

(IT?DRA(ALS/

(hat the!:er

ta)e !ut !5the

buie

RE'ENUE

S/

(hat the#!mpare#ei&e5!r a+e

−

EPENSES/

(hat the#!mpapa t!!perate

thebuie%

INCREASE DECREASE INCREASEDECREASE

E6UIT<



A;

Sometimes *e e-pand the

#ccounting E3uation to sho* allthe E3uity components% This is

called the EPANDED ACCOUNTING

E6UATION%

This e3uationmust AL(A<S .E

IN .ALANCE



Transaction #nalysis

Business activities can be described interms of transactions and events% E-ternaltransactions are e-changes of value

bet*een t*o entities& *hich yield changesin the accounting e3uation% .nternaltransactions are e-changes *ithin anyentityP they can also a$ect the accounting

e3uation% Events refer to happenings thata$ect an entity:s accounting e3uation andcan be reliably measured% Transactionanalysis is de'ned as the process used to

analy0e transactions and events% )23#

+)



#ccounting Transactions%%%

are economic eventsthat must be recorded

in the 'nancialstatements becausethey a$ect

assets liabilities andor stoc(holders:

e3uity




• The process of identifying thespeci'c e$ects of economicevents on the accounting

e3uation%

• Each transaction has a dual5double1sided6 e$ect on theaccounting e3uation%



Steps in transaction analysis

Step 1/ I"eti5 the ame !5 a##!ut

Step 2/ C+ai5 the A##!ut

Step 3/ Aa+Be the impa#t !a##!uti$ e9uati!



Steps in transaction analysis

Step 1/ I"eti5 the ame !5 a##!ut >im:s FemonadeChart of #ccounts

,=, 1 Cash,=A 1 #ccts eceivable,,= 1 Oce Supplies,A= 1 E3uipment<=, 1 #ccounts ayable<,= 1 "ages ayable?=A 1 Common Stoc(?<= 1 etained Earnings

@=, 1 Sales 1 Femonade@,= 1 Sales Q CateringA=, 1 Femon E-penseA=A 1 .nsurance E-penseA,= 1 Oce E-pense





The balances so far appear below. Note that theBalance Sheet Equation is still in balance.

+)

)23"





N!:, +et@ +!!) at traa#ti!

i&!+&i$ re&eue, epeea" "i&i"e"%

+)

)233





Provided consulting services receiving!"### cash.

+)

)234

Transaction #nalysis+)




$e%e%ber that e&penses decrease equity.

Paid salaries of '## to e%ployees.

+)

)231

Transaction #nalysis+)




$e%e%ber that dividends decrease equity.

(ividends of )## are paid to shareholders.

+)

)235

E # t h



Every #ccount has+

#n .ncrease Side&and

# 8ecrease SideBut& Some

#ccounts .ncreaseon the 8ebit Side

#nd& Some#ccounts .ncreaseon the Credit Side

Eff t f T ti * , E it



7,

*+NE$,S E-/T0

Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity




7<

*+NE$,S E-/T0


decreased by




7?

*+NE$,S E-/T0


*wner,s withdrawals

E&penses

decreased by




7@

*+NE$,S E-/T0


increased by




7A

*+NE$,S E-/T0


*wner,s invest%ents

$evenues

increased by

Effects of Transactions on * ner,s Eq it



74

*+NE$,S E-/T0


*wner,s withdrawals

E&penses

*wner,s invest%ents

$evenues

decreased by increased by



77

The #ccounting E3uation

h i i



79

Economic

esources

Claims to

Economicesources

The #ccounting E3uation

Assets $ %iabilities & Owner"s '#uit



7;

$esources

The Accounting Equation

What are an organization’s resources called?



9=

Assets

$esources 1 Sources


What are the

sources of the

assets?$esources usedin the business

Th A i E i



9,

Assets

Liabilities

*wner,s

Equity

$esources 1 Sources

$esources usedin the business

$esourcessupplied by

creditors andowners


B i T ti

Business Transactions



9<

a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd

ASSETS

;

Business TransactionsBusiness Transactions

*+NE$,S E-/T0

L/AB/L/T/ES

B i T ti




9?

a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd.

ASSETS

;


*+NE$,S E-/T0

4ash2)"###

L/AB/L/T/ES

B i T ti




9@

a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd.

ASSETS

;


*+NE$,S E-/T0

4ash2)"###

L/AB/L/T/ES

Sachin" 4apital2)"###





9A


b. AB4 Ltd. buys land for 2#"###.

ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES





94


b. AB4 Ltd. buys land for 2#"###.

ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash

52#"###6





97


b. AB4 Ltd buys land for 2#"###.

ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash

52#"###6

Land2#"###





99


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

c. AB4 Ltd buys goods for 7"!)#" agreeing to paythe supplier in the near future.





9;


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

c. AB4 Ltd buys goods for 7"!)#" agreeing to paythe supplier in the near future.

Accounts Payable

7"!)#Purchases7"!)#





;=


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

e. AB4 Ltd paid8 wages 2"72)9 rent" '##9utilities" :)#9 and %iscellaneous" 2;).





;,


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash5!"<)#6






;<


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash5!"<)#6

E&penses5!"<)#6






;?


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

f. AB4 Ltd pays =)# to creditors on account.





;@


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash5=)#6






;A


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash5=)#6

Accounts Payable5=)#6






;4


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

h. Sachin withdraws 2"### in cash.





;7


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash52"###6






;9


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash52"###6

Sachin,s" (rawing52"###6


Transaction Su%%ary

Transaction Su%%ary



;;

Transaction Su%%aryy

ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES

4ash <";##Purchases ))#Land 2#"###

Transaction Su%%ary

Transaction Su%%ary



,==


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES


Accts. Payable :##

Transaction Su%%ary

Transaction Su%%ary



,=,


ASSETS

;*+NE$,S E-/T0

L/AB/L/T/ES


Accts. Payable :##

Sachin" 4apital 2)"###Sachin" (rawing 52"###6>ees Earned ;")##+ages E&pense 52"72)6$ent E&pense 5'##64o%%ission 5:)#6?isc. E&pense 52;)6

ER#MFE



ER#MFE

• .ssuing stoc(s for cash or other assets 4===• Buying assets by borro*ing money 5ta(ing a

loan from a ban( or simply buying on credit6,====

• Selling assets for cash to pay o$ liabilities+both assets and liabilities are reduced ;==

• Buying assets by paying cash by shareholders

money 54==6 and by borro*ing money 5@==6• Earning revenues 7==

,=<

Eamp+e



Eamp+e

TransactionDumber

#ssets FiabilitiesShareholdersE3uity

, 4&=== 4&===

< ,=&==

=

,=&===

? ;== ;==

@ ,&=== @== 4==

A 7== 7==

Some more E-amples



Some more E-amples

• aying e-penses 5e%g% rent orprofessional fees6 or dividends <==

• ecording e-penses& but not paying

them at the moment ,==• aying a debt that you o*e A==

• eceiving cash for sale of an asset+

one asset is e-changed for anotherPno change in assets or liabilities

,=@

Solutions



SolutionsI

4 <== <==

7 ,== ,==

9 A== A==

; = = =

TransactionDumber

#ssets FiabilitiesShareholdersE3uity



EICabu"habi

Eur!pea Iterati!a+C!++e$e*AbuDhabi

EIC AbuDhabi

week 1 lesson 2

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