After you have mastered the material in this chapter, you will be able to: Explain the accounting entity assumption; define assets, liabilities, owner's equity, revenue and expenses and classify items into assets, liabilities, owner's equity, revenue and expenses; define the accounting equation and describe the link between the equation and the accounting entity assumption;. | This is the prescribed textbook for your course Available now at your campus bookstore! 1- Chapter 1 Accounting concepts 1- Objectives: Explain the accounting entity assumption. Define assets, liabilities, owner's equity, revenue and expenses and classify items into assets, liabilities, owner's equity, revenue and expenses. Define the accounting equation and describe the link between the equation and the accounting entity assumption. Analyse the effect of transactions on the accounting equation. 1- Accounting entity The entity assumption states that the business is a distinct accounting entity from the owner. 1- Entity Assumption - Business and owners financial dealings are recorded separately. Assets Assets can be classified as items of value owned by the business or owed to the business. Some examples are: Cash Buildings Motor Vehicles. 1- Assets definition “items of value owned by the business or owed to the business.” Assets (continued) Current assets include: Cash Debtors/account receivable. Non-current assets include: Car Buildings Land. 1- CA are converted into cash in the next 12 months. Liabilities Liabilities are obligations or debts a firm must pay. Some examples are: Creditors Loans Bank overdrafts. 1- Liabilities are obligations or debts, that a firm must pay, they are amounts of money owed by the business. Liabilities (continued) Current liability Accounts payable Non-current liability Loans 1- Owners equity Owners equity records all dealings between the owner and the business. Capital is what the owner contributes to the business. Drawings are withdrawals of money or assets for personal use from the business. 1- Owners Equity – records all dealings between the owner and the business Capital – what the owner contributes to the business Drawings – withdrawals of money or assets for personal use from the assets Accounting equation Assets = Liabilities + Owners equity or Liabilities = Assets – Owners equity or . | This is the prescribed textbook for your course Available now at your campus bookstore! 1- Chapter 1 Accounting concepts 1- Objectives: Explain the accounting entity assumption. Define assets, liabilities, owner's equity, revenue and expenses and classify items into assets, liabilities, owner's equity, revenue and expenses. Define the accounting equation and describe the link between the equation and the accounting entity assumption. Analyse the effect of transactions on the accounting equation. 1- Accounting entity The entity assumption states that the business is a distinct accounting entity from the owner. 1- Entity Assumption - Business and owners financial dealings are recorded separately. Assets Assets can be classified as items of value owned by the business or owed to the business. Some examples are: Cash Buildings Motor Vehicles. 1- Assets definition “items of value owned by the business or owed to the business.” Assets (continued) Current assets .
