Assets on the Balance Sheet

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Assets on the Balance Sheet

• Current Assets are used up, expended or
  converted into cash within 12 months
• Some expenses are Prepaid in advance. These
  become an ASSET

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Assets on the Balance Sheet

• Non-current Assets are used up or expended in
  a period longer than 12 months
• Non-current Assets do not have a category title,
  they are just listed after Current Assets

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Liabilities on the Balance Sheet

• Current Liabilities are discharged or paid
  off within 12 months.

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Owners Equity on the Balance Sheet

• Owners Equity is the difference between Assets
  and Liabilities.
• The value remaining in the company for the
  owners.
• Not a pool of cash
• Revenues increase Owners Equity Expenses
  decrease it.
• Invested Capital Voluntary investment of funds
• Retained Earnings residual value from
  profit-seeking activities
• Retained Earnings help the business to grow

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Double-entry Bookkeeping

• Newton Third Law of Motion
• For every action there is an equal and opposite
  reaction
• Accounting rules
• For every Debit there is an equal and opposite
  Credit recorded in the accounting records

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Double-entry Bookkeeping

• Double-entry bookkeeping is the accepted
  accounting mechanism for recording and
  classifying the monetary events of a business
  entity
• The T-account format
• For every monetary event there is at least one
  entry on the debit side of at least one account
  and the credit side of another account.

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Double-entry Bookkeeping

• A L OE

Account Type Debit Effect Credit Effect
Assets Increase Decrease
Liabilities Decrease Increase
Owners Equity Decrease Increase
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The Journal
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Chart of Accounts
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The Ledger
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The Cycle at Work