Assets
Current/Floating assets Fixed assets Tangible assets Intangible assets
Liabilities
Current liabilities Long-term liabilities
Capital
Assets
Assets represent everything which a business owns and has money value. They carry probable future benefits. Classified into:
Current assets
E.g.
Stock/inventory raw materials, work-in-progress, finished goods Debtors Bills receivable Cash at bank Cash in hand Prepaid expenses Short-term investments/marketable securities Accrued income
Fixed assets
Held for the purposes of providing or producing goods or services and those that are not held for resale in the normal course of business Classified into:
Three questions
1. Cash or bank balance ? 2. Converted into cash ? 3. Consumed in the production of goods in the normal course of business? All Negative FIXED ASSET Any one positive CURRENT ASSET
No No No FA
Liabilities
Financial obligations of an enterprise other than owners funds. Classified into:
Current liabilities
Those liabilities which fall due for payment in a relatively short period, (normally, a period of not more than 12 months) E.g.
Trade creditors Bills payable Outstanding expenses Bank overdraft Income received in advance Short terms loans
Long-term loans from banks Long-term loans from financial institutions Debentures
Capital
Amount invested in an enterprise by the proprietors. This amount is increased by the amount of profits earned and the amount of additional capital introduced and is decreased by the amount of losses incurred and the amount withdrawn (whether in cash or in kind). Also known as owners equity or net worth.
Drawings
Total amount of cash or goods or any other asset withdrawn by the proprietor for personal use.
Sales
The amount for which goods are sold or services are rendered. The sales may be for cash or credit E.g.
An ice-cream seller sold 10 cones on Sunday @ Rs. 20 each. His total sales for Sunday will be Rs. 200
Purchases
The total amount of goods obtained by an enterprise for resale or for use in the production of goods or rendering of services in the normal course of business. The purchases may be for cash or for credit. E.g.
An ice-cream seller bought 200 cones from the distributor @ Rs. 11 each. His total purchases are Rs. 2200.
Stock or inventory
Tangible property held for sale in the ordinary course of the business or for consumption in the production of goods or rendering of services for sale. Types:
Stock or inventory
May be opening stock or closing stock Opening stock
Closing stock
Goods lying unsold at the end of the current accounting period
Trade debtors
Persons from whom the amounts are due for goods sold or services rendered on credit basis.
Trade creditor
Persons from whom the amounts are due for goods purchased or services rendered on credit basis
Bill of exchange
Instrument in writing Unconditional order Signed by the maker Directing a certain person to pay a certain sum of money to a definite person or to the bearer of that instrument.
Bills receivable
Bills payable