Owner's Equity - Represent Owner's Current
Investment in Assets of Business
Equity represents share of assets
claimed by owners
2 Primary Sources of Equity -
Contributed Capital & Retained
Earnings
Sole Trades, these 2
sources are in one
account called
"capital" but companies kept separate
Often called Residual -
what's left over
A - L = OE
Creditors have priority (legally) over owners
If Assets & liabilities are measured according to GAAP, than dollar
value of Equity must be measured properly
Assets - Resources of
company
Requirements to appear on BS: Past Event, Resource controlled by
company, provide future economic benefits, reliably measured -
Verifiable (E.g. Source Doc)
Not all resources are shown in BS
CA - Cash &other assets that business
expects to convert into cash, sell, or use
up within 1 year of balance sheet date.
Helps asses liquidity also listed in in order of liquidity
On BS date, asset may not be
shown greater than exp eco
benefit measured of date
Acc rec.Debtors - Shown at recoverable amount
Inventory (Stock) - good
held or resale, shown at
lower of cost or net
realisable value (whichever
is lower)
Prepayment - Expense prepaid (CL)
NCA - Use it longer than 12 months
PP&E (Fixed Assets) - tangible productive
assets used in operations e.g.. land, buildings, equipment