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