ACC 407 Accounting for Lawyers Lecture 10 Flashcards

Vocabulary-style flashcards covering basic accounting definitions, financial statement equations, and asset/liability classifications as presented in ACC 407 Lecture 10.

Income Statement Summary Equation

$$\text{REVENUE} - \text{EXPENSES} = \text{PROFIT/LOSS}$$

Balance Sheet Equation

$$\text{ASSETS} = \text{CAPITAL} + \text{LIABILITIES}$$

Fixed Assets (Non-current Assets)

Assets acquired for use in the business that have a life span of more than $12$ months ($1$ year).

Current Assets

Cash and other assets that can easily be converted into cash within a period of a year ($12$ months).

Long Term Liabilities

Liabilities that are not due for repayment for a period in excess of $12$ months ($1$ year).

Current Liabilities

Liabilities that are payable within a period of $12$ months ($1$ year).

Capital Calculation

$$\text{ORIGINAL INVESTMENT} + \text{PROFIT} - \text{LOSS}$$

Net Profit

The result when total expenses (such as rent and stationery) are deducted from fees income or gross profit.

Gross Profit

$$\text{SALES REVENUE} - \text{COST OF GOODS SOLD (PURCHASES)}$$

Non-current Asset Examples

Accounts including Office furniture, Furniture fittings, Motor vehicle, Computer equipment, and Building.

Current Asset Examples

Accounts including Cash at bank, Cash in hand, Debtors (such as Debswana), and Prepaid rent.

Current Liability Examples

Accounts including Creditors (such as Homecorp or Mascom), utilities (telephone, mobile phones, water), and taxes.

Current Portion of Long Term Liability

The portion of a long term liability (e.g., a loan from FNBB) that becomes due for repayment within the next $12$ months.

Fees Income

The revenue earned by a law firm, such as TKM Attorneys, for providing legal services to clients like Debswana or ABSA.

Sundry Items

Miscellaneous small expenses, which in practice included coffee, tea, and sugar.

Prepaid Expenses

Payments made in advance for future benefits, such as rent paid for a future month, classified as a current asset.