BSNS115 FA

Assets =

Liabilities + Equity

Equity =

Assets - Liabilities

current

Held for no more than a year

non-current

Held for more than a year

asset

resource controlled by the entity

liability

present obligation of the entity

contingent liability

potential liabilities, not recorded on balance sheet

Equity

contributed capital and retained profit: residual interest in the assets of the entity after deducting liabilities

Owners equity

contributed capital, retained earnings, reserves

Contributed Capital

CC total amount invested in the entity by owners

Retained Earning

RE cumulative net profit retained for use in business, not paid out to owners

Drawings

Decrease equity: withdrawal of goods or cash from business for personal use

Dividends

decrease equity: distributions of earnings to the owners/shareholders

Income

revenue + gains

transaction is recorded

when business transaction made/not cash paid

accounting policy choices

method of depreciation

method of valuing PP+E

capitalising or expensing development expenditure

Depreciation

Allocation of cost to an asset over it’s tangible lifetime

Does not represent loss of value in assets life

Accumulated depreciation

total amount of depreciation being taken off an asset

depreciation expense

(cost - residual value) / useful life

book/carrying value

cost - accumulated depreciation

Net assets =

assets - liabilities

Net profit

increases retained earnings

Net loss

reduces retained earnings

Profit

= Income - expenses

Cash

Asset

Inventory, Supplies, PP+E

Asset

Short and Long term investments

Asset

Accounts receivable

Asset

Pre paid expenses

Asset

Long term receivables

Asset

Intangible asset

asset

Payables (accounts, interest, dividends, etc)

Liability

Unearned Income

Liability

Long- or short-term debt

Liability

Variable rate

variable divided by units

Profit/Loss

= Sales - Variable Cost = Contribution Margin - Fixed cost