Summary of Asset Management and Accounting Principles

Assets Overview

  • Assets are classified into current and non-current (long-term).

Inventory Management

  • Inventory: Items purchased for resale. Includes valuation methods, perpetual and periodic systems.

    • Perpetual System: Always updated with purchases and sales.

    • Periodic System: Physical count at end of period.

Inventory Valuation Methods

  • FIFO (First-In, First-Out): Costs oldest inventory first.

  • LIFO (Last-In, First-Out): Costs newest inventory first.

  • Average Cost: Uses average cost of all inventory.

Inventory Questions

  1. Total sales

  2. Total cost of merchandise sold

  3. Gross profit

  4. Ending inventory balance

Perpetual Inventory System Example

  • Sample grid shows purchases, COGS, and balances.

Cash Transactions

  • Cash Ledger: Tracks inflows/outflows. Important for monitoring.

  • Bank Reconciliation: Matches company records with bank statement.

Note Receivable

  • A loan to an executive or customer. Includes interest calculation.

Depreciation of Fixed Assets

  • Fixed Assets: Equipment, buildings, etc.; evaluated through depreciation.

    • Common methods: Straight-line, Units of Production, Declining Balance.

Amortization of Intangible Assets

  • Similar to depreciation but applies to non-physical assets (patents, copyrights).

Investments Overview

  • Investments in stocks/bonds categorized as current/non-current based on hold duration.

    • Equity Method: For 20-50% ownership; recognize share of net income.

    • Fair Value Method: For <20% ownership; securities adjusted to fair value.

Gains and Losses on Investments

  • Gains: Increase wealth; recorded separately from operational revenues.

  • Losses: Recorded similarly to expenses on financial statements.

Selling of Bonds

  • Bonds classified into trading or available-for-sale.

  • Amortization of discounts/premiums recognized annually.

Key Accounts Summarization

  • Distinction between current and long-term investments; includes unrealized gains/losses in financial reporting.