fundamental ideas of accounting
- assets = equity
everything you own => people who own it
- Accounting records can only show monetary assets
-intangibles: mkt share, brand recognition, etc.
- Accounts kept for business entities (like a person)
-shows profits/loss for that business only
4)Going concern concept
-assume business NOT liquidating, will keep running indefinitely
5) Cost concept: value assets at price paid (not market value)
-mkt value subjective
-most likely NOT going to sell assets (instead, use)
-assets must be OWNED to be counted (not borrowed or rented)
-asset must have value to the company
-must be purchased at measurable cost (unlike reputation)
-if money paid to aquire such a reputation, then asset (aquire other inc.)
intangibles called goodwill on balance sheet when purchased
locations, reputation, copyrights, patents, licenses, trademarks, franchise
assets:
current - cash, or convertible to cash shortly
inventory: goods intended for sale (current asset)
insurance an asset: paid for, provides value, owned by company
fixed - long life, not intended for resale
other
investments
non-current (over 1-year till turned into cash)
liabilities
current: due within one year (accts payable, taxes, etc.)
noncurrent: loans (mortgages)
owner's equity: whatever left over after creditors paid
stock: listed as price originally bought for
retained earnings: net change in company value... increase/decrease in stockholders' equity
-approximately, retained earnings = profits - dividends
-listed from since business began (not for year)
6)
depreciation: amount of asset that has been "used up"
