Accounting Chapter 1

Asset: An asset is an resource control by the entity as a result of the past events
and from which future economics benefits are expected to flow to the entity form
eg. Property/ equipment and land

Types of Assets

Non- Current Assets/ Fixed Assets

Life more then a year

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Cr
Assets

Current Assets
- Receivables/ Debtor
- Inventory / Stock
- Prepayment
-Cash in hand
-Cash at bank

Liability: A Liability is a present obligation of the entity arising from the past
events, the settlement of which is expected to result in an outflow from the entity
of resources, embodying economics benefits

Types of Liability

Non-Current Liability
Current liability
Bank loan
Bank
overdraft/ Creditors/ Payable
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Liability
Capital: Capital is what the owner of an entity have invested in an
enterprise. It represents what the business owns to its owner.
Dr Cr
Capital
Accounting Equation
Assets = Liabilities+ Capital
What are the types of Financial Statements
Statement of Comprehensive Income
Statement of Financial position
Statement of Cash Flows
Statement of changes in Equity
Notes
Who are the users of accounting information?
Manager. These are the day to day decision-maker. They need to know
how well things are progressing financially and about the financial
status of the business.

Owner(s) of the business. They want to be able to see whether or not

the business is profitable in addiction they want to know what the
financial resources if the business are.
A prospective buyer. When the owner wants to sell a business the
buyer will want to see such information
The bank. If the owner wants to borrow money for use in the business,
then the bank will need such information.
Tax inspectors. They need it to be able to calculate the taxes payable.
A prospective partner. If the owner wants to share ownership with
someone else, then the would-be partner will want such information
Investor, either existing ones or potential ones. They want know
whether or not to invest their money in the business

Q: What are the objectives of accounting?

If they are making a profits or a loss;

What their business is worth;
What a transaction was worth to them;
How much cash they have;
How much they are owned;
How much they own to someone else;
Enough information so that they can keep a financial check on the things
they do.