Lecture 4 Wednesday 15th of October Notes
Aims and Objectives
- Know what the accounting equation is
- Be able to explain the purpose of financial position
- Understand accounting conventions and the statement of financial position
The statement of financial position sets put the financial position of an entity at a given date in the form of a report and it is always dated.
Accoounting Equation for Statement of Financial Position
Assets = Capital or Equity + Liabilities
Assets: Are the resources owned by a firm that can be measured in monetary terms.
Characteristics of Assets
- Probable future benefit
- Business has exclusive right to control benefit
- Benefit arises from past transaction - e.g. buy a piece of machinery
- The asset can be measured in monetary terms
Examples of Assets
1. Buildings 2. Plant and machinery 3. Fixtures and fittings 4. Patents and trademarks 5. Trade and other receivables 6. Inventories 7. Investments 8. Cast at bank…