Accounting Essay

999 Words Mar 16th, 2015 4 Pages
1. Assets:
A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

Current Assets:

Current assets are the assets that a company expects to convert to cash or use up within one year or its operating cycle, whichever is longer.

A balance sheet account that represents the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business.

In accounting, a current asset is an asset on the balance sheet which can either be converted to cash or used to pay current liabilities within 12 months. Typical current assets include cash, cash equivalents, short-term investments, accounts
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Drawings decrease owner’s equity.

5. Accruals and deferrals:

a) Accruals:
The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows/outflows to be combined with future expected cash inflows/outflows to give a more accurate picture of a company's current financial condition. Thus the accrual will increase both a balance sheet and an income statement account.
b) Deferrals:
Deferrals are expenses or revenues that are recognized at a date later than the point when cash was originally exchanged. The two types of deferrals are prepaid expenses and unearned revenues.

6. Revenue:
Revenues are the gross increase in the owner;s equity resulting from business activities entered into for the purpose of earning income. Generally, revenues result from selling merchandise, performing services, renting property etc. Revenues result in an increase in an asset.

7. Expenses:
Expenses are the cost of assets consumed or services used in the process of earning revenue. They are decreases in owner’s equity that result from operating business.

8. Balance sheet:
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point

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