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CURRENT ASSETS A balance sheet item which equals the sum of cash and cash equivalents, accounts receivable,

inventories, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year. A companys creditors will often be interested in how much that company has in current assets, since these assets can be easily liquidated in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day to day operations.

FIXED ASSETS An asset that is not consumed or sold during the normal course of business, such as land, buildings, equipment, machinery, vehicles, leasehold improvements, and other such items. Fixed assets enable their owner to carry on its operations. In accounting, fixed does not necessarily mean immovable; any asset expected to last, or be in use for, more than one year is considered a fixed asset. On a balance sheet, these assets are shown at their book value (purchase price less depreciation).

LIABILITIES An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. In the case of a company, a liability is recorded on the balance sheet and can include accounts payable, taxes, wages, accrued expenses, and deferred revenues. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period.

EQUITY Equity is used in accounting in several ways. Often the word equity is used when referring to an ownership interest in a business. Examples include stockholders equity or owners equity. Occasionally, equity is used to mean the combination of liabilities and owners equity. For example, some restate the basic accounting equation from Assets = Liabilities + Owners Equity to Assets = Equities. Equity is also used to indicate an owners interest in a personal asset. Outside of accounting, the word equity is also used to indicate fairness or justice. Owners equity is the owners rights to the assets of the business. If the business is a sole proprietorship, the owners equity is also known as the owners capital account. As this figure increases, the owners right to the assets of the business increase. More simply translated, the larger the equity, generally the smaller the debt.

REVENUE For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner's equity and is calculated before any expenses are subtracted. Net income can be calculated by subtracting expenses from revenue. In terms of reporting revenue in a company's financial statements, different companies consider revenue to be received, or "recognized", different ways. For example, revenue could be recognized when a deal is signed, when the money is received, when the services are provided, or at other times. There are rules specifying when revenue should be recognized in different situations for companies using different accounting methods, such as cash basis and accrual basis accounting.

EXPENSES Money spent or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business. Expenses may be in the form of actual cash payments (such as wages and salaries), a computed expired portion (depreciation) of an asset, or an amount taken out of earnings (such as bad debts). Expenses are summarized and charged in the income statement

as deductions from the income before assessing income tax. Whereas all expenses are costs, not all costs (such as those incurred in acquisition of income generating assets) are expenses.

SAMPLE TRANSACTION OF ABC SDN. BHD. FOR THE MONTH OF AUGUST 2011 RM

Aug. 01 Aug. 03 Aug. 10 Aug. 15 Aug. 20 Aug. 25 Aug. 28

Purchased goods for cash Sold goods to Karim Received from Karim Purchased machinery for cash Cash sales Sold goods to Rahim & Sons Received from Rahim & Sons Discount allowed

2,000 500 500 1,000 300 600 590 10 50 100

Aug. 30 Aug. 31

Paid Rent Paid Salaries

LEDGER ACCOUNT
Purchases Account
Date 2011 Aug.1 Particulars Amount Date Particulars Amount

To Cash a/c

2,000

Cash Account
Date Particulars Amount Date 2011. Aug.1 Particulars Amount 2011. Aug.10 To Karim Aug.20 To Sales a/c Aug.28 To Rahim & Sons

500 300 590

By By By By

Purchases a/c Machinery a/c Rent a/c Salaries a/c

2,000 1,000 50 100

Karim Account
Date 2011. Aug.1 Particulars Amount 500 Date Particulars Amount 500 2011. Aug.10 By Cash a/c

To Sales a/c

Sales Account
Date Particulars Amount Date 2011. Aug.3 Particulars Amount 500 300 600

By Karim By Cash a/c By Rahim & Sons

Machinery Account
Date Particulars Amount 1,000 Date Particulars Amount 2011. Aug.15 To Cash Account

Rahim & Sons Account


Date Particulars Amount Date Particulars Amount 2011. Aug.25 To Sales a/c 2011. Aug.28 By Cash a/c By Discount a/c

600

590 10

Discount Account
Date Particulars Amount 10 Date Particulars Amount 2011. Aug.28 To Rahim & Sons

Rent Account
Date Particulars Amount 50 Date Particulars Amount 2011. Aug.30 To Cash a/c

Salaries Account
Date Particulars Amount Date Particulars Amount

2011. Aug.31 To Cash a/c

2,000

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