Unit6AssetsCurrentAssets II.Definition ofCurrentAssetsII.CurrentAssetsAccounts
Unit 6 Assets—Current Assets Ⅰ Ⅰ. Definition of Current Assets Ⅱ. Current Assets Accounts
AssetsDefinition:Assets areeconomic resourcesthataremeasurableinmonetary terms and owned or controlled by an enterprise forthe purpose of making profitsRecognition condition:An asset is recognized onthebalance sheet whenDit is probablethat thefutureeconomic benefits will flowtothe enterprise and②the asset has a cost or value that can be reliably measured2
2 Assets Definition: ⚫ Assets are economic resources that are measurable in monetary terms and owned or controlled by an enterprise for the purpose of making profits. Recognition condition: ⚫ An asset is recognized on the balance sheet when ①it is probable that the future economic benefits will flow to the enterprise and ②the asset has a cost or value that can be reliably measured
I .Definition of Current AssetsCurrentassets areassetsthatareexpected tobeconverted to cash, sold or consumed within 12months or within the business's normal operatingcycle if longer than a year. Current assets should include cash, short-terminvestment, receivable, prepayment and inventory.3
3 Ⅰ. Definition of Current Assets ⚫ Current assets are assets that are expected to be converted to cash, sold or consumed within 12 months or within the business’s normal operating cycle if longer than a year. ⚫ Current assets should include cash, short-term investment, receivable, prepayment and inventory
Currentassetsonthebalancesheetrepresent a company's liquidityThe more cash and short-terminvestments onhand,thelower afirm's risk of failure becausemanagement can use the money tocarry itself through tough periods
4 ⚫ Current assets on the balance sheet represent a company's liquidity. The more cash and short-term investments on hand, the lower a firm's risk of failure because management can use the money to carry itself through tough periods
II, Current Assets Accounts1.Assets101 Cash102 Accounts Receivable103NotesReceivable104 Office Supplies105 Equipment106Inventory107PrepaidInsurance108Land109Accumulated Depreciation110Intangible Assets5
5 Ⅱ. Current Assets Accounts ⚫ 1.Assets 101 Cash 102 Accounts Receivable 103 Notes Receivable 104 Office Supplies 105 Equipment 106 Inventory 107 Prepaid Insurance 108 Land 109 Accumulated Depreciation 110Intangible Assets
1.CashContentCashincludes coins,papermoney,checks,money orders.and money in depositPlaceOn balance sheet, cash islisted first among the currentassets. because it is the most current and liguid of all assetsAmountCash and cash equivalents areaccounted for accordingtothe actual amount ofreceipt and payment6
6 1. Cash ⚫ Content Cash includes coins, paper money, checks, money orders, and money in deposit. ⚫ Place On balance sheet, cash is listed first among the current assets, because it is the most current and liquid of all assets. ⚫ Amount Cash and cash equivalents are accounted for according to the actual amount of receipt and payment
CashandCashEquivalentsCashandCashEquivalents istheamountofmoney the company has in bank accounts, savingsbonds, certificates of deposit, and money marketfunds. It tells you how much money is availabletothebusiness immediately
7 Cash and Cash Equivalents ⚫ Cash and Cash Equivalents is the amount of money the company has in bank accounts, savings bonds, certificates of deposit, and money market funds. It tells you how much money is available to the business immediately
Cashisavital factor intheoperation oabusinesssince manybusiness transaction involve cash Cash is most subject to theft and fraud. So, strictcontrol over cash should be applied in a businessThere are some cases where cash on the balancesheet isn't necessarily a good thingThe moral:Youprobablywon'tbe abletotell if a company is weakbased on cash alone:the amount of debt isfar more8important
8 ⚫ Cash is a vital factor in the operation o a business, since many business transaction involve cash. ⚫ Cash is most subject to theft and fraud. So, strict control over cash should be applied in a business. There are some cases where cash on the balance sheet isn't necessarily a good thing. The moral: You probably won't be able to tell if a company is weak based on cash alone; the amount of debt is far more important
ExampleCingular company conducted the followingtransactions:(1)Invested $500,000 in the business(2)Purchased supplies and equipment for $100,000(3)Performed service for state Corporation andreceived $20,000 a month later.9
9 Example ⚫ Cingular company conducted the following transactions: (1)Invested $500,000 in the business. (2)Purchased supplies and equipment for $100,000. (3)Performed service for state Corporation and received $20,000 a month later
Solution500.000(1) Dr. Cash500,000Cr. Paid-in Capital100,000(2) Dr. Supplies and EquipmentCr. Cash100,00020,000(3)Dr.AccountsReceivable20,000Cr.ServiceRevenue20,000Dr. Cash20,000Cr.Accounts Receivable10
10 Solution ⚫ (1) Dr. Cash 500,000 Cr. Paid-in Capital 500,000 ⚫ (2) Dr. Supplies and Equipment 100,000 Cr. Cash 100,000 ⚫ (3) Dr. Accounts Receivable 20,000 Cr. Service Revenue 20,000 Dr. Cash 20,000 Cr. Accounts Receivable 20,000