Unit 2Accounting Elements &Accounting Equation
Unit 2 Accounting Elements & Accounting Equation
Accounting ElementsAccountingElementsDefinitionClassificationBased on economicItrefers to thebasiccontent,accountingclassification forelements canbeaccounting objectsdivided into assets,and the specificationliabilities, owner'sof accountingequity, revenues,calculation objectsexpenses, profit.2025
2025/12/3 2 Definition Classification Accounting Elements It refers to the basic classification for accounting objects and the specification of accounting calculation objects. Based on economic content, accounting elements can be divided into assets, liabilities, owner’s equity, revenues, expenses, profit. Accounting Elements
AssetsAssetsDefinitionClassificationAnyeconomic*Current assetsresources of＊ Property, Plantmonetary valueowned or controlledand Equipmentby a business that are* Intangible assetsexpected to benefitfuture operation.20
2025/12/3 3 Assets Definition Classification Assets Any economic resources of monetary value owned or controlled by a business that are expected to benefit future operation. ＊Current assets ＊ Property, Plant and Equipment ＊ Intangible assets
Franklin CorporationBalance sheetDecember 31.2009Current assetsCash700,000300,000Short-term investment550,000Accounts receivable5,500Notes receivable130.000Inventories50,000Prepaid expenses1,735,500Total current assetsNon-current assets1,000,000Property, Plant, and Equipment450,000Accumulateddepreciation550,000Total PPE50,000Intangible assets45,000Investment Property2.095,000Total Non-current assets3,830,500Total assets
2025/12/3 4 Franklin Corporation Balance sheet December 31, 2009 Current assets Cash 700,000 Short-term investment 300,000 Accounts receivable 550,000 Notes receivable 5,500 Inventories 130,000 Prepaid expenses 50,000 Total current assets 1,735,500 Non-current assets Property, Plant, and Equipment 1,000,000 Accumulated depreciation 450,000 Total PPE 550,000 Intangible assets 50,000 Investment Property 45,000 Total Non-current assets 2.095,000 Total assets 3,830,500
PPE:Land, Buildings, Machinery, Furniture andEquipmentIntangible assets:Patent, Copyrights, Franchises, Trademarks,Goodwill2025/12/35
2025/12/3 5 ◼ Intangible assets: Patent, Copyrights, Franchises, Trademarks, Goodwill ◼ PPE: Land, Buildings, Machinery, Furniture and Equipment
LiabilitiesLiabilitiesDefinitionClassificationAn outflow of*Currentresource indicatingliabilitieseconomic benefits* Non-currentwill result from theliabilitiessettlement of apresent obligation
2025/12/3 6 Liabilities Definition Classification Liabilities An outflow of resource indicating economic benefits will result from the settlement of a present obligation. ＊Current liabilities ＊ Non-current liabilities
Franklin CorporationBalance sheetDecember31.2009Current liabilities370,000Accounts payable20,000Salaries payable5,500Short-term loan395,500Total current liabilitiesNon-current liabilities595,000Long-term loan payable45,000Deferred tax liability640,000Total Non-current assets1,035,500Total liabilitiesOwner's equity1,500,000Paid-in capital500,000Share premium795,000Retained earnings2,795,000Total owner's equity3,830,500Total liabilities and owner's equity72025/12/3
2025/12/3 7 Franklin Corporation Balance sheet December 31, 2009 Current liabilities Accounts payable 370,000 Salaries payable 20,000 Short-term loan 5,500 Total current liabilities 395,500 Non-current liabilities Long-term loan payable 595,000 Deferred tax liability 45,000 Total Non-current assets 640,000 Total liabilities 1,035,500 Owner’s equity Paid-in capital 1,500,000 Share premium 500,000 Retained earnings 795,000 Total owner’s equity 2,795,000 Total liabilities and owner’s equity 3,830,500
Owner's equityOwner's equityDefinitionClassificationIt refers to the*Paid-inresources invested incapital/sharethe business by thecapitalowner oraccumulated* Capital surplusduring the course of* Retainedoperation.earnings
2025/12/3 8 Owner’s equity Definition Classification Owner’s equity It refers to the resources invested in the business by the owner or accumulated during the course of operation. ＊Paid-in capital/share capital ＊Capital surplus ＊ Retained earnings
RevenuesRevenuesDefinitionClassificationRevenues arecash* Sales revenueinflows or otherenhancementsofassets*Otherincomeof an entity or settlemenof its liabilities oracombination ofbothinthe normal operation ofbusiness activities
2025/12/3 9 Definition Classification Revenues ＊Sales revenue ＊Other income Revenues Revenues are cash inflows or other enhancements of assets of an entity or settlement of its liabilities or a combination of both in the normal operation of business activities
ExpensesExpensesDefinitionClassificationExpenses are*Operatingoutflows orotherexpensesusing up of assets or* Selling expenseincurrence of* General andliabilities or aadministrativecombination of bothinexpensethe normal operationofbusiness activities
2025/12/3 10 Expenses Definition Classification Expenses Expenses are outflows or other using up of assets or incurrence of liabilities or a combination of both in the normal operation of business activities. ＊Operating expenses ＊ Selling expense ＊ General and administrative expense