TASK 2
A. ASSET ACCOUNTS
Asset accounts are one of the three major classifications of balance sheet accounts:
• Assets
• Liabilities
• Stockholders' equity (or owner's equity)
The ending balances in the balance sheet accounts will be carried forward to the next accounting year. Hence the balance sheet accounts are called permanent accounts or real accounts.
The asset accounts are usually listed first in the company's chart of accounts and in the general ledger. In the general ledger the asset accounts will normally have debit balances.
The balances in some of the asset accounts will be combined and presented as a single amount when the balance sheet is prepared. For example, if a company has ten checking accounts, the balances will be combined and the total amount will be reported on the balance sheet as the asset Cash.
Assets include the things or resources that a company owns, that were acquired in a transaction, and have a future value that can be measured. Assets also include some costs that are prepaid or deferred and will become expenses as the costs are used up over time.
Here are some examples of asset accounts:
• Cash
• Short-term Investments
• Accounts Receivable
• Allowance for Doubtful Accounts (a contra-asset account)
• Accrued Revenues/Receivables
• Prepaid Expenses
• Inventory
• Supplies
•
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Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Revenues increase equity and result from a company’s earning activities. Examples are consulting services provided, sales of products, facilities rented to others, and commissions from services. In tuition centre, revenues are teaching tuition fees
Balance sheet lists assets, liabilities and owner’s equity. The assets listed on the balance sheet are acquired either by debt (liabilities) or equity. “Companies that use more debt than equity to finance assets have a high leverage ratio and an aggressive capital structure. A company that pays for assets with more equity than debt has a low leverage ratio and a conservative capital structure. That said, a high leverage ratio and/or an aggressive capital structure can also lead
B) assets are generally listed on the balance sheet at their historical cost, not their current value.
The amount of the sales should also be fixed and determinable. The principle of revenue recognition also assumes that cash will be collected in a timely manner. This means that upon receiving payment for goods or service revenue should be recorded and in the case of prepaid expense revenue is recognized when it is earned. For example you have a year prepayment of rent each month and when the rent becomes due you will debit your rent account and credit your prepaid rent account, because then the rental payment would be earned/
Companies can only recognize revenue if it is both realized and earned. In many situations, this clearly takes place when the company delivers the product and receives payment. However, there are some cases when organizations physically deliver a product but do not immediately recognize the revenue. In addition, there is a case when companies do not deliver a physical product but need to recognize revenue.
The purpose of an income statement is to report the revenue generated and the expenses incurred by a corporation for the past year. (Melicher, 2014) The gross revenue is the first item on the financial statement followed by several expenses and then the net revenue. One of the expenses a corporation incurs is the cost of goods sold, which is the amount of money it costs a corporation to produce or manufacture the items sold to generate a profit. The second expense on a financial statement is the cost of record keeping, preparing financial statements, advertising, and salaries grouped under the heading “Selling, general, marketing expenses”. The other expenses on an income statement are depreciation, interest expense, and the unavoidable income tax. (Melicher, 2014) Once all of these expenses haven been deducted from the gross revenue a company has an accurate depiction of their net
Revenue is nothing more than the monetary value placed on those goods and services sold to consumers and the price those consumers are going pay- it does not necessarily coincide with a cash transaction (Way, n.d.). Alternatively, cash flow is the actual movement of cash in and out of the business. Cash is money that is
As we learned in class by keeping accounting on the simple way of a General ledger the entries goes as follows, every entry is A Debit for 1 account following with a credit on the other for Example when you have a Rent Expenses of $ 15,000 meaning you taking out money from cash account to p...
Revenue serves as a representation of how much a company is worth in terms of how many products sold or services offered. The revenue recognition principle states that “revenue should be recognized when earned” (Averkamp 2004, online). When revenue is recognized is split over several periods, it can make a company appear to be more profitable, and display a stability in earnings that does not exist. When revenue is recorded as one lump sum at a future period such a recession, it can make companies appear to be profitable during a time when they should not be.
...n. Based on the definition of asset/liability, the operating leases items meet it. Therefore the amount should show as asset/liability off balance sheet as well.
FASB Statement of Financial Accounting Concepts (CON) 5, Recognition and Measurement in Financial Statements of Business Enterprises, set forth the historic guiding principle to revenue recognition. Pursuant to paragraph 83, for revenue to be recognized it must be (a) realized or realizable and (b) earned. Revenues are “realized” when products, goods, services, or other assets are exchanged for cash or claims to cash. They are “realizable” when related assets received or held are readily convertible to known amounts of cash or claims of cash. Revenue is “earned” when an entity has “substantially accomplished what it must do to be entitled to the benefits represented by the revenues.” SEC Staff Accounting Bulleting (SAB) 104, Revenue Recognition issued in December 2003 provided additional guidance to when revenue is realized or realizable and earned setting forth four basic criteria: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller’s price to the buyer is fixed or determinable, and (4) collectibility is reasonable assured.
Total revenue, which is the total amount of income received from the sales of a certain quantity of goods or services. Total revenue can be calculated by multiplying the price of a product times the quantity sold. For instance, if 160 baseball caps are sold and each baseball cap was priced at $5 each, the total revenue would be (160*5) $180.
Costco has been a strong company for many years. Asset utilization/ efficiency ratio is important for evaluating this company because this ratio is frequently used to compare a company’s efficiency over time. In accounting, asset is an economic resource, which means that anything that is capable of being owned or controlled to produce value has positive value to the company, is considered an asset. The more efficient Costco is with asset management, it shows how well they use their assets to generate revenue. A gain in revenue does not mean they are making profit, but part of the company’s goal is to maximize profit. The main assets we use to evaluate asset utilization are account receivable, inventory, and fixed asset, cost of goods sold, sales and total asset.
There are many techniques used to manage cash including, the nature of asset growth, controlling assets, patterns of financing, the financing decision, a decision process and shifts in asset structure. For any company the growth of asset results in a growth in wealth if managed effectively. The typical firm usually forecast the rate of sales to ensure that the production of goods match sales so there is not an overflow if inventory. As a company expands and produces more items they will acquire permanent current assets. Permanent current assets can be described as a constant inventory of items because it is almost impossible to predict the market and the demands of the consumer.
Asset are the resources for running the business work. As a business, if get more assets it means that the business is powerful. Asset also be divided into two categories which is non-current assets and current assets. Non-current assets are long-term use for
The resource of a business that owner own are called assets for example building, machinery etc. In other words we can say the thing that owned by a person a regard to company and having value, commitment and legacies.