UnitAccountingElementsampAccountingEquation

1、unit 2 accounting elements & accounting equationunit 2accounting elements & accounting equationaccounting elementsclassification definitionaccounting elements it refers to the basic classification for accounting objects and the specification of accounting calculation objects. based o

2、n economic content, accounting elements can be divided into assets, liabilities, owners equity, revenues, expenses, profit.assetsclassification definitionassets any economic resources of monetary value owned or controlled by a business that are expected to benefit future operation.current assets pro

3、perty, plant and equipment intangible assetsintangible assets: patent, copyrights, franchises, trademarks, goodwillppe: land, buildings, machinery, furniture and equipmentliabilitiesclassification definitionliabilities an outflow of resource indicating economic benefits will result from the settleme

4、nt of a present obligation.current liabilities non-current liabilitiesowners equityclassification definitionowners equity it refers to the resources invested in the business by the owner or accumulated during the course of operation.paid-in capital/share capitalcapital surplus retained earningsreven

5、uesclassification definitionrevenuessales revenueother income 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.expensesclassification definitionexpenses expenses are outflow

6、s 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 expenseprofitprofit refers to the operating results of a business for a period of time. it is an important

7、index for evaluating managers.classification definitionprofit the matching result of revenues and expenses.operating profit net amount of non-operating income and expenseaccounting equationit shows the relationship among assets, liabilities, owners equity, revenues, expenses and profit.it reflect th

8、e rule of firms economic activities and usage of capital. it lays the theoretical foundation for accounting practice and is extremely important for both the double-entry system and the preparation of financial statements.accounting equationat a specific timeassets = claimsduring a period timeaccount

9、ing equationassetscapital usagecapital sourcefirmowners equityliabilitiesat a specific timeassets = claimsie. assets = liabilities + owners equity(static)accounting equationcashmaterialwipfgcashsupplyproducesaleprofitexpenses (input)revenues (output)during a period timerevenues expenses = profit(dyn

10、amic)assets + expenses = liabilities +owners equity + revenuescomprehensive accounting equationexample1.invested $18><#004699'>0<#004699'>0,<#004699'>0<#004699'>0<#004699'>0 to open the pet store on january 1, 2<#004699'>0<#004699'

11、;>09.2.on january 2, 2<#004699'>0<#004699'>09, richard paid $1,35<#004699'>0 rent.3.on january 3, 2<#004699'>0<#004699'>09, richard borrowed $5<#004699'>0,<#004699'>0<#004699'>0<#004699'>0 by signing a 4-mon

12、th,1<#004699'>0% notes payable.4. on january 3, 2<#004699'>0<#004699'>09, richard purchased pet store equipment for $7,5<#004699'>0<#004699'>0 in cash.5. on january 4, 2<#004699'>0<#004699'>09, richard hired two people in the stor

13、e for a monthly salary of $8<#004699'>0<#004699'>0 each.6. on january 1<#004699'>0,2<#004699'>0<#004699'>09, richard receives a cash advance of $1,2<#004699'>0<#004699'>0 from a customer for a parrot.example7.on january 11, 2<#

14、004699'>0<#004699'>09, richard received $5, 5<#004699'>0<#004699'>0 in cash for two lizards sold to a customer.8.on january 13, 2<#004699'>0<#004699'>09, richard purchased pet supplies on account at a cost of $5<#004699'>0<#004699

15、'>0 from molley pet supply store. 9. on january 17, 2<#004699'>0<#004699'>09, richard declared and paid a dividend to stockholders of $4<#004699'>0<#004699'>0.1<#004699'>0. on january 31, 2<#004699'>0<#004699'>09, richard p

16、urchased a 3-year insurance policy costing $2,4<#004699'>0<#004699'>0 that will expire on january 31 of 2<#004699'>011.11. on january 31, 2<#004699'>0<#004699'>09, richard paid the employees monthly salaries.answer1.invested $1<#004699'>0&l

17、t;#004699'>0,<#004699'>0<#004699'>0<#004699'>0 to open the pet store on january 1,2<#004699'>0<#004699'>09. cash paid-in capital 2.on january 2,2<#004699'>0<#004699'>09,richard paid $1,35<#004699'>0 rent. retained

18、 earnings cash 3.on january 3,2<#004699'>0<#004699'>09,richard borrowed $5<#004699'>0,<#004699'>0<#004699'>0<#004699'>0 by signing a 4-month,1<#004699'>0% notes payable. cash notes payable 4. on january 3,2<#004699'>0<

19、;#004699'>09,richard purchased pet store equipment for $7,5<#004699'>0<#004699'>0 in cash. ppe cash 5. on january 4,2<#004699'>0<#004699'>09,richard hired two people in the store for a monthly salary of $8<#004699'>0<#004699'>0 each.

20、6. on january 1<#004699'>0,2<#004699'>0<#004699'>09,richard receives a cash advance of $1,2<#004699'>0<#004699'>0 from a customer for a parrot. cash unearned revenue 7.on january 11,2<#004699'>0<#004699'>09,richard received $5, 5&

21、lt;#004699'>0<#004699'>0 in cash for two lizards sold to a customer. cash retained earnings 8.on january 13,2<#004699'>0<#004699'>09,richard purchased pet supplies on account at a cost of $5<#004699'>0<#004699'>0 from molley pet supply store.

22、supplies accounts payable 9. on january 17,2<#004699'>0<#004699'>09,richard declared and paid a dividend to stockholders of $4<#004699'>0<#004699'>0. retained earnings cash 1<#004699'>0. on january 31,2<#004699'>0<#004699'>09,richard purchased a 3-year insurance policy costing $2,4<#004699'>0<#004699'>0 that will expire on january 31 of 2<#004699'>011. prepaid insurance cash