Notes
ACCOUNTING EQUATION
Content of the notes (5)
Page 1
ACCOUNTING EQUATION
ASSETS = LIABILITIES + OWNER'S EQUITY
Page 2
ASSETS
It is classified into 2 categories which are Non-Current Assets and Current Assets.
NON-CURRENT ASSETS
It is the assets which is having the useful life for more than 12 months.
Example: Buildings, Premises, Vehicle, Furniture, etc
CURRENT ASSETS
It is the assets which is having the useful life for less than 12 months.
Example: Closing Inventory, Accounts Receivable, Cash, Bank, etc
Page 3
LIABILITIES
It is the debts that owed by company to the other parties.
it is also classified into 2 categories which are Non-Current Liabilities and Current Liabilities.
NON-CURRENT LIABILITIES
It is the debts which is owing by the business for more than 12 months.
Example: Bank Loan, Mortgage Loan, etc
CURRENT LIABILITIES
It is the debts which is owing by the business for less than 12 months.
Example: Accounts Payable, Bank Overdraft, etc
Page 4
OWNER'S EQUITY
It is the part that recording for how much the business owner had invested into the business.
The items that recorded into the element such as Capital, Drawings, Net Profit / Net Loss, etc
Page 5
EXERCISE
The total amount for assets is RM 12,000. The amount that invested by the owner was RM 10,000. Therefore, what is the value for Liabilities?
ASSETS = LIABILITIES + OWNER'S EQUITY
RM 12,000 = LIABILITIES + RM 10,000
LIABILITIES = RM 12,000 - RM 10,000
LIABILITIES = RM 2,000