Accounting Concepts

Accounting Concepts

1. Capital- funds that you need to start a business

   • - Borrowed Capital, money loaned. e.g. Bank - Own Capital, personal possessions used in a business.

2. Assets- everything that belongs to a business

   • E.g.- freezer, fryer, cars, tables, cutlery, ovens. After you have all the items you price them all and this is only when you sell a business so you add the amount to the selling price.
   • Fixed assets- possessions that do not change for more than 1 year, e.g. land and building, vehicles, equipment
   • Current assets- possessions that change during the course of a year, e.g. trading inventory, bank account, petty cash, debtors control, fixed deposit

3. Liabilities- debt that a business or person has to pay

   • Long-term- debts paid over more than 12 months
     • Current- debts paid within 1 year