Hi everyone i’m just checking in seeing as i dont get much time to do that having a gorgoues kid to look after. I am going to try and have a new post every couple of days just updating you on how my degree is going and what i have learnt as well as all my drafts for assesment.
This post is designed to help me and you guys, so if anyone ever needs a quick recap just look back into my past posts and see what i have summarised. This week i’ve red the study guide 1.1-1.4 and this is what i have come up with.
ASSET – A resource controlled by the entity as a result of post events and from which future ecomonic benefits are expected to flow to the entity.
LIABILITIES – A present obligationof the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
EQUITY – The residual interest in the assets of the entity after deducting all it’s liabilities.
Assets, liabilities and equity accounts measure value of a firm. The current value of a firm as expressed in it’s assets and liabilities (and the current value of the interests of a firms equity investors as expressed in it’s equity).
A profit is an increase in value amd a loss is a decrease in value. We transfer the profit or loss to a firm’s euity at the end of a period. We then start the next period with zero amounts in our revenue and expense accounts.
Revenue are additiins to equity as a result of increases to assets or reductions in liabilities of a firm. Revenue increases the value of the interests of our equity investors in a firm and expenses reduce the value of the interests of our equity investors in a firm.
If a firms revenues are greater than it’s expenses during a period, then the firm has added value for it’s equity investors. If the firms expenses are greater than it’s revenues during a period then thefirm has reduced value for it’s equity investors.
The difference between the fundamental accounting equation and the extended fundamental accounting equation (EFAE) is that the EFAE has the extra account of Revenue and Expenses.
Extended fundamental accounting Equation
Assets = Equity + (Revenue – Expenses) + Liabilities
or
Assets + Expenses = Equity + Revenue + Liabilities
These are the notes i think are important to remember in the section 1.1-1.4 i am currently working on my assignment step 1 and will keep you guys informed and put up my draft once completed. Make sure you guys are logging onto peerwise to answer questions and put up your own i have currently put up a couple relating to sections 1.1-1.4.
Accounting And Its Effects 