Week 2

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Question 1 : Definitions of concepts (Phillips , Libby and Libby , 2006

Asset : Assets are the resources used by a business enterprise . It includes property , equipment , supplies , inventories , cash and receivable accounts

Current asset : Current assets are those resources in a company that are used up or converted into cash within the next 12 months

Liability : Liabilities are the debts and obligations to be paid by a company . It includes accounts , notes and bonds to be paid

Current liability : Current liabilities are the debts and other obligations in

a business enterprise that are to be paid , settled or fulfilled within the next 12 months

Contributed capital : Contributed capital is the amount of financing contributed to a business enterprise by stockholders

Retained earnings : Retained earnings is the amount of earnings retained or accumulated by a company

Question 4 : Basic accounting equation

The basic accounting equation is the fundamental framework on which accounting systems of business companies are built (Phillips , Libby and Libby , 2006 . According to the equation , A L SE , the assets (A ) of a business enterprise are a combination of its liabilities (L ) and stockholder 's equity (SE , that is , contributed capital and retained earnings of the company

Reference

Phillips , Fred , Libby , R and Libby ,

. A (2006 . Fundamentals of Financial Accounting . Boston : McGraw-Hill /Irwin...