Accounting Project

Accounting Project

Assets also include intangible rights granted by patents, copyright or license (AU, 2015). Accounts receivable is created by selling products and services on credit. It IS amounts owed to a company by its credit customers; also known as debtors. Assets amount and the makeup of assets differ from company to company. Some companies may require land and factories to operate, while another company may need only an office to operate. Liabilities are obligations of a company that reflects the claims of others against assets. Liabilities reduce future assets and can require future services or products.

Liabilities include account payable and notes payable. Accounts payable is created by buying products or services on credit. Notes payable is a written promise to make a future moment at a specific time. Other liabilities include wages and salaries owed to employees and interest payable. Creditors are individuals or organizations that have the right to receive or collect payment from a company (AIL], 2015). A corporation’s equity is known as stockholders equity or corporate capital (AIL], 2015). Stockholder’s equity includes contributed (or paid-in) capital and retained earnings (AAU, 2015).

Contributed capital reflects the total amount of cash and other assets the corporation receives from its stockholders in exchange for common stock. Retained earnings is the cumulative net income and loss) retained by a corporation (AIL), 2015). Accountability of Assets, Liabilities, Equity & Inventory Valuation Wellbeing does not sell products it does not have inventory as part of it current assets. Instead it is made up of cash and cash equivalents, premium and self- funded receivables, deferred tax assets and others (Corporate, 2014).

Wellspring’s liabilities include medical claim payable, and other policy liabilities, unearned income, security payable and current portion of long-term debts (Corporate, 2014). Wellspring’s shareholder’s equity includes common stock, par value, shares authorized, hares issued and outstanding, paid in capital; retained earnings and accumulated and other comprehensive income (Corporate, 2014). Debit refers to the left and credit refers to the right side of a t-account. Debits increases assets, withdrawals and expenses, while credits decrease them. Credits increase liabilities, capital, and revenues; debits decrease them.

Assets normal balance is debit. So for example if Wellbeing purchases new equipment then the asset account cash will be credited to show a decrease and the account equipment would be debited to show an increase in the account equipment. Double entry accounting requires the sum of debit count balance must equal the sum Of credit account balances; mean inning that each transaction affects at least two accounts and has at least one debit and one credit. The recording of debits and credits follow the accounting equation of Assets-? Liabilities+ Equity.

Assets, liabilities and shareholder equity are accounted using the accounting cycle. It consist of 10 steps that include analyze transactions, journalize, post, prepare an adjusted trial balancer prepare statements, close and prepare a post- closing trial balance (Cheapest, Larson , 2002, They are also accounted for in the four ajar accounting statements, the income statement, balance sheet, statement of changes in owners equity and statement of cash flows. An income statement shows a company’s revenues and expenses along with the resulting net income or loss over a period of time (AILS, 2015).

The balance sheet shows a company’s financial position of assets, liabilities and equity, at a point in time (AAU, 2015). The equity account in the balance sheet is taken from the statement of changes in owner’s equity (AAU, 2015). A statement of changes in owners equity shows changes in equity for a period of time (AAU, 2015). Cash flows from operating activities report cash receipts and payments from the primary business the company is engaged in (AIL’, 2015). Cash flows from investing activities involve cash transactions from buying and selling long-term assets.

Cash flows from financing activities include long-term cash borrowings and repayments from lenders and the cash investments and withdrawals of the owner (AAU, 2015). There are three approaches to valuing inventory that are allowed by GAP, First- in, First-out (FIFO), Last- in, Last-out (LILLO) and Weighted Average. First-in, First-out is the first goods purchased are the first goods sold (AAU, 2015). The oldest cost is then matched against revenue and assigned to cost of goods sold. The ending balance reflects recent inventory cost.

Under FIFO during periods of inflation, it will result in the lowest estimate of cost of goods sold among LIFO and Weighted Average, and the highest net income (AIL’, 2015). Under LIFO the goods last purchased are the first to be sold. Under this method during periods of inflation it will result in the highest estimate of cost Of goods, among FIFO and Weighted Average, and the lowest net income (. Weighed inventory are based upon average cost of all units brought during the period. When inventory is rapid it ill resemble FIFO. Inventories are valued in the current assets section of the balance sheet using one of the methods.

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