Financial Accounting Notes

Financial Accounting Notes

Dividends are effectively accounts payable, and hence liabilities. Revenues Expenses = Net Income Net Income – Dividends = Retained Earnings To be recorded as an asset, an economic resource must meet four requirements: * Acquired at measurable cost * Obtained or controlled by the entity * Expected to produce future economic benefits * Arises from a past transaction or event Assets like computers and buildings having physical substance are tangible assets. Other assets, like licenses and prepaid expenses that lack physical substance, are intangible assets.

On the balance sheet, assets are organized into two categories: current and non-current. Current assets include cash and those assets that are expected o be converted into cash or consumed within 12 months of the balance sheet date. Non-current or F-axed assets are assets that are expected to provide economic benefits for periods longer than a year. Some tangible, non-current assets with limited lives, such as the warehouse building, have an associated contra-asset account, called accumulated depreciation, that reduces the recorded value of the asset.

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