1st Bac - Assets, liabilities, equity, income, costs and expenses

 Assets, liabilities, equity, income, costs and expenses

It is important to classify the financial accounts in order to know or to find information quicker. In every entrepreneurship there are two big groups of accounts:

-       Assets, liabilities and equity: accounts that make part of the balance sheet

-       Income, costs and expenses: accounts that make part of the profit and loss statement

Specific denominations of the financial accounts

Assets: There are divided in three types, which are current, fixed and deferred

Current assets are those goods or values that are in coin or paper in the cash account. The characteristics of current assets is that they can be converted into cash within a year.

Fixed assets are those which are not bought to be sold, but they work as support for the business. For example:

-       Land, buildings, machines, equipment, furniture, computers, cars, etc.

Deferred assets are related to the accounts that belong to payments made in advance with the purpose of facilitating the business operation. For example:

-       Insurance paid in advance

-       Taxes paid in advance

-       Rent paid in advance

-       Salary paid in advance, etc.

 

Liabilities: All the debt that the business must pay. There are also three types: current, fixed and deferred. 

Current liabilities must be paid within a year. For example: taxes, insurance, salary, etc.

Fixed liabilities or long term must be paid in a period over a year. For example: credit for a car, machine, land, house, offices, etc.

Deferred liabilities have to deal with payment received by the company in advance. For example: a customer might want to secure the product, so they pay in advance, prior to receiving the product.

 

Equity: All the resources that are property of the owners of the business. The main accounts are capital, reserves and profits collected from prior periods. 

 

Income: Has to do with all the accounts in which contain any income generated by the business. For example: from the sale of goods or services, rent, interest, etc.

 

Costs: It is related with everything involved with the production area, making sure everything is working properly. This will vary according to the type of business.

 

Expenses: Has to deal with all the payments to the areas such as:

-       Commercial (payments such as advertisement)

-       Administrative (payments such as salary, water, electricity, phone)

-       Financial (payments such as interests of a credit)

Comments

Post a Comment

Popular posts from this blog

1st Bac - Handling of the main accounting accounts

  Handling of the main accounting accounts The majority of productive entrepreneurships, when accounting for their financial transactions, tend to accumulate records in accounts such as: cash, banks, accounts receivable, inventory, fixed assets, depreciation, accounts payable, capital, income, costs and expenses. These accounts belong to the main accounts such as: assets, liabilities, equity, income, costs and expenses.   Plan of financial account of a business When the entrepreneur decides to permanently record the financial movements of the business, it is important to structure, in first place, a list followed by its definition of the financial accounts involved. This practice is very useful since the person in charge of keeping the business accounting, finds within the plan of financial account the qualifying group frame. Here are located the accounts that have a direct connection with the financial movement that will be registered.   Here we have an example of the pl...
Read more

1st Bac - Exercises: Double-Entry System

Image
For the exercises below, create the double-entry system according to the accounts involved. Think carefully and analyze each exercise. 1. John is the owner of a fast food restaurant. He buys $50 of potatoes from his supplier. What are the accounts involved? (Use the double-entry system) 2. Peter is the owner of a furniture store. He sales $1200 worth of furniture to a customer. What are the accounts involved? (Use the double-entry system) 3. Mary is the owner of a toy store. She has a loan from the bank. The amount of the loan is $3000. This month Mary pays $200 for the monthly fee to the bank. What are the accounts involved? (Use the double-entry system) 4. Anna is the owner of a pizza restaurant. She uses her personal savings ($4500) to buy an oven. What are the accounts involved? (Use the double-entry system) 5. David is the owner of a sandwich shop. He uses the money from the business ($2500) to buy a new refrigerator. What are the accounts involved? (Use the double-entry system) 6...
Read more

1st Bac - STR - Single Taxpayer Registration

  Legal and Social Responsibility of the Entrepreneur STR Single Taxpayer Registration (RUC) At the moment of meeting the requirements established by the Ecuadorian legislation, the entrepreneur must obtain a Single Taxpayer Registration (STR) (in Spanish RUC – Registro Único de Contribuyente) as a means of formal recognition of your business. It is like an identification to carry out productive activities, acts to comply the tributary obligations and it is the means used by the tax control authority.   According to the Internal Revenue Service (IRS) (in Spanish SRI – Servicio de Rentas Internas), the STR it is a number identification for all the people and societies that make an economic activity in Ecuador. It contains 13 numbers according to the type of taxpayer its composition varies, the STR is usually the citizenship identification number followed by 001.   What is it used for? The Ecuadorian tax administration establishes that the STR has as main function the regis...
Read more