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| Assets |
| anything of material value or usefulness that is owned by a person or company |
| Type of Assets |
| Current assets |
| Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle (whichever is longer), without disturbing the normal operations of a business. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets: |
| 1. Cash and cash equivalents — it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts). |
| 2. Short-term investments — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities). |
| 3. Receivables — usually reported as net of allowance for uncollectable accounts. |
| 4. Inventory — trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule. |
| Long-term investments |
| Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed of in the near future. This group usually consists of four types of investments: |
| 1. Investments in securities such as bonds, common stock, or long-term notes. |
| 2. Investments in fixed assets not used in operations (e.g., land held for sale). |
| 3. Investments in special funds (e.g. sinking funds or pension funds). |
| Fixed asset |
| Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes as an asset land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land assets). Accumulated depreciation is shown in the face of the balance sheet or in the notes. |
| Intangible asset |
| Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill. |
| Websites are treated differently in different countries and may fall under either tangible or intangible assets. |
| Tangible Assets |
| Tangible assets are those that have a physical substance and can be touched, such as currencies, buildings, real estate, vehicles, inventories, equipment, and precious metals. |
| Expenses |
| In accounting, expense has a very specific meaning. It is an outflow of cash or other valuable assets from a person or company to another person or company |
| Operating Expenses |
| Usually the largest expense category (by the number of accounts, at least) are operating expenses, which identify all normal costs that relate to the day-to-day necessities of the organization. In this category, basic accounting rules specify the inclusion of compensation, benefits, local, state, and federal payroll taxes, office expenses, supplies, postage, travel and entertainment, advertising (amounts not included in the cost of goods sold category), repairs and maintenance, depreciation (the non-cash expense of writing "down" the cost of some assets over time), mortgage or rent of facilities, utilities (telephone, electricity, heat, and air conditioning), and professional fees (accountants and attorneys). |
| Non-Operating Expenses (or Other Expenses) |
| This category typically includes all other expenses that the organization deems outside of operations. For example, corporate income taxes are often placed in this category. Companies identify federal and state corporate income taxes after they determine their net income (or net profit) for the fiscal or calendar year. Unlike compensation, travel, or repairs, income taxes are not calculated (or paid) until after all operations for the accounting period have closed. |
| Employee and Officer Expense Accounts |
| Accounting expense account classifications should not be confused with employee and officer expense accounts, which are usually operating expenses. Employee and officer expense accounts are not typically specified in the income statement (profit and loss statement) for a good reason. These accounts are designed to categorize amounts spent by employees, management, and/or board of director members for the efficient performance of their duties. For example, travel and lodging is often a major component of expense accounts. However, on the income statement, the total for all forms of travel and lodging will correctly appear in the travel or travel and entertainment account on the income statement. |
| Capital |
| The term Capital has several meanings and it is used in many business contexts. In general, capital is accumulated assets or ownership. More specifically, |
| * Capital is the amount of cash and other assets owned by a business. These business assets include accounts receivable, equipment, and land/buildings of the business. |
| * Capital can also represent the accumulated wealth of a business, represented by its assets less liabilities. |
| * Capital can also mean stock or ownership in a company. |
| Type Of Capital |
| Fixed capital |
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| Working capital |
| Working capital is money which is used to buy stock, pay expenses and finance credit. |
| Borrowed capital |
| This is capital which the business borrows from institutions or people, and includes debentures: |
| Own capital |
| This is capital that owners of a business (shareholders and partners, for example) provide: |
| Revenue |
| From the business point of view revenue can be understood as a gross increase in owners’ capital resulting from the operations of a business. Gross means not decreased by the expenses incurred to earn revenue. |
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| . For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner's equity and is calculated before any expenses are subtracted. Net income can be calculated by subtracting expenses from revenue. In terms of reporting revenue in a company's financial statements, different companies consider revenue to be received, or "recognized", different ways. For example, revenue could be recognized when a deal is signed, when the money is received, when the services are provided, or at other times. There are rules specifying when revenue should be recognized in different situations for companies using different accounting methods, such as cash basis and accrual basis. |
| 2. For the government, the increase in assets of governmental funds that do not increase liability or recovery of expenditure. This revenue is obtained from taxes, licenses and fees. |
| Liability |
| # a current obligation of an entity arising from past transactions or events |
| CURRENT LIABILITIES Current liabilities are short-term financial obligations that are paid off within one year or one current operating cycle, whichever is longer |
| LONG-TERM LIABILITIES Liabilities that are not paid off within a year, or within a business's operating cycle, are known as long-term or noncurrent liabilities. |
CONTINGENT LIABILITIES A third kind of liability accrued by companies is known as a contingent liability. The term refers to instances in which a company reports that there is a possible liability for an event, transaction, or incident that has already taken place; the company, however, does not yet know whether a financial drain on its resources will result. It also is often uncertain of the size of the financial obligation or the exact time that the obligation might have to be pa
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