Professional Documents
Culture Documents
Non-Current Assets - This is emphasis on the assets which are not over within
one year in the operational cycle of the business. The assets are kept for long
term benefits (more than one year).
E.g. – Property, Plant & Equipment, Investments, & Intangible assets.
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Liabilities
The liability is a present obligation of the entity arising from past events,
the settlement of which is expected to result in an outflow of economic
benefits. This is emphasis on everything which is liable or entity has
obligation to pay to the external parties of the business. This can be divided
into two parts.
Current Liabilities – This is emphasis on the liabilities which are expected
to settle within one year.
E.g. – Accrued expenses, Creditors & Bank Overdraft.
Accounting equation shows the ways of getting the resources to the business & utilizing them.
Either the owner or an external party supplies the business with resources.
Debit Entries
Credit Entries
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The Basic Accounting Equation - Practice
1. The owner Introduced Rs.800,000 as Capital to the Business
(Income – Expense)
Capital Income - This is the earnings which arise from long term liability or
fixed assets of the business.
E.g. - Revaluation profit, Profit on sale of fixed assets.
Not Spent for continuing in daily business Spent for continuing in daily business
2
operation. operation.
Reduces parts by parts from the income Reduces whole expenditure from the
3
statement. income statement.
4 Helps to generate income at long term. Helps to generate income at short term.
• Increase in an element in the left • Increase in an element in the right side of the
side of the equation is a debit equation is a credit
• Decrease is a credit • Decrease is a debit
Assets xxx
Expenditure xxx
Losses xxx
Liabilities xxx
Income xxx
Equity xxx
xxxxxx xxxxxx
The total of the Debit balances should be equal to the total Credit balances