Basic Accounting Equation
Assets = Liabilities + Owner's Equity
•The liabilities of Platt Company are $90,000. Owner's capital is $150,000; drawings are $40,000; revenues, $450,000; and expenses, $340,000. What is
...
Basic Accounting Equation
Assets = Liabilities + Owner's Equity
•The liabilities of Platt Company are $90,000. Owner's capital is $150,000; drawings are $40,000; revenues, $450,000; and expenses, $340,000. What is the amount of Platt Company's total assets?
$310,000
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•The total assets of Sierra Company are $57,000. Owner's capital is $35,000; drawings are $7,000; revenues, $52,000; and expenses, $35,000. What is the amount of the company's total liabilities?
$12,000
•The total assets of Birch Co. are $660,000 and its liabilities are equal to two-thirds of its total assets. What is the amount of Birch Co.'s owner's equity?
$220,000
Ethics
standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair.
Historic Cost Principle
Dictates that companies record assets at their cost
Fair Value Principle
States that assets & liabilities should be reported at fair value (only used when an asset is actively traded).
Relevance
Financial information that is capable of making a difference in a decision.
Faithful Representation
Number & descriptions match what really existed or happened.
Monetary Unit Assumption
Transactions that can be expressed in terms of money.
Economic Entity Assumption
Requires that the activity of the entity be kept separate & distinct from activities of its owners & all other economic entities.
Sole Proprietorship
-Doesn't require much capital to start business
-personally liable for all debts
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