AECN 201 Lecture Notes - Lecture 3: Accounting Equation, Retained Earnings, Deferral
Document Summary
Credit card --> buy lunch --> owe credit card bill (account payable from your point of view, account receivable from credit card company"s point of view) Right now what are we worth; snapshot of the business. Want owner"s equity to always be going up. Just because you borrow money to buy something doesn"t mean the bank or loaner owns it. 3 sources owners equity: outside money, retained earnings/revenue/profit, asset values increase. Breaking current portion out of a non-current liability: 10 year equipment loan for ,000, at 0% interest. Farmers/ranchers never expect to pay capital gains and estate taxes: only paid if ground is sold, very few family farmers plan on selling, must be accounted for in the case that land is sold. Some things always valued at cost or market no matter which you choose. Market doesn"t value everything at market because there isn"t a market value for prepaid expenses. Insolvency: ~bankruptcy; liabilities greater than assets; about balance sheet.
