ADMS 1500 Lecture Notes - Lecture 2: Share Capital, Accrual, Retained Earnings

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It is, therefore, a list showing a point in time: what a company owns, (cid:449)hat it o(cid:449)es, a(cid:374)d (cid:449)hat o(cid:449)(cid:374)e(cid:396)s" e(cid:395)uit(cid:455) remains: nc no change to assets, liabilities or equity, ai assets increase, ad assets decrease. Ld liabilities decrease: ei equity increase, ed equity decrease. The balance sheet lists things in order of liquidity: Long-term assets (maybe longer than 2 months) (used indefinitely) Trade payables (payable within one year) (payable within one month) When all the above assets are added together, the total represents all the assets the company has control over. This total is used by analysts to get an objective measure of the size of the company. The greater the total assets, the larger the company, and so the greater the profit it should make. The total of all liabilities, long-term and short-term, will be shown on the balance sheet.

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