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10 views5 pages

1. Understanding Assets, Liabilities and Equity - Activity

Uploaded by

shafin.in.korea
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Understanding Assets, Liabilities and Equity

Assets/Liabilities/Equity/Revenue/ Current/Long term


Expenses/Dividends
Long-term investments
Accounts receivable
Consulting revenue
Rent revenue
Computer
Mortgage payable
Salaries payable
Cash
Supplies expense
Retained earnings
Temporary investments
Accounts payable
Income tax expense
Car
Salaries expense
Utilities expense
Land
Inventory
Building
Interest expense
Bank loan payable
Common shares
Supplies

Answers:

Sure! Here's a more relatable explanation of the concepts of assets, liabilities, equity, revenue, and
expenses, along with their classification:

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Understanding Assets, Liabilities, and Equity

In the world of finance, it’s important to know the different pieces of a business’s financial puzzle. Here’s
a breakdown of some common terms and how they fit into the picture:
1. Assets

These are the things a business owns that have value and can help generate future income. Think of
them as the resources that keep the business running.

Long-term investments: These are assets that a business intends to hold for more than a year, like stocks
or bonds.

Accounts receivable: Money owed to the business from customers who bought goods or services on
credit.

Computer: A tool for business operations that will last for several years.

Cash: The money available on hand to pay for immediate expenses.

Land and Building: Real estate owned by the business, which can appreciate over time.

Car: A vehicle used for business purposes, expected to last for several years.

Inventory: Goods that are ready to be sold or are in the process of being made.

Temporary investments: Short-term assets that can be quickly converted into cash, usually within a year.

2. Liabilities

These are what a business owes to others—debts and obligations that need to be settled in the future.

Mortgage payable: A long-term debt specifically related to the purchase of property.


Salaries payable: Money owed to employees for work they have already done.

Accounts payable: Money the business owes to suppliers for products or services received.

Bank loan payable: A long-term loan taken out from a bank to fund operations or investments.

3. Equity

This represents the ownership interest in the business. It's what remains after all liabilities have been
deducted from assets.

Common shares: Represents ownership in the company, often issued to investors.

Retained earnings: Profits that the business has reinvested back into itself instead of distributing to
shareholders.

4. Revenue

This is the income a business earns from its core operations, like selling products or providing services.

Consulting revenue: Income earned from offering professional advice.

Rent revenue: Money received from leasing property.

5. Expenses
These are the costs incurred by the business to generate revenue. They are necessary to keep the
operations going.

Salaries expense: Payments made to employees for their work.

Utilities expense: Costs for services like electricity, water, and internet.

Supplies expense: Money spent on materials needed for daily operations.

Income tax expense: Taxes owed based on the business’s income.

Interest expense: Costs incurred from borrowing money.

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Current vs. Long-term

When classifying these terms, we often look at whether they are current (short-term, typically due
within a year) or long-term (expected to last or be settled over a year):

Current assets and liabilities are like the cash you have in your wallet or the bills you need to pay soon.

Long-term assets and liabilities are more like a mortgage on your home or savings you plan to keep for
many years.
Understanding these concepts helps you grasp how a business operates financially, making it easier to
see where money is coming from, how it’s being spent, and what value it holds.

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