Subject Economics
Elements of Accounting Equation
There are three elements of accounting equation namely,
AssetsLiabilitiesEquity
In accounting equation,
Assets = Liabilities + Equity1. ASSETS
In accounting, assets are any resources with value owned by the business, company, entity or person. Assets have two categories, these are:
Current AssetsNon-current Assets
Current Assets
-these are assets that can be readily convertible to cash in a normal operating cycle of a business.
Some Examples of Current Assets
Cash and cash equivalentsAccounts ExpensesMarketable Securities
Non-current Assets
-these are long-term assets or long-term investments that have a longer useful life that is usually more than 1 year. Not easily convertible to cash.
Some Examples of Non-Current Assets
LandProperty, Plant and EquipmentTrademarksLong-term InvestmentsGoodwill
All fixed assets and intangible assets fall under the category of non-current assets.
2. LIABILITIES
In accounting, liabilities are the payables or debts of a business to settle. Liabilities have two main categories:
Current Liabilities
-these are payables or debts which are short-term payables that needs to be paid or settled by the business within a year.
Some Examples of Current Liabilities
Accounts PayableInterest PayableIncome Tax PayableAccrued ExpensesShort-term loans
Non-Current Liabilities
-these are payables or obligations that are long-term liabilities that can be settle after a year or more than a year.
Some Examples of Non-Current Liabilities
Bonds PayableLong-term Notes PayableDeferred Tax LiabilitiesMortgage Payable3. EQUITY
In accounting and finance, equity refers to shareholders/ owners' equity. This is the net worth value attributable to the owners of a business. This is the difference between the value of the assets of the business and the value of the liabilities.
Shareholders Equity Components
On the balance sheet, under equity components are:
Common StockPreferred StockRetained EarningsAdditional paid-up capital-common stockAdditional paid-up capital- preferred stockTreasury sharesNon-controlling interest (also called minority interest)Foreign currency translation reserve
For further details about equity
Further topics about assets and liabilities
What is the opposite of assets
Code 11.11.3.7.