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    Accounting Lecture 2

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    layla
    The document discusses key concepts in accounting including current and non-current assets and liabilities. Current assets are expected to be converted to cash within one year and include cash, accounts receivable, inventory. Non-current assets include long-term investments, property, plant and equipment, and intangible assets. The document also discusses the concepts of depreciation and amortization.

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    Download as PDF, TXT or read online from Scribd

    Accounting Lecture 2

    Uploaded by

    layla
    6 views2 pages
    The document discusses key concepts in accounting including current and non-current assets and liabilities. Current assets are expected to be converted to cash within one year and include cash, accounts receivable, inventory. Non-current assets include long-term investments, property, plant and equipment, and intangible assets. The document also discusses the concepts of depreciation and amortization.

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    Accounting lecture 2

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    The document discusses key concepts in accounting including current and non-current assets and liabilities. Current assets are expected to be converted to cash within one year and include cash, accounts receivable, inventory. Non-current assets include long-term investments, property, plant and equipment, and intangible assets. The document also discusses the concepts of depreciation and amortization.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views2 pages

    Accounting Lecture 2

    Uploaded by

    layla
    The document discusses key concepts in accounting including current and non-current assets and liabilities. Current assets are expected to be converted to cash within one year and include cash, accounts receivable, inventory. Non-current assets include long-term investments, property, plant and equipment, and intangible assets. The document also discusses the concepts of depreciation and amortization.

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    © All Rights Reserved
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    Accounting lecture 2

    Chapter 2: a further look at financial accounting


    Current assets
    - Assets expected to be converted to cash, sold or used in the business within one year or
    one operating cycle, whichever is longer
    - Operating cycle is the average time it takes to go from cash to cash in producing
    revenue
    - Usually listed in order of liquidity
    - Reverse order of liquidity also possible
    - Examples:
    - cash, held-for-trading; short term profit only, investments, accounts receivable;
    customer buying things on credit you expect to get money back, inventory: good
    held for sale non-current asset, supplies and prepaid expenses: pay for but
    haven't used up yet

    Non-current assets
    - Assets not expected to be converted to cash, sold or used in the business within one
    year or one operating cycle
    - All assets not considered current
    - Examples
    - Long-term investments: not held for sale within a year, Property, plant, and
    equipment, Intangible assets and goodwill, Other assets

    Long-term investments
    - Multi-year investments in:
    - Debt securities: loans, notes, bonds, mortgages
    - Equity securities: shares of other companies
    - These assets are normally not intended to be sold (and converted to cash) within one
    year

    Property, Plant, and Equipment


    - Tangible assets with relatively long useful lives
    - PPE
    - Used in operating the business
    - Classify items on how long they will be used for; longest permanency
    - Examples:
    - Land Buildings, Equipment (eg. furniture, laptop, etc.), Furniture, Computers,
    Vehicles
    - Usually listed in order of permanency
    Depreciation
    - allocation of the cost of property, plant, and equipment over their estimated useful lives:
    companies systematically assign a portion of the cost of an asset to expense each year
    - Under IFRS this allocation is referred to as depreciation for property, plant and
    equipment and amortization for intangible assets
    - Intangible asset: can’t physically touch it
    - Under ASPE amortization is often used instead of depreciation
    - The cost of long-lived assets with indefinite lives is not depreciated (e.g. land)
    - Accumulated depreciation account shows the total amount of depreciation taken to
    date
    - The difference between the cost of the asset and its accumulated depreciation is
    referred to as the carrying amount of the asset
    - Accumulated depreciation is a contra asset account

    Intangible asset
    - Non-current assets that do not have physical substance and represent a privilege or a
    right held by the company
    - Examples:
    - Patents, copyrights, trademarks, licenses
    - Goodwill: excess price paid on acquisition of another company
    - Generate a future value to the company
    - Amortized if they do not have an indefinite life

    Current liabilities
    ● Obligations that are to be paid or settled within the (longer of the) coming year or one
    operating cycle
    ● Examples:
    ○ Bank indebtedness, Accounts payable, Unearned revenue, Bank loan/notes
    payable, Current maturities of long-term debt

    Non-current liabilities
    - Debts expected to be paid or settled after one year
    - Examples:Bank loan/notes payableLease obligations
    - Pension and benefit obligations
    - Deferred income tax liabilities
    - Usually accompanied by extensive notes to the financial statements

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