C1: Accounting equation [Part 1]

The total resources provided by the owner and represents what the business owes the owner.

• Capital

• Liabilities

• Asset

Represent anything owned by or owning to the business.

• Assets

• Capital

• Liabilities

Represent anything owed by the business.

• Assets

• Capital

• Liabilities

Resource/item that the business has bought with the intention of using them for a period of more than a year, such as machinery, motor vehicles and premises.

• Assets

• Non-current assets

• Expenses

• Current assets

Resource/item that can be sold, used up or consumed through the normal workings of a business within no more than a year from the date of the statement of financial position.

• Non-current assets

• Current assets

• Non-current liabilities

• Current liabilities

Those debts that do not need to be paid within a year from the date of the statement of financial position, for example a long-term bank loan or lease.

• Non-current assets

• Current liabilities

• Non-current liabilities

• Capital

Those debts that must be paid within a year from the date of the statement of financial position, for example, trade payables and overdraft.

• Capital

• Current assets

• Non-current liabilities

• Current liabilities

A formula that is used to illustrate the relationship between the assets, liabilities and capital (owner’s equity) of a business. It shows that all the assets of a business are provided or funded either by the owner or the trade payables or other creditors of the business.

• Accounting principles

• Accounting equation

• Statement of financial position

• Income statement

The goods a business has available for resale.

• Inventory

• Purchases

• Assets

• Liabilities

Represent the amount the business owes to the credit suppliers of goods (the trade creditors).

• Trade payables

• Trade receivables

• Other payables

• Other receivables