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AccountingTermsDictionary |
| U.S. GAAP Codification | Accounting Topics |
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Accounting Terms Dictionary |
| Principles of Accounting, U.S. GAAP Financial Reporting Guide |
| Accounting by Topic, Accounting Terms Dictionary |
| Accounting Terms Dictionary |
| Assets: Definition and Classification |
| Assets: Definition and Classification Definition of assets --> Assets represent future economic benefits. --> Future benefits should be probable. --> Past transactions created future benefits. --> Future benefits are controlled by an entity. Assets: Classification 1. Current assets and noncurrent assets --> current assets will be converted into cash within one year --> noncurrent assets will be converted into cash after one year [Example] On March 1, 2011, Entity A loaned $100,000 to Entity B. The loan is due on September 1, 2012. Is this a current or noncurrent asset on the Statement of Financial Positions as of December 31, 2011? --> Since the loan is due within a year from December 31, 2011, it is reported as a current asset. 2. Cash and receivables --> Cash is a financial asset. --> Receivables include accounts receivable and notes receivable. [Example] On April 1, 2011, Entity A sold 200 units of product to Entity B at $10 per unit on credit. April 20, 2011, Entity B paid $2,000 to Entity A. Prepare journal entries for these transactions. April 1, 2011 To record the sale of products on credit |
April 20, 2011 To record the collection of accounts receivable |
3. Inventories and prepaid expenses Inventories include: --> merchandise --> raw materials --> work in process --> finished goods Prepaid expenses include: --> prepaid rent --> prepaid insurance Prepaid expenses are assets, because the entity will receive economic benefits from the amount of expenses paid in advance. [Example] On November 1, 2011, Entity A paid $60,000 cash as a rent for six months from November 1, 2011 to April 30, 2012. Prepare journal entries for these transactions. November 1, 2011 To record prepaid rent expense |
December 31, 2011 To record rent expense for the period from November 1 to December 31, 2011 |
April 30, 2010 To record rent expense for the period from January 1 to April 30, 2012 |
4. Investments in debt and equity securities --> Trading securities --> Available for sale securities --> Held to maturity securities 5. Property, plant and equipment --> Land --> Buildings --> Machinery --> Equipment 6. Intangible assets --> Intangible assets do not have physical substance --> Patents --> Trademarks --> Copyright --> Goodwill |
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