Accounting Presentation

ASSETS, LIABILITIES AND EQUITY: THE ACCOUNTING EQUATION

Maria Baena Joan Jimoh

Summary

The accounting equation, Assets = Liabilities + Equity, serves as a profound reflection of the balance in the universe of commerce. It illustrates the delicate interplay between what a company owns, what it owes, and the stake of its owners in the unfolding narrative of its existence. Assets embodying the resources that can create value, while liabilities remind us of the obligations and responsibilities that accompany growth. Equity, the owners' claim, signifies not just financial investment but a shared vision and trust in the enterprise's journey.

Index

Format of the BS in new P.G.C (Liability)

Balance Sheet - Definition

Financial investment

Componets Balance Sheet

Current assets

Equity

Liquidity

Equity and liability

Format of the BS in new P.G.S (Assets)

Non-current assets

Balance sheet-Definition

Represents financial resources received either from shareholders (equity) or from external agents (liabilities) that allow the firm to make the necessary investments (assets) in order to be able to develop its business.

A balance sheet is like a special picture of a company’s things. On one side, it shows all the toys and goodies the company has (like money and buildings). On the other side, it lists what the company still needs to pay back (like borrowed toys). In the middle, it tells how much all the toys are worth after paying back what’s owed. So, it helps everyone see what the company owns and how much it’s really worth, all in one big, colorful drawing!

OWES

owns

worth after paying whats owed

Company

Componets Balace Sheet

Assets = Liabilities + Equity

This equation shows that what a company owns (assets) is financed either by borrowing (liabilities) or through investments made by the owners (equity). It highlights the balance between what the company possesses and the claims against those possessions.

Assets

CURRENT

NON - CURRENT

Resourses a company owns that can be easily converted into cash within a year. They help a business manage its day-to-day operations and meet short-term financial obligations.

Non-current assets are long-term resources that a company owns and expects to use for more than a year. . They play a crucial role in supporting the company’s operations and generating revenue over time.

+45k

Liquidity

what?

Liquidity refers to how quickly and easily an asset can be converted into cash. Assets are categorized based on their liquidity: highly liquid assets, like cash and marketable securities, can be readily converted to cash; moderately liquid assets, such as inventory and accounts receivable, can be sold with some effort; while less liquid assets, including real estate and specialized equipment, are more challenging to sell quickly.

ASSETS

CASH

EXCHANGED

QUICLY

EASILY

AT NO COST

+45k

Liabilities

CURRENT

NON - CURRENT

Current liabilities are debts or obligations that a company expects to settle within one year or within its operating cycle, whichever is longer.

Non-current liabilities are debts or obligations that a company does not expect to settle within one year. These are financial responsibilities that the company will pay off over a longer period, often more than a year.

Equity

Equity refers to ownership in an asset, like a company or property. In a business context, it represents the value of shares owned by shareholders. Simply put, equity is what you truly own after subtracting what you owe. A net of assets.

Contributed Capital

Equity refers to ownership in an asset, like a company or property. In a business context, it represents the value of shares owned by shareholders. Simply put, equity is what you truly own after subtracting what you owe. A net of assets.

Retained Earnings

Equity refers to ownership in an asset, like a company or property. In a business context, it represents the value of shares owned by shareholders. Simply put, equity is what you truly own after subtracting what you owe. A net of assets.

Classification - Assets

INTANGIBLE ASSETS

DEFERRED TAX ASSETS

NON CURRENT ASSET

TANGIBLE FIXED ASSETS

LONG-TERM FINANCIAL INVESTMENT

IINVESTMENT PROPERTY

Non-current assets

Classification at the balance sheet , valuation criteria Here we found the acquisition cost that relates to price in voice plus other expenses before putting into operation; We can also find production cost that are Raw materials cost plus direct costs and a proportion of indirect costs

Iintangible assets

tangible fixed assets

investment property

these generate revenue or benefits for the business in the future, but they do not have any physical substance (like software). Intangible assets include trademarks, copyrights, and patents..

It is refers to those asss¡ets that has physical susbstance.

Those that are not used as a primary residence. They generate some form of income, dividends, interest, rents

Fanancial investment

Rational and unbiased estimate of the potential market price of a asset, so it is an asset that you put money into with the hope that it will grow or appreciate into a larger sum of money (price + transaction costs)

Current assets

Short-term investments in subsidiaries and associated companies

Accrual accounts

inventuries

Cash and cash equivalents

Trade accounts receivables and other receivables

non-current held for sale

Short-term financial investments

Interactive question

Commercial (goods for sale)

Finished goods

Raw materials and other supplies

inventories

Auxiliary products, consumables & replacements

Work-in process

Advances to suppliers.

Called subscribed capital receivable.

Sundry accounts receivables

Employee receivables

Trade accounts receivables for sale and services.

Trade accounts receivables and other receivables

Assets for current tax

Accounts receivables from subsidiaries and associated companies

Other receivables from public authorities.

Valuation criteria

• Trate accounts: nominal value
• Financial investment: fair value
• Inventuries: FIFO (first in first out)

Weighted Average Cost

Equity

Adjustments for changes in value

Adjustments for changes in value

Grants, donations and legacies received

Shareholders’ equity

Liability

CURRENT

NON - CURRENT

Liabilities linked to non-current assets held for sale: – The liabilities of a disposal group classified as held for sale are also presented separately from other liabilities in the balance sheet. – Those assets and liabilities are not offset and presented as a single amount

Here we can found: -Long-term provisions, represent liabilities that a company expects to settle or discharge beyond one year from the reporting date. -Long-term accrual accounts, they are advances from customers towards future sales or services rendered

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1. Cash 2. Cash equivalents Financial instruments that: • are readily convertible to know amounts of cash, • in the date of acquisition the original maturity is three months or less, • have negligible risk of changes in value, and • are used in the usual entity’s cash management

Intangible assets are non-physical resources that provide long-term economic benefits to a business. They typically include intellectual property, brand value, and contractual rights. Unlike tangible assets, they cannot be physically touched or seen and are often more challenging to value and measure. Intangible assets contribute to a company's competitive advantage

Tangible assets are physical resources owned by a business that have measurable value and can be seen or touched. These assets include items like machinery, buildings, vehicles, and inventory.They play a crucial role in a company's operations, as they are often necessary for production and service delivery, directly impacting the business's ability to generate revenue

1.Financial instruments available for sale.2. Hedging operations.3. Other

Investment property assets are real estate properties held for generating rental income or capital appreciation, rather than for use in business operations. These properties are purchased with the intention of earning returns through leasing or future resale. These can provide a steady income stream as well as potential long-term growth in value

Deferred tax assets are tax-related benefits that arise when a company has overpaid taxes or has tax deductions that can be utilized in the future. These assets represent the potential reduction in future tax payments. They may arise from various factors, such as carryforward losses, tax credits, or temporary differences between accounting income and taxable income. Deferred tax assets reflect the expectation of future tax relief, contributing to the overall financial position of the company.

Resourses as Liabilities and Equity

Liabilities represent the company’s obligations, or debts, while equity reflects the owners' claim on the company's assets after those liabilities are paid. Essentially, investments enhance assets, resources support operations, liabilities indicate what is owed, and equity shows the value left for the owners.

Grants, donations and legacies, non returnable, received from third parties that are not shareholders

Include assets like trade accounts receivable, receivables from affiliated companies, employee receivables, etc. Trade accounts receivable represents amounts due from customers arising from transactions in the ordinary course of business.

Capital. 1. Registered capital. 2. (Uncalled subscribed capital). II. Additional paid-in capital (share premium). III. Reserves. 1. Legal and statutory. 2. Other reserves. IV. (Shares in the entity held by the entity) V. Prior years' income. 1. Non-distributed income. 2. (Prior years' negative income). VI. Other owners' contributions. VII. Income for the year. VIII. (Dividends paid in advance). IX. Other equity instruments

Expenses and Interest paid in advance

Appear when revenues or expenses are allocated to the reporting period coming to an end but cash will be received in the next year and the company may not recognize the right to receive cash (accounts receivable) or the obligation to pay (accounts payable)

Its book value will be recovered principally through a sale transaction rather than through continuing use, and the following circumstances are that:The asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets – its sale must be highly probable (less than one year)

Investment as Assets

These are valuable items put into the company with the expectation of generating returns, like purchasing stocks or equipment. On the other hand, resources can be seen as broader elements that include both tangible and intangible assets but also encompass things like skilled employees and technology.

Long-term financial investment assets are investments that a company holds for over one year with the intent to generate returns through capital appreciation or income. These assets include equity securities, debt securities, and other financial instruments.

1. Holdings in equity.
2. Loans to companies.
3. Debt instruments.
4. Derivative financial instruments.
5. Other financial assets

Are goods or items of value that a company plans to sell for profit. These items include any raw production materials, merchandise, and products that are either finished or unfinished. They also include any kind of securities that a stock broker or dealer buys and then sells.

1. Holdings in equity.
2. Loans to companies.
3. Debt instruments.
4. Derivative financial instruments.
5. Other financial assets (deposits given)