ACCT2010

Relevant econ events

 operating activities
 Buying raw material
 =current assets
 Investing activities
 Expanding their business (land  property, plant and equipment (PP&E)
~fixed cost, use longer period of time
 Purchasing non-current assets: stuff that u will not sell within 1 yr for ur
comapny
 Financing activities
 Sell share to shareholder
 IPO(幫公司上市)
 Obtain funds to start n operate a business (raising capital)

Invest in non-current assets like Property, Plant and Equipment

would be investing activities because it generates profit
gradually over the long-term (more than 1 year).

Asset->liabilities
-Account receviables
-Account payable

Regulators- gov

Generally accepted accounting principles GAAP

-from US

HK principle is similar to

INSIDERS
Board of director
- not engage in the business decision of the company
- selected by shareholder
- protect the interest of shareholder
- can decide recruitment or fire of manager
Manager
- Daily managerial stuff
- Incharge of the business matter of the company

Balance sheet
Asset
- Sub items Arranged according to liquidity (highest liquidity is on top) eg. cash

Liabilities
- Obligation u hv
- Source n finance u have from
- Sub items arranged according to Maturity (highest maturity will be the top one)
 Use current liability n non-current liability to divide
 Current liability: liability need to be repaid within one yr
 Non-current liability: liability need to paid after one yr

Finanacing provided by stockholder

Past earning not distributed to stockholder by DIVIDENDS
 The firm retain the capital/earning (retainary)

***

Accrued revenue is revenue earned in this accounting period but it

has not yet received. So, the amount of revenue will be treated as
an asset in the balance sheet to indicate that will be received in the
future period.

Unearned revenue is revenue earned in the future but have received

it already. So, the amount of revenue will be treated as an liability in
the balance sheet to indicate that will be recognised in the future
period.

Both of them will be carried to the next accounting year since they
are asset and liability respectively which is one of the permanent
accounts.
According to Accural concept, expenditures are written off as
expenses or revenues when they are incurred or earned, but
not when they are paid or received. As the prepaid expenses
are not paid for the current accounting period, but the next
accounting period instead. Prepaid expenses are different from
expenses. Prepaid expenses should not be charged as expense
in this accounting period even though it has been paid. Prepaid
expenses are current assets. Similarly, unearned revenue
means the income received in advance in the current
accounting period. Even though the amount has been received
already, the income received should not be charged as income
in that period. Unearned revenue is supposed not to be earned
in this accounting period, thus it should be classified as
current liabilities in the balance sheet.

Credit note n debit note

If you send a debit note, you are returning the goods back to the supplier.
Whereas when you send a credit note, your customers are returning goods back to
you.

For reciving a debit note, your customers are returning goods back;
and you are returning goods back to your supplier if you receive a credit note.

Expenses ≠ cash outflow

- Cash outflow only recorded when the company pay cash to settle transaction
- Expenses are recorded when it is incurred
- But purchase of equipment for business use is NOT expenses  EXCHANGE of
cash(asset) for equipment(another equipment)  it IS cash outflow
- Eg. Cost of building wont be expenses in income statement
- Only depreciation of non-current assets(building) is the expense
- The non-current assets helps generate long term benefits
for the company, therefore we calculate depreciation
to allocate the cost of the assets over its useful life.
Depreciation is an expense showing that the efficiency of
the non current assets is lowered due to our use on
them. You don’t need to pay money when the efficiency of
 the assets is lowered.
- DEPRECIATION expenses doesn’t lead to cash outflow
- Eg. When talking about the insurance expenses, we usually
pay the fee in advance. For example, the insurance coverage
period is the whole January 2019 and you make the payment
on 31 December 2018. In the income statement for the year
ended 2018, we will not record insurance as an expenses in
2018. It is because the insurance didn’t cover this
accounting year(2018).