Accounting principals

Accounting principals
• Any business has two basic elements
1- what it owns
2- what it owes
-: ‫• مالحظات هامة‬
> ‫ الزم الطرف األيمن = الطرف األيسر < ألنها معادلة‬-1
why??? owner’s equity ‫ قبل الـ‬liabilities ‫ تكتب الـ‬-2
• Assets :- are the resources a business owns.
• Because they are paid first if a business is liquidated.
• Liabilities :- are claims of those to whom the
company owes money ( creditors).
• The equation provides the underlying framework for
recording and memorizing economic events.
• owner’s equity :- claims of owners.
• For example :- Google has total assets of $18.4
billion, $1.4 billion as liabilities and $17 billion as
owner’s equity.
Assets = liabilities + owner’s Equity
• The basic accounting equation:•
is a relationship between
1- resources a business owns.
2- the business uses it in production and sales.
3- the most common characteristics of all assets is the
capacity to provide future services or benefits.
Cash inflows.
Examples of assets : buildings – furniture – chairs –
delivery truck and so on.
First year
Accounting principals
• What is increasing and decreasing owner’s equity:-
• Liabilities :-
1- it is against assets.
2- is the existing debts and obligations.
‫ يأما‬business ‫معظم الـ‬
Buy on credit
Examples:. When a business buy supplies on credit from suppliers it is {
Account payable }
. A business may buy supplies using { note payable}.
. sales and real estate taxes payable
.)creditors ( ‫كدا اللي أنا مديون ليهم دول أسمهم‬
‫ الدائنون دول ممكن يتسببوا في تصفية الشركة لو مدفعلهمش فلوسهم‬-: ‫ملحوظة‬
.‫وكمان القانون بيكفل ليهم الحصول على حقهم قبل ما المالك يخدوا نصيبهم‬
• Increasing :• 1- investment by the owners :-are the assets the owners put into the business.
-they are recorded in a category called owner’s
• 2- Revenues :- are the gross increase in owner’s Equity resulting
from business activities entered for the purpose of
earning income.
- Examples :- sales – fees – renting prosperity – performing
services – lending money – dividends – royalties
• Decreasing :• 1- Drawings :- an owner may withdraw cash or other assets for
personal use.
- we use it for determining the total withdrawal for
each accounting period.
First year
Accounting principals
• 2- Expense :- are the cost of assets or services used in the process of
earning revenues.
- the decrease in owner’s equity that result from
operating the business.
• Examples :- cost of ingredients – utility expense – delivery expense
– rent expense – interest expense – property expense.
Assets = Liabilities + Owner’s Equity
Assets = Liabilities + Owner’s capital - Owner’s drawings +
Revenues - Expense
First year
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