Acct120 class #11 -liquidity, accounts receivable and liabilities

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Acct120 class #11 -liquidity, accounts receivable and liabilities

  1. 1. Introduction to Accounting 120 Mr. Binet / Moncton High School Class #11: Liquidity, Accounts Receivable and Liabilities
  2. 2. <ul><li>We will go over the assignments of last week and take an opportunity to submit any over-due work. </li></ul><ul><li>We will go over the concepts of: </li></ul><ul><ul><li>Liquidity; </li></ul></ul><ul><ul><li>Accounts Receivable and; </li></ul></ul><ul><ul><li>Liabilities </li></ul></ul>In Today’s Class…
  3. 3. <ul><li>The assets are listed in order of liquidity. Liquidity is the order in which assets could be turned into cash. </li></ul><ul><li>Obviously cash on hand is the most liquid asset. Here is a sample list of various assets in the order of liquidity (one being the most liquid). </li></ul><ul><ul><ul><li>Cash </li></ul></ul></ul><ul><ul><ul><li>Bank (bank balance) </li></ul></ul></ul><ul><ul><ul><li>Accounts receivable </li></ul></ul></ul><ul><ul><ul><li>Office supplies </li></ul></ul></ul><ul><ul><ul><li>Office equipment </li></ul></ul></ul><ul><ul><ul><li>Office furniture </li></ul></ul></ul><ul><ul><ul><li>Automobiles </li></ul></ul></ul><ul><ul><ul><li>Building </li></ul></ul></ul><ul><ul><ul><li>Land </li></ul></ul></ul>What is Liquidity?
  4. 4. <ul><li>Items not normally converted are listed later. When trying to determine the liquidity order, try to imagine how easily something could be sold or returned. Supplies and equipment could possibly be returned to a supplier for a cash refund or sold to another business. Larger items may prove more difficult to unload. </li></ul>What is Liquidity?
  5. 5. <ul><li>Assets are either tangible or intangible . A tangible asset is real, or concrete, meaning you can touch it. Tangible asset amounts are recorded and remain on the balance sheet at their purchase price even though the actual value of the asset may be much different. Accounting for the change in the value of assets will be discussed later in the course. </li></ul>What is Liquidity?
  6. 6. <ul><li>Companies avoid storing large quantities of cash on their premises. Most business is conducted using cheques and/or electronic fund transfers. The term bank is used to indicate a company bank balance. You can expect to see the term bank used to indicate any bank balance a company may have. </li></ul>What is Liquidity?
  7. 7. Lehman Brothers
  8. 8. <ul><li>There are customers who buy goods or services but pay for them at a later date. These customers represent a dollar value to a business and thus are listed as assets. The total amount of money owing to a business from its customers is termed accounts receivable. Each individual owing money to the business is a debtor. </li></ul>Accounts Receivable
  9. 9. <ul><li>The liabilities are listed in order of retiring debt. Retiring debt is the order in which the debts would be paid in the event of closure. </li></ul><ul><li>Money owed to a bank in the form of a loan is normally the first liability listed on an account form balance sheet, thus, banks are secure creditors. If a company goes bankrupt, the bank would have the first claim against the assets. </li></ul><ul><li>A few means used for borrowing money from a bank are: </li></ul><ul><ul><li>Line of credit </li></ul></ul><ul><ul><li>Demand note </li></ul></ul><ul><ul><li>Promissory note </li></ul></ul><ul><ul><li>Loan </li></ul></ul><ul><ul><li>Leasing agreements </li></ul></ul>Liabilities
  10. 10. <ul><li>For the purpose of this course, assume companies utilize a basic bank loan when borrowing from a bank. </li></ul><ul><li>A mortgage, although financed through a banking institution, is generally the last liability item listed. </li></ul><ul><li>The general order for liabilities on an account form balance sheet is: </li></ul><ul><ul><li>Bank loan </li></ul></ul><ul><ul><li>Accounts payable </li></ul></ul><ul><ul><li>Mortgage payable </li></ul></ul>Liabilities
  11. 11. <ul><li>Go to the O: drive and in the “BINET” folder find Unit II, Assignment #3. Open it, and immediately “SAVE AS” on to your “U” drive. Go ahead and complete (individually) the assignment. </li></ul><ul><li>Take your time and go over it slowly, this is a basis for the rest of the course! See if you can recreate the spreadsheet which is pictured in the file! </li></ul><ul><li>Login to your email ( https:// exchange.nbss.nbed.nb.ca ). </li></ul><ul><li>When you are finished, submit the assignment to me via e-mail ( [email_address] ) with the subject “Unit II, Assignment 2”. </li></ul>Your Turn! Excel Fun!
  12. 12. <ul><li>Go to the O: drive and in the “BINET” folder find Unit II, Assignment #2. Open it, and immediately “SAVE AS” on to your “U” drive. Assignment #1 should be done by now too! </li></ul><ul><li>Go ahead and complete (individually) the assignment. </li></ul><ul><li>Take your time and go over it slowly, this is a basis for the rest of the course! </li></ul><ul><li>Login to your email ( https:// exchange.nbss.nbed.nb.ca ). </li></ul><ul><li>When you are finished, submit the assignment to me via e-mail ( [email_address] ) with the subject “Unit II, Assignment 2”. </li></ul>Assignment Time!

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