Acct120 Class #16 Claims Against The Assets


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Acct120 Class #16 Claims Against The Assets

  1. 1. Introduction to Accounting 120 Mr. Binet Moncton High School Class #15: Claims Against the Assets
  2. 2. <ul><li>We will learn about what happens when a business closes down and the concept of claims against the assets. </li></ul><ul><li>You will have a chance to practice setting up claims against assets in a spreadsheet. </li></ul>In Today’s Class…
  3. 3. <ul><li>Who owns the assets of a business? </li></ul><ul><li>Those persons who provided the funds used to acquire the assets. </li></ul><ul><li>These people have a claim against the assets of the business. </li></ul>Claims Against the Assets
  4. 4. <ul><li>If those persons who provided the funds are not the owners, they are creditors. </li></ul><ul><li>Refer to figure 2.8 on page 29 to see how creditors and debtors are shown on a spreadsheet. </li></ul>Claims Against the Assets
  5. 5. <ul><li>As shown on the left side of the balance sheet, Janet’s business assets are $43 763.10. </li></ul><ul><li>The right side of the balance sheet shows that these assets or the funds to obtain them, were provided by the bank, $9 000; the other creditors, $1 905; $750 and Janet herself, $32 108.10 </li></ul>Claims Against the Assets
  6. 6. <ul><li>Expressed in another way, the fundamental accounting equation is: </li></ul><ul><li>$43 763.10 = $9 000 + $1 095 + $750 + $32 108.10 </li></ul>Claims Against the Assets Assets Creditors’ claims against the assets Owner’s claim agaibnst the assets
  7. 7. <ul><li>If a business is closed down, to whom do the assets belong? </li></ul><ul><li>They still belong to the owners and creditors. </li></ul><ul><li>However, the claims of the creditors are settled first, followed by the claim of the owner. </li></ul>Creditors’ Claims First
  8. 8. <ul><li>This means that the owner has to accept any losses that might occur from selling off any assets. </li></ul><ul><li>Or, the owner may benefit from any profits that may occur. </li></ul><ul><li>The owner always gets what is left after the claims of the creditors have been paid! </li></ul>Creditors’ Claims First
  9. 9. <ul><li>Suppose Janet’s business clsoed and in the process she suffered a loss of $7 200. </li></ul><ul><li>$36 564.10 = $9 000 + $1 095 + $750 + $32 108.10 </li></ul>Claims Against the Assets Assets (now all cash, down $7 2000) Creditors’ claims remain the same against Janet Owner’s claim down $7 200.
  10. 10. <ul><li>Complete Section Exercises 1 and 2 on page 31 and 32. </li></ul><ul><li>Open the Excel file “Section 2-3, Exercises 1-2.xls” on the O:Binet drive and immediately save-as to your U: drive. </li></ul><ul><li>Complete the two questions within the Excel file INDIVIDUALLY and e-mail to me, </li></ul>Quick Check
  11. 11. <ul><li>Chapter 1 textbook questions. </li></ul>Assignments Due Thus Far