1. Assets and liabilities

2. • ASSETS
•CAPITAL
•LIABILITY

3. ASSET
• When you start business you convert your
money or borrowed money into business
assets.

4. Which is the first asset of a business?

5. • First asset of a business is cash.

6. ASSETS
• Cash.
• Land.
• Building.
• Machinery , etc……..

7. CAPITAL
• The money which an owner arranges for the
business is called capital.
• If owners keeps money in his pocket ,it is money
not capital.
• When money is put into a business activity, its
name will be capital.
• When capital is converted into business activity, it
is converted into assets.

8. When one starts business, he will become
different entity from the business for
accounting purpose.
 Owner of business.
 Business.

9. If one starts business with Rs.10 M of his own
money, how will he record it?

10. Business manager or accountant will
record it in this way .
• What has come to him ?
• Where has it come?

11. Business started with Rs.10M.
Where has it come ? What has come ?
(Rs in Millions)
Source of Cash ? Cash 10

12.  If the source of cash is owner.
 For accounting purpose, it is called Capital
or Equity.

13. Business manager or accountant will
record it in this way .
( Rs. in millions)
Capital : 10 Cash: 10
__ ___
Total 10 Total 10

14. With Rs.10M, business activity starts with
buying of land for Rs.2M.
How will it be recorded ?

15. CAPITAL CONVERSION INTO ASSETS
CAPITAL ASSETS
Rs. Rs.
Capital : 10 millions. Cash: 8 millions.
Land: 2 millions
__ ___
Total 10 Total 10

16. CAPITAL CONVERSION INTO ASSETS
CAPITAL ASSETS
Rs. Rs.
Capital : 10 millions. Cash 6 millions.
Land 2 millions.
Building 2 millions.
__ ___
Total 10 Total 10

17. CAPITAL ASSETS
Rs. Rs.
Capital : 10 millions. Cash - millions.
Land 2 millions.
Building 2 millions.
Inventory 8 millions
__ ___
Total Total 12

18. CAPITAL & LIABILITIES ASSETS
Rs. Rs.
Capital 10 millions. Cash - millions.
Loan 2 millions Land 2 millions.
Building 2 millions.
Inventory 8 millions
___ ___
Total 12 Total 12

19. CAPITAL CONVERSION INTO ASSETS
CAPITAL& LIABIULITIEES ASSETS
Cash
Land
Building
Furniture
Inventory.

20. ASSET
• Asset is every conversion of money which
helps to earn lawful profit.

21. ASSETS
LONG TERM ASSETS/FIXED ASSETS.
CURRENT ASSETS.
OTHER ASSETS
TANGIBLE ASSETS.
INTANGIBLE ASSETS.

22. LONG TERM ASSETS/FIXED ASSET
• Such assets which life is long.
• Such assets are not consumed in a period of a
year.
• Land , building , plant and machinery are fixed
assets.
• Such assets can not easily be converted into
cash.

23. CURRENT ASSETS
• The life of such assets is not more than a year.
• Such asset can easily be converted into cash.
• Cash, Account receivable , inventory,
marketable securities.

24. ACCOUNTS RECEIVABLE
• Account receivable are also called debtors.
• Suppose you have sold some goods on credit in
November.
• Money will be received after three months.
• Your accounts are closed in December.
• Such receivable money is called account
receivable.
• If it is receivable from more persons, it is called
accounts receivable.

25. INVENTORY
• Business raw material placed in the business
wherehouse.
• Sometimes such purchases are made in bulk and
are gradually used.
• The goods produced in a factory are also placed
in the wherehouse.
• All material purchased and goods produced and
placed in wherehouse and named as inventory.
• Work-in- process is also included in Inventory.

26. MARKETABLE SECURITIES
• Usually business buys shares, debentures of
other companies or bonds issued by Govt. for
earning profit.
• Such shares , debentures or bonds are
marketable and can be sold at any time.

27. PREPAID EXPENSES
• Advance income tax paid.
• Advance sale tax paid.
• Payment made to a contractor but services
yet to be acquired.

28. OTHER ASSETS
• Patent.
• Trade marks.
• Goodwill.

29. PATENTS
• Rights for exclusive use of your invention.
• Right for using your new recipe.
• It requires registration from registrar of
patents.

30. TRADE MARK
• It is name of your product. It is symbol used
on your product. It is any sign used by you for
marketing your product.
• It requires registration from registrar Trade
Mark.

31. GOOD WILL
• Good will is reputation of your business which
you earn over the years.
• When you buy some reputed business, you
pay goodwill.

32. TANGIBLE ASSETS
• The assets which can be touched.
• Land, building, cash,etc.

33. INTANGIBLE ASSETS
• Such assets can not be touched.
• Goodwill.
• Patent.
• Trademarks.

34. LIABILITIES
• Liability means borrowed money/ loan.
• Liability means material or services purchased
on credit where money is yet to be paid.
• Bank loans, private loans, payment due for
purchases, etc.

35. WHY DO YOU NEED LOAN?
WHY DO YOU BUY THINGS ON
CREDIT?

36. WHY LIABILITY?
• You may have potential or expertise but not
money.
• Your goods have demand and you have
capacity to produce but no money.
• Borrowed money or deferred payment helps
you in such situation.

37. KINDS OF LIABILITY
• LONG TERMS LIABILITIES.
• MEDIAM TERMS LIABILITIES.
• CURRENT LIABILITIES.

38. LONG TERM LIABILITIES
• Such liabilities may be payable over the
period of 5 to 25 years or more.
• Long term bank loans.
• Debentures.

39. DEBENTURES
• They are issued by limited companies and
interest is paid against them.
• Companies issue debenture certificates against
receipt of money.
• These are issued against over all assets of the
company.
• Debentures are having different kinds.
• They may be traded like shares.

40. DIFFERENCE BETWEEN LOAN AND
DEBENTURE
• Loans are securitized against particular
assets.
• Mostly banks issue loans against mortgages
and pledges.
• Debentures are issued not against a
particular asset, they are issued on security
of whole company.

41. MEDIAM TERMS LIABILITIES
• Such liabilities are payable between 01 to 05
years.
CURRENT LIABILITIES
• Such liabilities are payable within 01 year.
• Short term loans.
• Accounts payable.
• Unpaid utility bills.
• Unpaid wages.

42. ACCOUNTS PAYABLE
• Suppose you have purchased raw material for
your factory in November and is payable
within 06 months.
• Your accounts are closed in December.
• Such payments are shown as Accounts
payable.

43. CLASSIFY THE FOLLOWING ITEMS INTO
LIABILITIES AND ASSETS
• Motor vehicles.
• Premises.
• Accounts payable.
• Inventory.
• Accounts receivable.
• Owing to bank.
• Cash at bank.
• Loan from A.
• Loan to B.
• Computer.
• Outstanding fees of a consultant.
• Patents.
• Goodwill.
• Capital.

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