Claims Against the Assets. Balance Sheets show us what the company owns, and what it owes. But who has the rights to the assets? Remember, assets are.

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Presentation transcript:

Claims Against the Assets

Balance Sheets show us what the company owns, and what it owes. But who has the rights to the assets? Remember, assets are anything worth value to the company…this is not necessarily OWNED by you. Creditors have a claim on the assets.

Assets = $49, 121 Liabilities = $14,956 (What are these again?) This means that the business owner provided the difference, and the $14,956 was provided by other sources.

The $34,156 is the Owner’s CLAIM AGAINST THE ASSETS.

Creditor’s Claims first Businesses close down all the time. Who gets the assets when they do? The short answer? EVERYONE. The creditors and the owner still own all the assets. Since creditors are owed money first, any losses from the sale of the assets are taken by the owner.

Hopefully, the owner is able to sell everything for what it is valued. BUT… …this rarely happens.

The creditor’s claims do not change.

Accounting Standards Do you remember GAAP and IFRS? They stand for: Generally Accepted Accounting Principles and International Financial Reporting Standards. Other names you need to know. Accounting Standards Board (AcSB) and International Accounting Standards Board (IASB) Companies had to start moving to the new IFRS by January 1, 2011, but this only applied to publically-traded companies. Private companies have a separate set of rules called the Accounting Standards for Private Enterprise (ASPE).

Business Entity Concept Business and personal finances are kept COMPLETELY separate. All we know about the owner of this company is that she has a claim of $34,165 on the assets. She is not allowed to use the businesses money for herself. She is not allowed to use her own money for the business.

You must know these to be an accountant. VERY IMPORTANT!!! Here are the main 3.