BUSS1030 Lecture Notes - Lecture 2: Double-Entry Bookkeeping System, Unsecured Debt, Accounting Equation
31 Jul 2018
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Chapter 2 measuring and reporting financial position. The company would build an asset, e. g. power plant, and immediately claim the projected profit on its books, even though it hadn"t made one dime from it. If the revenue from the power plant were less than the projected amount, instead of taking the loss, the company would then transfer these assets to an off- the-books corporation, where the loss would go unreported. This type of accounting enabled enron to write off losses without hurting the company"s bottom line. Learning objective 1: explain the nature and purpose of the statement of financial position and its component parts. Nature and purpose of the statement of financial position. Examples of assets (i. e. found on statement of financial position: freehold premises, machinery and equipment, fixtures and fittings, cash. Inventories: tangible assets physical substance e. g. inventory, land, plant, equipment. Intangible assets not physical e. g. copyright, trademark, patent, franchise, goodwill.
