[quote]LankyMofo wrote:
I just wanted to 2nd, 3rd and 4th everyones opinion that yorik is a moron. [/quote]
Somehow being called a moron by accountants doesn’t bother me at all.
[quote]yorik wrote:
LankyMofo wrote:
I just wanted to 2nd, 3rd and 4th everyones opinion that yorik is a moron.
Somehow being called a moron by accountants doesn’t bother me at all.[/quote]
Somehow an engineer thinking he knows everything doesn’t surprise me at all.
[quote]countingbeans wrote:
yorik wrote:
LankyMofo wrote:
I just wanted to 2nd, 3rd and 4th everyones opinion that yorik is a moron.
Somehow being called a moron by accountants doesn’t bother me at all.
Somehow an engineer thinking he knows everything doesn’t surprise me at all.[/quote]
Sounds like he got his concept of assets and liabilities from Rich Dad, Poor Dad tbh. For the average Joe it make sense - liabilities “cost” money (ie car = petrol, loan, upkeep or house = mortgage, bills etc…), where as “assets” create cash flow (business, shares etc…). So inventory some how become a liability cos it’s not generating cash flow immediately, and there’s an opportunity cost associated with holding large levels of it. But because it’s such a liquid asset, it’d be ridiculous to class it as a liability, and something only someone with a passing interest in finance/accounting would attempt to do.
OP, the best way of reconciling equity as a liability is to look at it from the company’s perspective. They owe the equity back to whoever gave it to them (shareholder, director, what ever!) so since they owe it to someone, it’s a liability, in much the same way as an overdraft or creditor is! I know the person it’s owed to may be the same person who set up the company, but since it’s a separate legal entity the debt technically still exists.
yeah that is the easiest way to view it…
Assets(resources owned by business) = Liabilities(claims of assets by creditors) + Stockholders’ Equity (claims of assets by owners)
stockholders equity can’t be an asset because it is a claim to an asset…not an asset itself
[quote]yorik wrote:
LankyMofo wrote:
I just wanted to 2nd, 3rd and 4th everyones opinion that yorik is a moron.
Somehow being called a moron by accountants doesn’t bother me at all.[/quote]
I are engineer
[quote]yorik wrote:
This equation makes no sense… Asset = liablitiy + Owners Equity; if equity goes to zero, it reduces to asset = liability which is nonsensical.
That’s can’t be a real accounting equation, or you got it wrong.[/quote]
It wouldn’t mean that assets equal equity, it would mean that the value of a firm’s equity is the entire amount of their assets because there are no external claims against the company that need to be filled.
Assets are assets and liabilities are external claims against the company. Equity is the intrinsic value of the firm, or the remaining value of all assets once all claims against the company are filled.
There are real-world firms that have a debit balance for equity. That is, companies that have more claims against them than they have assets to fill those claims.
This is non-sensical.
If your only asset is a house, it’s impossible to have a credit balance for assets. It’s impossible to have a debit balance for liabilities under any realistic circumstances.
While it is possible to create some crazy scenario in bizarro-world where a company could have contra balances for assets and liabilities, and thus have a credit balance for equity, it couldn’t happen in reality.
It couldn’t happen even in theory in the hypothetical you’ve described.
Even from a non-accounting perspective, this statement is inaccurate.
Actually, on further thinking, I’m not certain you could even construct a theoretical scenario in bizarro world where a firm could have contra balances in both assets and liabilities.
It could be a firm whose business is lending money. But in order for their assets to be in credit balance, they’d need for their allowance for doubtful accounts to exceed the value of all other assets.
In order to have a debit balance for liabilities, they’d need to pay somebody money to accept a bond.
So they’d need to lend money while consciously knowing that they would not be paid back, while simultaneously paying other people to accept promises for further payments.
[quote]tGunslinger wrote:
But in order for their assets to be in credit balance, they’d need for their allowance for doubtful accounts to exceed the value of all other assets.
[/quote]
But that isn’t even possible. The allowance could only be as large as the receivable.
I guess if you had a ton of outstanding checks, even then it is really still AP.
Damn it dude, now I’m gonna be thinking about this all night, lol
[quote]countingbeans wrote:
tGunslinger wrote:
But in order for their assets to be in credit balance, they’d need for their allowance for doubtful accounts to exceed the value of all other assets.
But that isn’t even possible. The allowance could only be as large as the receivable.
I guess if you had a ton of outstanding checks, even then it is really still AP.
Damn it dude, now I’m gonna be thinking about this all night, lol[/quote]
I knew it couldn’t be done with depreciation, but I’d forgotten a lot of the nuts and bolts of allowances. Not even the concept of “negative assets” makes sense.
For liabilities, I think the discount on issued debt would have to exceed the principal of the debt itself. For that to happen, the firm would have to pay money to issue debt. While it couldn’t happen if the firm is acting rationally, I suppose it could happen if the firm really wanted to.
Sorry yorik, I don’t think your hypothetical is even theoretically possible.
[quote]jck524 wrote:
yorik wrote:
This equation makes no sense… Asset = liablitiy + Owners Equity; if equity goes to zero, it reduces to asset = liability which is nonsensical.
That’s can’t be a real accounting equation, or you got it wrong.
I think you mean the value of an asset = amount of equity held (a positive number) plus the liability on the asset (how much you owe, a negative number. So if you own a house with $10K in equity and -$180K liability your “asset” is worth -$170K
Here’s one to throw you for a loop. Contrary to “normal” accounting practice, inventory is a liability. It’s just junk sitting on the shelf that you sank money into. It’s not an asset until you convert it to cash by selling it, therefore it makes sense to hold as little inventory as possible. Inventory is a liability. Just don’t try saying that in accounting 101. haha!
you are an idiot.
[/quote]
LOL’D
a = l + Se is the balance sheet equation dawgs.
…dumb as hell
Okay i a couple more questions im stuck on, i would post in the online discussion but the teacher takes forever to answer questions.
Revenue should be recognized when:
A)cash is received.
B)the service is performed.
C)the customer places an order.
D)the customer charges an order.
This one is hard because it can be either A,C, or D, or at least i think it can be any one of those.
[quote]optheta wrote:
daneq wrote:
Wow, OP try going to class… or studying some. Wow
Some of you are fucking morons and should think before you speak about shit you have absolutely no clue about.
If it is:
A=100
L=100
SE=0
it simply is. Mostly the equation is meant to help keep things in balance. When shit gets exponentially more complicated, a nice simple balancing equation is a lovely thing.
… My class just started on the 8th and im Sorry if I didn’t have any prior knowledge of accounting before this class cunt.
[/quote]
So they quiz you on things you haven’t covered in class, or did they cover this in class and you just failed to learn it?
it’s b…It’s called the revenue recognition principle
in accrual accounting(which is what you are learning)…revenue is recognized when it is realized and earned…It doesn’t matter when you receive the cash…
I think that was in accrual section in my textbook from what I remember…
[quote]optheta wrote:
Okay i a couple more questions im stuck on, i would post in the online discussion but the teacher takes forever to answer questions.
Revenue should be recognized when:
A)cash is received.
B)the service is performed.
C)the customer places an order.
D)the customer charges an order.
This one is hard because it can be either A,C, or D, or at least i think it can be any one of those.
[/quote]
Lol i figured it out im dumb its B
[quote]D Public wrote:
it’s b…It’s called the revenue recognition principle
in accrual accounting(which is what you are learning)…revenue is recognized when it is realized and earned…It doesn’t matter when you receive the cash…
I think that was in accrual section in my textbook from what I remember…[/quote]
Maybe, but the question wasn’t very specific.
Revenue in accrual accounting is recognized and earned once the goods are transferred or services are rendered regardless of when cash is received. In cash accounting, regardless of whether or not services are rendered or goods are transferred, revenues are recognized when cash is received.
well the reason I assume it is accrual is that he is taking AC101(financial accounting)…I just took AC101 last fall, so I have a pretty good idea of what he is being taught right now…
I mean…I practically saw the same exact question on my test…
If you’re having trouble with these questions I just want to let you know that you should not make accounting your major. It gets much harder.
[quote]LankyMofo wrote:
If you’re having trouble with these questions I just want to let you know that you should not make accounting your major. It gets much harder.[/quote]
This is all new stuff to me so shouldn’t it be hard? I mean even the teacher of the class said that the Debit/Credit concept is the hardest for students to understand. Wouldn’t any major i choose that i have no knowledge of in be hard for me at first? Or do you have to “Get it” right off the bat in order to be an Acct. Major?
[quote]optheta wrote:
LankyMofo wrote:
If you’re having trouble with these questions I just want to let you know that you should not make accounting your major. It gets much harder.
This is all new stuff to me so shouldn’t it be hard? I mean even the teacher of the class said that the Debit/Credit concept is the hardest for students to understand. Wouldn’t any major i choose that i have no knowledge of in be hard for me at first? Or do you have to “Get it” right off the bat in order to be an Acct. Major?[/quote]
What have you done to learn the material? Do you have a textbook? Do you read it? Do you take notes when you read? Do you attempt to understand what you’ve read?
[quote]optheta wrote:
LankyMofo wrote:
If you’re having trouble with these questions I just want to let you know that you should not make accounting your major. It gets much harder.
This is all new stuff to me so shouldn’t it be hard? I mean even the teacher of the class said that the Debit/Credit concept is the hardest for students to understand. Wouldn’t any major i choose that i have no knowledge of in be hard for me at first? Or do you have to “Get it” right off the bat in order to be an Acct. Major?[/quote]
debit credit is not the hardest concept by any stretc of the imaginaition…it is prob the hardest concept in intro to accounting