Chapter (1) Elementary Accounting Equation: Lcci Level I & Ii
Chapter (1) Elementary Accounting Equation: Lcci Level I & Ii
Chapter (1) Elementary Accounting Equation: Lcci Level I & Ii
CHAPTER (1)
ELEMENTARY ACCOUNTING EQUATION
If there is no liability
ASSETS = CAPITAL
ASSETS
The properties owned by a business and used in the operation of that business is called assets.
{Properties owned by the company}
2. CURRENT ASSETS
Current Assets are those in the form of cash or those that may be expected to be converted into
cash in the near future by the regular operations of the business.
Examples of Current Assets are:
(1) Inventory
(2) Trade Receivables (Debtors)
pg. 1 Capital Vocational Training School
LCCI Level I & II
LIABILITIES
The right of the creditors in the assets of a business is called the liabilities of the business.
(Amounts owned by the company to external parties.)
CAPITAL
The right or interest of the proprietor, that is, ownship in the assets of the business is called net
worth, capital or equity. (Amounts owned by the company to the owner)
Adjustment for Capital;
£
Capital xxxx
Add: Profit xxxx
Less: Loss (x x x x)
Less; Drawing (x x x x)
4. A Smart Set up a new business. Before he actually sells anything, he has bought motor vehicles
£2000, premises £5000, stock of goods £1000. He did not pay in full for his stock of goods and still
owes £400 in respect of them. He had borrowed £3000 from D.Bevan. After the events just described,
and before trading starts, he has £100 cash in hand and £700 cash at bank. You are required to calculate
the amount of his capital.
5. T. Charles strarts a business, Before he actually starts to sell anything, he has bought fixtures £2000,
motor vehicles £5000 and a stock of goods £3500. Although he has paid in full for the fixtures and
the motor vehicle, he still owes £1400 for some of the goods. J.Preston had lent him £3000. Charle,
after the above, has £2800 in the business bank account and £100 cash in hand. You are required to
calculate the amount of his capital.