Accounting chapters 1-6 extras

Created by johnfdhartman 

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The two main company structures

Propriety Companies, Public Companies

The four types of public company

Companies where capital is limited by shares, companies where share capital is limited by guarantee, no-liability companies, unlimited share capital companies.

The two types of share

Ordinary shares, preference shares.

The advantages of companies as a business structure

Limited liability, separate legal entity, can gain capital via selling shares.

The disadvantages of companies as a business structure

More expensive and difficult to establish, must comply with more legal acts, subject to company tax, owners get little say in the company's direction.

The two types of trust

Family trusts, Unit trusts.

The advantages of trusts as a business structure

Minimal tax payments, limited liability, little regulation (unless they are listed on the ASX).

The disadvantages of trusts as a business structure

Additional complex laws apply, they require suitable, qualified accountants to run.

Source documents

Original documents that verify the transaction

Liquidity

The ability of an entity to meet its short term financial commitments

Recognition criteria of assets/liabilities

The future economic benefits/outflows must be probably, and they must be able to be measured reliably.

Contingent liability

A liability where the result depends on a future event.

Paid up share capital

The amount payed in by shareholders for shares in the company.

Minority interests in controlled entities

Claims on the net assets that belong to the shareholders of controlled entities.

Net realizable value

Expected selling price minus expected costs of getting the inventory to a saleable state.

Net market value

Amount gained from selling an asset minus the costs associated with selling it.

Value in use

Present value of expect cash flows from the asset's use and subsequent disposal.

Impairment

The expense incurred when the carrying value of an asset exceeds the recoverable amount.

Historical cost

The original cost of an asset.

Current cost

The cost of replacing an asset.

Market value

Expected cash from selling an asset.

Present value

Sum of discounted cash flows from an asset.

Fair value

How much the asset could be exchanged for between parties at arm's length.

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