ALBA_Financial Accounting_Chapter 3_Suggested Exercises - 6 MSc In Business for Lawyers Course Financial Accounting Instructor Dr Stylianos Kotsias

ALBA_Financial Accounting_Chapter 3_Suggested Exercises - 6...

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6MSc. In Business for LawyersCourse: Financial AccountingInstructor: Dr. Stylianos KotsiasStudent: Charalampia A. NousiChapter 3- Suggested Exercise 3.1, p. 112You have heard the following statements made. Comment critically on them.(a)‘Equity only increases or decreases as a result of the owners putting more cash into the business or taking some out.’It is true that equity either increases or decreases as a result of the owners putting more cash into the business or taking some out. However, it should be underlined that putting more cash or taking some cash out are not the only ways for the occurrence of either an increase or a decrease in equity respectively. To begin with, there are more than one ways in which an increase in equity occurs. In particular, equity increases when a) revenue from sales is gained, and b) new assets are introduced in the company. Concerning a) revenue from sales, when a business operation sells inventories, revenue occurs, and equity increases. In addition,b) equity increases when new assets are introduced to the business, for example equipment, vehicles, machinery, et cetera.As far as the decrease of equity is concerned, it happens when a) expenses incur and b) assets of the business are withdrawn by the owners of the company.
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  • Fall '15
  • Dr. Kotsias
  • Financial Accounting, Depreciation, Generally Accepted Accounting Principles, FIFO and LIFO accounting, FIFO method, Non-current asset

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