b Creditors Equity represents the creditors claims in the assets of the

B creditors equity represents the creditors claims in

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b. Creditors’ Equity: represents the creditors’ claims in the assets of the business to the extent of the debt owed to them. 1. Liabilities: amounts owed by the business for which it is liable to pay back. Borrowing money or purchasing assets on account or on credit. 5. When assets other than cash are invested by the stockholder, then they should be recorded at their fair market value. Accounting Principles and Concepts 1. Business Entity Concept: the financial activities of a business firm should be accounted for separately from the affairs of its owners. 2. Cost Principle: properties and services should be recorded at what they cost or eventually will cost the business. 3. Revenue Realization Principle: revenue is recognized (recorded) at the time it is earned. The amount of revenue recognized is the cash received or amount receivable. a. Revenue: the amount earned by the business for selling its products to its customers. Transaction: the occurrence of an event or a condition that must be recorded.
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Accounting Period: a specific time period in which a business will record, classify, and report its financial activity.
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