Accounting English,Sunxiaoyuan E-mail: sunjimingyeye163.com 8111326,Lesson one,Lesson six Assets,Accounting English,Lesson Six Assets,Learning objectives 1. Account for inventory by the periodic and perpetual systems 2. Apply the inventory costing methods: specific unit cost, weighted-average cost, FIFO and LIFO 3. Determine the cost of a non-current asset 4. Account for depreciation 5. Depreciation methods 6. Account for intangible assets,Accounting English,words and phrases,Lesson Six Assets,Accounting English,6.1 Current Asset The definition of current assets means the property be expected to be used up or sold during the operating period (within the next twelve months). The cash at bank account and Stocks account are expected to be converted into cash as quickly as possible. Businessmen want to collect the account receivable as soon as possible to decrease the possibility of bad debt. All the above examples are typical of current assets.,Lesson Six Assets,Accounting English,6.1.1 Cash Cash is, in general sense, bills and silver in the till and money on deposit in the bank. In accounting, cash means currency(coins, paper currency) on hand or on deposit in a bank or other depositories. Besides, those formal negotiable papers that will be due on demand are classified as cash for accounting purpose. They include bank drafts, cashiers checks，money orders, certified checks and ordinary checks. Cash is the most active item on the accounting statements and is often called quick asset.,Lesson Six Assets,Accounting English,6.1.2 Account Receivable Receivables: An introduction The Types of Receivables Receivables are monetary claims against businesses and individuals. The two major types of receivables are accounts receivable and bills receivable. A businesss accounts receivable are the amounts to be collected from its customers. Accounts receivable are current assets.,Lesson Six Assets,Accounting English,6.1.3 Inventory 1. The Definition and Categories of Inventory Inventory is the name given to goods that are either manufactured or purchased for resale in the normal course of business. A car dealers inventory is comprised of automobiles; a grocery stores inventory consists of vegetables, meats, dairy products, canned goods, and bakery items; Wal-Marts inventory is composed of shirts, CDs, car batteries, pet supplies, linens, toys, and more. Like other items of value, such as cash or equipment, inventory is classified as an asset and reported on the balance sheet.,Lesson Six Assets,Accounting English,2. INVENTORY SYSTEMS There are two main types of inventory accounting systems: the periodic system and the perpetual system.,Lesson Six Assets,Accounting English,3. COST OF GOODS SOLD (COST OF SALES) AND GROSS PROFIT (GROSSS MARGIN) Using the periodic system, the cost-of-goods-sold calculation as follows: Cost of goods sold = Beginning inventory + Purchase (including freight in) = Cost of goods available for sale - Ending inventory,Lesson Six Assets,Accounting English,4. INVENTORY COSTING METHODS Four of the most commonly used costing methods are: Specific unit cost; Weighted- average cost; First-in, First out (FIFO)cost; Last-in, First out(LIFO)cost.,Lesson Six Assets,Accounting English,课本P66,Lesson Six Assets,Accounting English,6.2 Fixed Assets 6.2.1 Measuring the cost of Property, Plant and Equipment The general rule for measuring the cost of any asset is: The cost of an asset= the sum of all the costs incurred to bring the asset to the location and condition necessary for its intended use Business hold some long term (useful life is over a year), expensive (unit value is above the prescribed criteria) tangible assets. They are fixes assets. Common forms of fixed assets refer to manufacturing equipment, transportation equipment, furniture, etc.,Lesson Six Assets,Accounting English,6.2.2 Depreciable During the use of fixed assets, the value of them will reduce. This part of reduction will be converted into the value of products or a business operating costs. Abide by the matching principle, accountants need to consider about the account of depreciation. Depreciation by dictionary definition is “the loss in value of an asset over time.” From the accounting purpose, This account is used to allocation the charge of an asset over a useful life.,Lesson Six Assets,Accounting English,Helping to understand the depreciation properly, several definitions should be known: Depreciable amount: it refers to the historical cost of an asset against the residual value. Depreciable asset: not all the non current asset depreciated. Just the one has a limited useful life. For instance, land is one of the important assets for the entity, but it has a limitless life, so it is not a depreciable asset. Estimated Useful life: The depreciable assets have a limited life. However, many factors affect the useful life. This time need the professional to estimate. Accumulated depreciation: the total amount of depreciat