CHAPTER NO 1 FINANCIAL ACCOUNTING
To understand the financial statements of company, one must understand first its operations.
Accounting is a system the collects and processes financial information about an organization and reports that information to the decision makers. Decision makers could be internal decision makers and outsider decision makers. External decision makers are creditors, investors, suppliers and customers. Internal decision makers could be managers to make day to day operations.
Balance Sheet reports financial position (assets, capital, and liabilities) of a company at a point of time.

Assets: Assets are the economic resources controlled by the organization so that future benefits can be obtained. Assessment of assets is important to its creditors and to its owners because assets provide a basis for judging whether the company has sufficient resources available to operate the business.

Typically, the assets of a company include the following: 1. Current assets (short-term): short term assets that transform into cash and within the next year or the operating business cycle of the company. a. Cash and cash equivalents: Highly liquid assets, that can be easily convertible to cash such as bonds, marketable securities. b. Short-term investments: represents the reported values of shares of other companies as investment of access cash c. Trade receivables: When a company sells it products on credit, and receives promises to get back. d. Inventories: refers to the goods which used to produced products and services on credit. e. Prepayments: Prepayments are the advanced payment of any insurance premiums that reflect future economic benefits. f. Other current assets

2. Non-current assets (long-term) : are considered to be long term because they will be used or turned into cash over