Ownership

Ownership and Equity

Ownership = Is the exclusive tight to posses, use, enjoy, and dispose of property.

Equity = Is the owners' contributions to the business.

Equity represents the noncurrent obligations of the entity to the owners. Because equity equals the amount of assets remaining after subtracting liabilities, equity is sometimes called net assets. (The term "net" indicates that at least one amount has been subtracted from another to reach this final amount)

Equity comes from two primary sources: investments by owners and earnings.
An unincorporated business (sole proprietorship or partnership) will be illustrated first.

Equity is equal to the owners' investments plus net income, less any withdrawals and losses.

Capital = The owner's current investment, or equity, in the assets of a business.

Drawing Account = A temporary capital account, set up in the name of the sole proprietorship or a partner, form which he or she can withdraw money or other assets in anticipation of profit.

Liabilities

LIABILITIES

Liabilities - Debts, amounts owed to creditors
1. Current Liabilities - Liabilities that will be paid with current assets within one year or one operating cycle, whichever is longer.
Accounts Payable - Amounts owed creditors that result from the purchased of goods or services on account.
Notes Payable - Written promises in the hands of the makers, that serve as evidence of debts. If due within one year or one operating cycle, whichever is longer.
Interest Rate Payable - A percentage of the principal that is paid for the use of money borrowed.
Interest - Money paid for the use or borrowing of money.
Unearned Revenue - Advance payment for services that still must be performed. Unearned revenue represents a liability or obligation of the company receiving the payment for a service not yet rendered.
2. Non Current Liabilities - In general liabilities that have a due date more than a year beyond the balance sheet date or beyond one operating cycle, whichever is longer, are classified as non current source is considered non current, whatever the due date. There are several accounts that are classified as noncurrent liabilities, such as mortgages payable, Bonds Payable, Long-term Notes Payable.