NCEA L2 Accounting - Examples of Correct Language - Not Money

Assets

• XYZ Computers incurs rent, utilities, salaries, and advertising costs totaling $200,000.
• XYZ Computers has $50,000 in cash, $200,000 worth of inventory, and $100,000 in accounts receivable from business customers.
• XYZ Computers records $300,000 from the sale of computer hardware during the financial year.
• The owner of XYZ Computers withdraws $5,000 from the business for personal expenses.

Liabilities

• On XYZ Computers' balance sheet these consist of property, plant, and equipment (PP&E) valued at $200,000.
• Estimates that 5% of its accounts receivable ($10,000) may not be collectible and records an allowance for doubtful debts accordingly.
• XYZ Computers generates cash inflows from sales revenue and cash outflows for expenses such as inventory purchases and operating costs.
• XYZ Computers owes $30,000 to suppliers for inventory purchases and has a short-term loan of $50,000 from a bank.

Equity

• These includes a building valued at $150,000 and computer equipment valued at $50,000.
• These include $500,000 from sales revenue and $50,000 from a bank loan.
• XYZ Computers' owner initially invested $100,000 in the business. The company has retained earnings of $50,000 from previous profitable operations.
• XYZ Computers calculates this by summing the cost of inventory used during the year, which amounts to $150,000.

Drawings

• On XYZ Computers' balance sheet these consist of property, plant, and equipment (PP&E) valued at $200,000.
• XYZ Computers generates cash inflows from sales revenue and cash outflows for expenses such as inventory purchases and operating costs.
• At the end of the fiscal year, XYZ Computers' balance sheet shows total assets of $350,000, total liabilities of $80,000, and owner's equity of $270,000.
• The owner of XYZ Computers withdraws $5,000 from the business for personal expenses.

Revenue

• These include $50,000 in cash, $200,000 in accounts receivable, and $100,000 in inventory which may be used in the current financial year.
• XYZ Computers records $300,000 from the sale of computer hardware during the financial year.
• These includes a building valued at $150,000 and computer equipment valued at $50,000.
• On XYZ Computers' balance sheet these consist of property, plant, and equipment (PP&E) valued at $200,000.

Expenses

• XYZ Computers calculates this by summing the cost of inventory used during the year, which amounts to $150,000.
• XYZ Computers' owner initially invested $100,000 in the business. The company has retained earnings of $50,000 from previous profitable operations.
• XYZ Computers incurs rent, utilities, salaries, and advertising costs totaling $200,000.
• XYZ Computers has debts totaling $50,000, which include a long-term loan from a bank.

Net Profit

• XYZ Computers identifies $5,000 in accounts receivable to be written them off as uncollectible.
• At the end of the fiscal year, XYZ Computers' balance sheet shows total assets of $350,000, total liabilities of $80,000, and owner's equity of $270,000.
• Calculated as revenue ($300,000) minus expenses ($200,000), resulting in a net profit of $100,000.
• XYZ Computers has debts totaling $50,000, which include a long-term loan from a bank.

Cost of Goods Sold (COGS)

• XYZ Computers incurs rent, utilities, salaries, and advertising costs totaling $200,000.
• At the end of the fiscal year, XYZ Computers' balance sheet shows total assets of $350,000, total liabilities of $80,000, and owner's equity of $270,000.
• XYZ Computers has $50,000 in cash, $200,000 worth of inventory, and $100,000 in accounts receivable from business customers.
• XYZ Computers calculates this by summing the cost of inventory used during the year, which amounts to $150,000.

Accounts Receivable

• XYZ Computers extends credit terms to its business customers, resulting in $100,000 owed to it.
• Calculated as revenue ($300,000) minus expenses ($200,000), resulting in a net profit of $100,000.
• XYZ Computers identifies $5,000 in accounts receivable to be written them off as uncollectible.
• XYZ Computers records $300,000 from the sale of computer hardware during the financial year.

Accounts Payable

• On XYZ Computers' balance sheet these consist of property, plant, and equipment (PP&E) valued at $200,000.
• This includes laptops, desktops, servers, networking equipment, and accessories valued at $200,000 which are ready to be sold.
• XYZ Computers incurs rent, utilities, salaries, and advertising costs totaling $200,000.
• XYZ Computers has $30,000 owed to various suppliers for inventory purchases.