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Balance Sheet Items Assets: Assets are things of value owned. Assets are the things that may have value for several reasons; for instance: (1) The assets may be used as purchasing power. Cash is an example. Cash has value because other things can be acquired with it. (2) The assets may be a money claim. The holder of these types of assets has the right to receive money for them. Receivables and Saving Bonds are good examples for these types of assets. (3) The assets offer some potential benefits, rights, or services to the owner. A Building is an example because it provides a place in which activities can be conducted and revenue is generated. Land, machinery, tolls & equipments, supplies, patents (Intangible assets), goodwill are other examples for these types of assets. (4) Assets can be held for investment purposes to generate return such as interest, dividend, and rental revenue. So; investment in stock and bonds of other firms, tangible economic values such as land kept for investment purposes are also regarded assets. Liabilities: Liabilities are debts. They represent company’s obligations to pay money, to submit goods, and to perform services. Accounts payable, notes payable, wages payable, bonds payable, unearned revenues, accrued expenses, and tax payable are several examples for liabilities. Owners’ Equity (Capital): Capital is the excess of the assets over the liabilities of the company. It shows owners’ claims on the company’s assets. Income Statement Items Revenues: Revenues are inflows of assets in the form of cash, receivables, or other property of value in from customers and they are related to sales of merchandise or rendering of services within the context of core operations of the enterprise. Revenues can also be earned from investments of assets. Interest revenue earned on bonds and saving deposits, rental revenue earned on rented assets, and dividend revenue earned on stock investments are good examples. Gains: Gains are increases in net assets that result from peripheral or incidental transactions NOT from sale of goods or services. Gains occur when a company sells its assets at a price above the book value of these assets. The excess of the selling price over the book value is to be the amount of the gain. For example, if a company sells its tangible fixed assets such as machinery, and equipment at a price above book value of these assets, gains occur. Gain on sale of fixed assets, and gain on sale of investments are some gain accounts. Gains can also occur when company’s assets kept for investment purposes appreciate in value. For example; if the market value of the stock investments increases, gain occurs. Gain on investment account is an example for these types of gains. Expenses: Expenses are used up benefits of the cost as a result of generating revenue. The essential characteristic of expense is that they are incurred in the process of generating revenue. Cost and expense are different concepts. Cost represents total monetary amount of sacrifices made in order to acquire anything. On the other, expense occurs when the benefit of the cost is used up to get revenue. For example; when supplies are purchased, they are recorded as asset on the basis of the acquisition cost. Then; as these supplies are used, the cost of these supplies becomes expense. Losses: Losses are decreases in net assets that result from peripheral or incidental transactions NOT from the use of costs in an attempt to generate revenue. Losses occur when a company sells its assets at a price below the book value of these assets. The excess of the book value over the selling price is to be the amount of the loss. For example, if a company sells its tangible fixed assets such as machinery, and equipment at a price below book value of these assets, losses occur. Loss on sale of fixed assets, and Loss on sale of investments are some loss accounts. Losses can also occur when company’s assets kept for investment purposes lose value. For example; if the market value of the stock investments decreases, loss occurs. Loss on investment account is an example for these types of losses.