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1.20 Assets v Expenses

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VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.

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1.20 Assets v Expenses

  1. 1. 1.20 ASSETS VS EXPENSES
  2. 2. Video of this presentation at… YouTube Channel for VCE Accounting
  3. 3. © Michael Allison. Author’s permission required for external use.  There is close link between Assets and Expenses 1.20 ASSETS VS EXPENSES Assets: An asset is: 1. A resource controlled by the entity 2. As a result of past events (transactions) 3. From which future economic benefits are expected to flow to the entity Expenses: Expenses are: 1. Outflows of economic benefits 2. That will either: •  Assets • Liabilities 3. With the ultimate effect of: •  Owner’s Equity
  4. 4. © Michael Allison. Author’s permission required for external use.  The difference is in economic benefits:  When the economic benefits of an item will be consumed in the future, this represents an Asset  When the economic benefits of the Asset are actually consumed (used up), this represents an Expense  Example: a firm purchases a delivery truck for $20,000 on 1 January 2015 that will last for 4 years 2015 2016 2017 2018 $20,000 delivery truck 1.20 ASSETS VS EXPENSES
  5. 5. © Michael Allison. Author’s permission required for external use.  At 1 January 2015, the firm has:  Assets of $20,000 – $20,000 of the economic benefits of the truck will occur in the future  Expenses of $0 – $0 of the truck has been consumed (used up) 2015 2016 2017 2018 $20,000 delivery truck Asset $20,000 Expense $0 1.20 ASSETS VS EXPENSES
  6. 6. © Michael Allison. Author’s permission required for external use.  At 31 December 2015, the firm has:  Assets of $15,000 – $15,000 of the economic benefits of the truck will occur in the future  Expenses of $5,000 – $5,000 of the truck has been consumed (used up) 2015 2016 2017 2018 $20,000 delivery truck Asset $15,000 Expense $5,000 1.20 ASSETS VS EXPENSES
  7. 7. © Michael Allison. Author’s permission required for external use.  At 31 December 2016, the firm has:  Assets of $10,000 – $10,000 of the economic benefits of the truck will occur in the future  Expenses of $10,000 – $10,000 of the truck has been consumed (used up) 2015 2016 2017 2018 $20,000 delivery truck Asset $10,000 Expense $10,000 1.20 ASSETS VS EXPENSES
  8. 8. © Michael Allison. Author’s permission required for external use.  At 31 December 2017, the firm has:  Assets of $5,000 – $5,000 of the economic benefits of the truck will occur in the future  Expenses of $15,000 – $15,000 of the truck has been consumed (used up) 2015 2016 2017 2018 $20,000 delivery truck Asset $5,000 Expense $15,000 1.20 ASSETS VS EXPENSES
  9. 9. © Michael Allison. Author’s permission required for external use.  At 31 December 2018, the firm has:  Assets of $0 – $0 of the economic benefits of the truck will occur in the future  Expenses of $20,000 – $20,000 of the truck has been consumed (used up) 2015 2016 2017 2018 $20,000 delivery truck Asset $0 Expense $20,000 1.20 ASSETS VS EXPENSES
  10. 10. © Michael Allison. Author’s permission required for external use.  The difference is in economic benefits:  When the economic benefits of an item will be consumed in the future, this represents an Asset  When the economic benefits of the Asset are actually consumed (used up), this represents an Expense $20,000 delivery truck Asset $20,000 Year 0 Year 1 Year 2 Year 3 Year 4 Expense $5,000 Asset $15,000 Expense $10,000 Asset $10,000 Expense $15,000 Asset $5,000 Expense $20,000 1.20 ASSETS VS EXPENSES
  11. 11. © Michael Allison. Author’s permission required for external use. TASK In-class Homework Ex1.3 X Ex1.4 X Ex1.5 X Ex1.6 X Ex1.7 X

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