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Initial and subsequent investment with which the business is started and expanded respectively
Mr. A started a business with $50,000 and after two years a further amount of $80,000 was injected into the business for expansion. So $50,000 is the initial investment and $80,000 subsequent investment, both are capitalso capital for Mr. A would be $130,000.
Separate Entity Concept:
Its states that the affairs of the business are to be treated as being quite separate from the non business activitiesof the owner. In short owner starts the business, works for the business but still cannot use businessmoney/goods for his/her personal purposes, if he/she does it, these are said to be drawings. The benefit of theowner is the profit that he/she earns from the business and the amount of salary that he/she takes for working for the business.
Amounts or goods taken by the owner/proprietor for his/her personal use
Things owned by a business are known as assetsThere are two types of assets1.
Non Current Assets / Fixed Assets2.
Non Current Assets / Fixed Assets:
Non Current Assets have a life of more than one year.
Land & Building
Fixtures & Fittings
Plant & Machinery etc etc,
Current Assets have a life of less than a year
Stock / Inventories (Unsold Goods are known as Inventories)
Trade Receivables (Who owe money to the business)
Other Receivables / Prepaid Expenses
Cash at Bank
Cash in hand
Amounts payable by the businessThere are two types of liabilities1.
Long term Liabilities / Non Current Liabilities