Define the following:
- a. Asset
- b. Current asset
- c. Liability
- d. Current liability
- e. Common stock
- f. Retained earnings
To define: The meaning of (a) assets, (b) current assets, (c) liability, (d) current liability, (e) common stock, and (f) retained earnings.
Explanation of Solution
(a) Asset: Assets refer to the resources owned by the business, which are utilized in the course of the business to generate revenue.
(b) Current assets: Assets of an organization which can be liquidated within a period of one year, is termed as current asset.
(c) Liability: Liability is an obligation of the business to pay to the creditors in future for the goods and services purchased on account or any for other financial benefit received.
(d)Current liability: Current liability is the liability, which has to be paid within a year or within the end of fiscal year, whichever is earlier.
(e) Common stock: The amount invested in the business by an investor in exchange of shares, and receives a return or share of profit from the profits earned by the business, is known as common stock.
(f) Retained earnings: Retained earnings are the portion of earnings kept aside by the business for the purpose of reinvestments, payment of debts, or for future growth.
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Chapter 2 Solutions
Fundamentals Of Financial Accounting
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