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Assets, liabilities, equity Essay

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Accounting, per se, is based on five types of accounts namely: assets, liabilities, equity, income and expense. These account types belong either of the Balance sheet accounts or Income and Expense accounts. Assets, liabiliites, and equity fall under the balance sheet account and the rest goes to the income and expense accoutnts. Definining each, asset is composed of a group of things that an individual or an entity owns. These includes tangible items like car, cash or often stocks (intangible) and others that possess convertible values.

On the other hand, liabilities are group of things on which an individual or an entity is indebted to. Loans and mortgages are the common examples of liabilities. Equity, is what we also call net worth – an amount that is represented to be the remainder after deducting the liabilities of an individual’s or an entity’s from its group of assets. Meanwhile, income is the same as profit – something that you earn as payment from the time, services, or goods that you offered in exchange of money.

Expenses include all those monetaries that were used to acquire the goods or services of someone else. Amongst various accounts in an entity, the stocks swap and replacement costs are the fundamental accounts that change when an entity assimilates to a corporate merger. Stock swap is frequently used in the accounts of a corporate merger since it does not prohibit the shareholders of merging companies to distribute among them the risk that is involved in the merging transaction.

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Replacement cost, on the other hand is comes in when entities will employ cost in replacing that target company. However, replacment cost can only be true in most cases where an industry does not give services. References Investopedia ULC (2008) Mergers and Acquisitions: Introduction. Retrieved November 17, 2008, from http://www. investopedia. com/university/mergers/default. asp Money Instructor (2005) Basic Accounting Terminology 101. Retrieved November 17, 2008, from http://www. moneyinstructor. com/art/basicaccounting. asp

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