Question
1-1)
Why
do we have double-entry accounting? Why do we enter everything in twice? Why not
just the once?
Double-entry accounting is a system of recording
transactions (from journals to ledgers). It ensures that the relationship
between the different elements of a business model remain intact.
Question
1-2)
Identify
3 Assets, 3 Liabilities and 3 items of Equity:
Assets:
- Property, Plant and Equipment.Land, land used for vineyards and land used for production of vineyards. Building and investment properties. Net worth for this asset in 2013 was €9,602m.
- Brands and other intangible assets.This area consists of brands, trade names, license rights leaseholder rights, software and websites. Net worth for this asset in 2013 was €11,458m.
- Investments in associates.LVMH has a 40% stake in Mongoual, SA, a real estate firm; a 45% stake in PT. Sona Topas Tourism Company TBK (STTI), an Indonesian retail company and a 46% stake in JW Anderson, a London based ready to wear brand.
Liabilities:
- Deferred income.Deferred income is money paid for goods before receiving them.
- Employee profit sharing.Employee profit sharing is a scheme that entitles employees to a percentage of company profit.
- Advances and payments on accounts from customers.This one speaks for its self, money received from customers before goods or services are received.
Equity:
- Long term borrowing.Borrowings for things such as bonds and interest rate risk derivatives and other derivatives. (Tools to manage financial risk with interest rates, currency exchange etc.)
- Provisions.Provisions such as medical costs and pensions.
- Deferred tax.Deferred tax can be used to reduce the subsequent period’s tax bills.KCQsThe idea that a company is a separate legal entity to its owners. Is this just with finances? What about if the company is caught doing something fraudulent? The owners are surely the ones in trouble then? Maybe I am thinking in to it all a bit too much?
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