Businessclassificationanddefinition
Foreigneconomicbusinessreferstoeconomiceventsarisingfromtransactionsbetweenenterprisesandotherenterprisesorunits.Forexample,raisingfundsfrominvestorsandpurchasingfromsuppliersPurchasegoods,returnloanstobanks,sellgoodstobuyers,etc.
Internaleconomicbusinessreferstotheconsumptionofinternalcostsandexpensesoftheenterprise,andtheeconomicMatters.Forexample,thematerialsusedintheproductionandoperationprocess,thedepreciationofmachineryandequipment,thedistributionofwages,andthecarry-overofincomeandexpenses.
Detailedbusinessexplanation
1.Assetsincrease,Theowner’sequityincreases;
Forexample:CompanyAusesbankdepositstomakeadditionalinvestmentinCompanyB.
2.Assetsincreaseandliabilitiesincrease;
Forexample:CompanyBpurchasedabatchofrawmaterials,butthepaymentwasnotpaid.
3.Oneassetincreases,theotherassetdecreases;
Forexample:CompanyBgoestothebankforcashwithdrawal.
4.Assetsdecrease,owner’sequitydecreases;
Forexample:CompanyAreducesitsinvestment,andCompanyBreturnstheinvestor’scapitalwithbankdeposits.
5.Assetsdecreaseandliabilitiesdecrease;
Forexample:CompanyBpaysaccountspayablewithbankdeposits.
6.Oneliabilityincreases,andtheotherdecreases;
Forexample:CompanyB’sshort-termliabilitiesbecomelong-termliabilities.
7.Oneowner’sequityincreases,andtheotherowner’sequitydecreases;
Forexample:CompanyBtransferscapitalreservestoincreasecapital.
8.Thedebtincreasesandtheowner’sequitydecreases;
Forexample:CompanyBhasdecidedtodistributetheprofit,buttheprofithasnotbeenpaid.
9.Thedebtdecreasesandtheowner'sequityincreases.
Forexample:CompanyAtransferscompanyB’slong-termloantocompanyB’sinvestment.
Nomatterhowcomplexthebusinessofanenterpriseis,itcanbesummarizedintooneoftheaboveninetypesofbusiness,andthelawofincreaseanddecreaseis:
EconomicbusinessalwayscausesItemsofthesametype(assettypeorequitytype)increaseordecrease,andtheamountofincreaseordecreaseisequal.
Differenttypes(assettypeandequitytype)itemshavethesameincreaseanddecrease,andtheincreaseanddecreaseareequal.
Nomatterwhichtype,itdoesnotaffectthebalancebetweenassetsandliabilities,andowner'sequity.Thatis:
Accountingidentity:assets=liabilities+owner'sequity.