Lesson 4: Assets and Obligations - The Duality
An entity has assets, and those assets are ascribed a value expressed as a monetary amount. For each asset that the entity claims, it has an obligation to an external party: the owner/s (Equity) and or the creditors (Liabilities). The Funding Butterfly summarises this relationship.
In the following video, 'Business Is All About Assets,' we explore the essential duality of accounting: for every asset there is an equivalent value claim on that asset. But what does that look like?
[Duration 8:57]
In the following video, 'Business Is All About Assets,' we explore the essential duality of accounting: for every asset there is an equivalent value claim on that asset. But what does that look like?
[Duration 8:57]
Extenders
- Looking at the Funding Butterfly on pp24-25, and let’s say we wanted to start a business like this. The Assets will cost us (say) R500 000. Where can we get these funds from?
- Continuing on from #1, if we borrow R300 000, how much will the owners have to contribute?
- In the Sipho’s Shoes example, if the shop was robbed overnight and R40 000 of stock was stolen, how would the balance sheet return to balance - who would suffer the loss? The Lender (Ace Bank) or the Owner (Sipho)? Explain.
Resources
- Student Workbook - Lesson 4 [4.7MB] - download