Investment, Incurring Liabilities and Borrowing of Money

During our third meeting, we discussed about investment of the owner, incurring liabilities, and borrowing of money. After that, we answered our task sheet #2 which is Categorizing Grid.

From our discussion, I realized that recording investment of the owner in service business and in merchandising business is a little different. In merchandise business, there's an additional account title which is Merchandise Inventory Beginning. Merchandise Inventory Beginning is the account title for the merchandise invested by the owner at the start of the business. Merchandising business also uses two account titles for cash — cash on hand and cash in bank. Cash on hand refers to the cash given on hand to the owner while cash in back refers to the deposited money to the account of the business.

Incurring liabilities are the payables of the business. It is recorded as an account payable due to the merchandise or purchases that the business bought on account.

Borrowing of money by the business occurs due to shortage in funds or resources. Interests can be deducted in advance or paid upon maturity.

It's good that I got a good score in our Task Sheet #2 compared to my score in Task Sheet #1. It means that I still understand what Sir Randy is discussing. I hope that in the following activities, the results will also be good. ☺