"FINANCE MANAGEMENT Student...NameCourse..TitleProfessor..NameUniversity NameSubject: financial accounting 1 FINANCE MANAGEMENT ContentsRelation between asset, equity and liability ……………………………………………4Problem solving…………………………………………………………………………5Difference between cost and expense…………………………………………………..6References…………………………………………………………………………………72 FINANCE MANAGEMENT Ques.1: What is the common accounting equation that reflects relationship amongliabilities, owner equity and assets? Define each?Ans. ASSETS - LIABLITIES = OWNER’S EQUITYThe above formula indicates the relationship among liabilities, owner equity and assets(Rosemary,2017). Before understanding this formula we need to understand these terms. Assetsrefer to what your company owns for example: cash, inventory and furniture etc.Liabilities referto what your company owes for example: bank loan and amount payable. Owner equity refers tothe difference between assets and liabilities for example company profit, investment, retainedearnings and dividend etc. Owner equity also known as net assets. It generally decreases when afirm faces losses. Owner equity must be equal to the difference between assets and liabilities.The person or any supplier who give the loan to the firm is the liability of the firm. The firm hasto repay it back after some time. Assets are being used by the firm to make huge profit. For example: assets- Rs.50,000 liabilities- Rs.40,000. What is the amount of owner equity?ASSETS - LIABLITIES = OWNER EQITY50,000 - 40,000= 10,00010,000= 10,000 3 FINANCE MANAGEMENT Ques2.Exercise: Cash- Rs,89000Accounts payable – Rs.25,000Building – Rs.10,00,000 Mortgage payable – Rs.2,50,000Retained earnings – Rs.8,37,000Payroll taxes due – 9,000 Patent receivables – Rs.55,000Accounts payable – Rs.23000ASSETS = LIABLITIES +OWNER EQITYCash (+89,000)=0+cash(+89000)Cash (-25000)=Account payable(-25,000)+ 0Building (+ 10,00,000)= 0 +building(+10,00,000)Cash(-10,00,000)Cash(-2,50,000)=mortgage payable(+2,50,000)+0Retained earnings(8,37,000)=0+cash(+8,37,000)Payroll taxes (-9000)=cash(+9000)+ 0Patent rec.(+55,000) = 0 + patent(+55000)Supplies(+23000) =-23000 +0Total =7,20,000= 30,000 +6,90.000 4 FINANCE MANAGEMENT Ques.3 what is the difference between expense and cost?Ans. Cost is the monetary value of any item to which we spent to gain something useful (d,2017).Cost is the value of the respective item purchased. Expense is generally charge to gainrevenue. Whenever we purchase any item the amount we pay for it is known as cost. It’s themonetary value of the benefit which we derive for further use.Suppose we purchase a telephonecost Rs. 20,000. So the cost will be 20,000. Expense is the monetary value of the item which isalready used. It is charged against the revenue occurred (d, 2017). There are two types ofexpenses:prepaid expenses and accrued expenses. Prepaid expenses are the expenses which arepaid in advance and become current asset. Accrued expenses are the expenses are recorded inbook before it paid and recorded ad current liability. There is a very common concept betweenexpense and cost. Cost is the value of the product purchased whereas expense is the value forwhich we get the desired benefit before.SPECIFICATION:The assignment is about the financial accounts. It will help you to know the relationship betweenasset, liability and owner equity in detail. It will also give you the knowledge about thedifference between cost and expenses. This assignment helps you to get authentic information toknow everything in detail. The answer has been phrased in very easy manner and easy tounderstand. 5 "