In the continuation to my previous article wherein we defined some Expense accounts, next we will be creating Asset, Liability, Revenue & Owner Equity accounts. Firstly, we need to understand the concepts, i.e. what is asset and liability and how does it impact the accounting. The understanding of this concept will help you appreciate why the account values within the Fusion Financials Value Set must be qualified as an Asset or Liability or Revenue or Owners Equity. There is a lot of information on the web, and therefore I will be touching base at a very high level in the context of Fusion Financials Accounting Hub.
If you haven’t read the previous article, it must be read using this link. In that article, I explained that any value in the accounting flexfield value set, a segment that has label named Natural Account, can be assigned one of the Account types.
Some examples of Assets, Liabilities and Revenue are
Staff Loans
If you pay to staff in cash for a loan that they must return, then following components are involved from accounting perspective
1. Cash is given out by the company to the staff
This is a credit to the Cash Account. Now cash account is of type Asset.
2. Employee owes the money back to the company. In other words, the company has not thrown away the money, it is owed and that money still remains an asset to the company. The reality is that this is a piece of money that still belongs to the company and must be displayed in their balance sheet as an asset
This is a debit to the Staff Loan Account, which is of type Asset.