Professional Documents
Culture Documents
- is considered to be the foundation of the double-entry accounting system. The accounting equation shows on a
company's balance that a company's total assets are equal to the sum of the company's liabilities and shareholders'
equity.
Formula
A=L+E
Assets
- are items of value that your business owns, creates or benefits from.
- a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it
will provide a future benefit. Assets are reported on a company's balance sheet and are bought or created to increase a
firm's value or benefit the firm's operations.
Examples of assets
Cash.
Investments.
Inventory.
Office equipment.
Machinery.
Real estate.
Company-owned vehicles.
Liabilities
- is something a person or company owes, usually a sum of money.
- it is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result
of past transactions or other past events
Examples of liabilities
Bank debt.
Mortgage debt.
Money owed to suppliers (accounts payable)
Wages owed.
Taxes owed.
Income
- is money (or some equivalent value) that an individual or business receives, usually in exchange for providing a good or
service or through investing capital.
- can refer to a company's remaining revenues after paying all expenses and taxes.
Examples of Income
Money earned from working, investments or doing business. Example: Sam earned $700 from his job, got $30 from bank
interest, and bought and sold vegetables for a profit of $40, making a total income of $770 for the week.
Gross income
Net income
Expenses
- is the cost of operations that a company incurs to generate revenue
Examples of Expenses
Cost of goods sold.
Sales commissions’ expense.
Delivery expense.
Rent expense.
Salaries expense.
Advertising expense.