Accounting Function- 2

Accounting Function- 2 - The Function Keeping the...

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10-3-07: The Function- Keeping the Scorecard #2 4. Basics of the Accounting Language: Accounting Equation: Relationship between assets, liabilities, and owners equity o Assets= Liabilities + Owners Equity o Assets-Liabilities= Owners Equity Assets: Things of value that a firm owns Cash, inventory, property, idea Liabilities: Firm’s debts and obligations Accounts payable, loans, taxes, insurance salaries, pensions Owner’s Equity: Difference between firms assets and its liabilities Money put into, what a company is worth o Example: $10,000= $7,500 + $2,500 $10,000: What you own, assets $7,500: What you owe, liabilities $2,500: Your net worth, owners equity Double- Entry bookkeeping: Dual aspect, have to do two things o System of recording and classifying business transactions in separate accounts in order to maintain the balance of the accounting equation o It’s a process Example in hand-out 5. Fundamental Financial Statements Word Used interchangeably o
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