A = L + E
Assets: All property owned by the company
Liabilities: All debts the company has outstanding to lenders
Equity: The company's ownership interest in assets after debts are paid
For example...
A company's balance sheet is it's financial situation at a particular time. It is just a formal presentation of the Accounting Equation (/7/chapter-1-the-accounting-equation)
| Balance Sheet ...
This shows the company's financial performance over a period, usually one year
A balance sheet is like a photo and an income statement is like a video
Also called a Profit and Loss (P&L) statement
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Retained earnings are the company's undistributed profits over the existence of the company (i.e. dividends that have not been distributed). The statement of retained earnings shows changes in the ...
Reports the company's cash in and cash out over a certain period. It is not the same as the income statement
1. Income and expense may be recorded at a different time than when the cash is actually...
For a bank account a debit means decrease and credit means increase -- this is not always true in accounting. A debit or credit to an account can increase or decrease it depending on the type of ac...
To be GAAP complaint you must use Accrual method.
The cash method records sales when cash is received and expenses when cash is paid. This can distort the true situation, for example if a business...
When an asset is purchased that will last more than one year the cost of the asset is not counted as an expense. Instead the cost is spread over many years using depreciation.
In Straight-Line Depr...