Many are terrified to study accounting. To make it less intimidating, it is crucial to begin from the primary concepts-financial statements. There are four main financial statements: balance sheets, income statements, cash flow statements, and statements of shareholders' equity.
Let us focus on balance sheets. Balance sheets enumerate what a company owns and owes for a particular time. A balance sheet reveals information on a company's assets, liabilities and shareholders' equity.
Assets are the things, which the company owns. They must be of measured value. This means that these things can be sold and/or used by the company to produce goods and services that can be sold for value. This label includes physical property, like plants, trucks, equipment and inventory. It also embraces things that non-tangible but undeniably existing and of value, such as trademarks and patents. This also covers cash and investments.
Liabilities, on the other hand, pertain to amounts of money that a company is obliged to pay other parties. This necessarily includes other obligation, including obligations to provide goods or services to customers at a future specified time.
Shareholder's equity, also known as capital or net worth, is the money that would be retained if a company were to decide to sell its assets and pay off all of its liabilities. The money that remains will properly belong to the shareholders, or the proprietors of the company.
The balance sheet shows a simple computation comprised of the three elements that have been explained: assets must be equal to the sum of its liabilities and shareholders' equity. - 16890
Let us focus on balance sheets. Balance sheets enumerate what a company owns and owes for a particular time. A balance sheet reveals information on a company's assets, liabilities and shareholders' equity.
Assets are the things, which the company owns. They must be of measured value. This means that these things can be sold and/or used by the company to produce goods and services that can be sold for value. This label includes physical property, like plants, trucks, equipment and inventory. It also embraces things that non-tangible but undeniably existing and of value, such as trademarks and patents. This also covers cash and investments.
Liabilities, on the other hand, pertain to amounts of money that a company is obliged to pay other parties. This necessarily includes other obligation, including obligations to provide goods or services to customers at a future specified time.
Shareholder's equity, also known as capital or net worth, is the money that would be retained if a company were to decide to sell its assets and pay off all of its liabilities. The money that remains will properly belong to the shareholders, or the proprietors of the company.
The balance sheet shows a simple computation comprised of the three elements that have been explained: assets must be equal to the sum of its liabilities and shareholders' equity. - 16890
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