Second day of class. Don’t have my textbook yet, which puts me in company with about three quarters of the class, but still something that needs to be taken care of.
Five types of accounts:
Assets: Cash, accounts receivable, equipment, prepaid insurance
Liabilities: Accounts payable, interest payable, wages payable, unearned revenue
Owner’s equity: Owner’s claims on assets
Revenue: amounts earned
Expenses: sacrifices incurred to earn revenue
Transaction: An exchange of value.
The accounting equation is the basis for double-entry book keeping.
Assets = Liabilities + Owner’s Equity
1. The accounting equation must always balance. Assets must always equal liabilities + equity.
2. Every transaction affects at least two accounts.
An Income Statement shows how the company did over a period of time. Usually month/quarter/year.
Revenues – Expenses = net income.
If net income is negative, it’s a net loss.