ACCOUNTING FUNDAMENTALS
Assets = Liabilities + Owner’s Equity
Resources owned by a Amounts owed to a company The owner’s net worth or
company (lenders and suppliers). investment in the company
…. and which have future
economic value that can Liabilities usually have the word The difference between assets and
be measured and that can "payable" in the account title. liabilities
be expressed in dollars.
Listed in
order of liquidity Liabilities also include amounts
received in advance for a future
(how easily they can be sale or for a future service to be
turned into cash) performed. This is called
Unearned Revenue
Asset Accounts: Liability Accounts: Equity-related Accounts:
Cash Accounts Payable owner investment
Accounts Receivable Accrued Expenses revenue/expenses = net income (or
Inventory Unearned Revenue net loss)
Supplies Loan Payable withdrawals or dividends
Prepaid Expenses Mortgage Loans Payable
(rent, insurance, etc.)
Equipment
Vehicles
Land
Buildings
Analyzing Transactions
1. Which accounts are affected?
2. Is the account increasing or decreasing?
3. Apply the rules for debits and credits.
Expenses Revenue
Dividends Share Capital
Assets = Liabilities + Owner’s Equity
Resources owned by a Amounts owed to a company The owner’s net worth or
company (lenders and suppliers). investment in the company
…. and which have future
economic value that can Liabilities usually have the word The difference between assets and
be measured and that can "payable" in the account title. liabilities
be expressed in dollars.
Listed in
order of liquidity Liabilities also include amounts
received in advance for a future
(how easily they can be sale or for a future service to be
turned into cash) performed. This is called
Unearned Revenue
Asset Accounts: Liability Accounts: Equity-related Accounts:
Cash Accounts Payable owner investment
Accounts Receivable Accrued Expenses revenue/expenses = net income (or
Inventory Unearned Revenue net loss)
Supplies Loan Payable withdrawals or dividends
Prepaid Expenses Mortgage Loans Payable
(rent, insurance, etc.)
Equipment
Vehicles
Land
Buildings
Analyzing Transactions
1. Which accounts are affected?
2. Is the account increasing or decreasing?
3. Apply the rules for debits and credits.
Expenses Revenue
Dividends Share Capital
