Accounting Basics

							Accounting:


The Basics
Net Worth

   AKA your “financial position”
   How do we calculate it?
What is…

   An Asset
   A Liability
   Equity
The Balance Sheet

   So, we know how to calculate
    financial position.
   The formal way to do this is in a
    balance sheet
       A balance sheet is a statement showing
        the financial position of a person,
        business, or other organization
A Sample Balance Sheet
The Balance Sheet
   Set up in the form of the basic accounting
    equation:
            A=L+E
       Assets on left, liabilities and equity on right
       3 line heading
          Who?

          What?

          When?

       Assets listed in order of liquidity
       Liabilities listed in order in which they must be
        paid
The Balance Sheet
for a small business
Accounts Receivable

   Customers buy goods with the
    understanding that they’ll pay later
   They owe money to you, and so
    these debts represent a dollar value
    to the business
   Also known as A/R
Accounts Payable

   Same deal.
   You may owe money, for example
    to a supplier, so you’re in debt
   This is an obligation or liability
   Also known as A/P