Accounting Basics

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What are Assets?

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Resources controlled as a result of past transactions that are expected to have future economic value.

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What are Liabilities?

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Obligations as a result of past events that are expected to require an outflow of resources.

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What is Owners' Equity?

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The owners’ residual (leftover) interest in the assets after deducting the liabilities.

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What is the Accounting Equation?

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Assets = Liabilities + Owners’ Equity. It shows that assets are either funded by borrowing (liabilities) or contributed directly by owners (owners’ equity).

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What are Cash and Cash Equivalents?

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Short-term, highly liquid investments that are easily converted into cash.

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What are Accounts Receivable?

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Amounts owed to firms by customers for goods and services sold on credit.

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What is Inventory?

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Goods held for sale to customers or used in manufacturing to be sold.

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What are Accounts Payable?

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Amounts the firm owes to suppliers for goods or services purchased on credit.

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What is Plant, Property & Equipment?

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Non-current assets used in the production of goods and services including land, buildings, machinery, equipment, and natural resources.

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What are Investments?

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Non-current assets such as stocks and bonds of other corporations owned by the company.