The balance sheet |
The basic law of accounting states that value to the owners include, what the business have less what the business owe to others people, vendors and/or banks. In accounting terms: Worth or Net worth = Assets – Liabilities This is what is reflected on the financial statement called Balance Sheet By accounting law, this equation must always be in balance. This is the premise of a financial statement; which depicts a financial picture of the business at a given time. What exactly are assets? The businesses' assets include cash, inventory or stock, money that is to be received for products sold or delivered service, value of services that the business has paid for but has not yet used, and buildings and equipment that belong to the business. What are liabilities? Liabilities refer to the value of what the business owes to other people. This includes money invested by shareholders, bills that the business have to pay , taxes, loans, etc. |
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