The Transactions Behind the Balance Sheet

Short-Term Assets are Those Assets that are cash or will be converted to cash or consumed within a period of one year or less. Examples of these Assets in the bicycle company are Cash, Accounts Receivable, bicycle Inventory, and Prepaid Insurance. Long-Term Assets are Those items that will be consumed or converted to cash after … Read more

The Components of the Balance Sheet

Balance Sheet : This financial statement is a listing of the Assets (items owned), Liabilities (items owed), and Owner’s Equity (what belongs to the owner(s)). The relationships between all these items are represented by the accounting equation. Assets As was discussed above, Assets are items that are of value and are owned by the entity … Read more

Understanding The Accounting Equation

Accounting Equation : A(ssets) = L (iabilities) + OE (Owner’s Equity), The formula depicts the relationships of the various elements of the Balance Sheet to each other. Often the relationships between Assets (A), Liabilities (L), and Owner’s Equity (OE) are shown in terms of a formula. Accounting Equation A = L + OEAssets = Liabilities … Read more

Understanding the Balance Sheet

Imagine that you make a list of everything that is important to you. Along with this list you attach values to all of these items. Then you make a list of everything that you owe to others, and again you attach values to these items. Then you subtract the total value of the second list … Read more

11 Generally Accepted Accounting Principles (GAAP)

It is important that you understand the concepts of Generally Accepted Accounting Principles (GAAP), which form the basis of accounting and are part of the language of accounting and business. This chapter will introduce the agencies responsible for standardizing the accounting principles that are used in the United States and it will describe those principles … Read more

How Different Business Entities Present Accounting Information

Proprietorships are businesses with a single owner like you and me. These types of businesses tend to be small retail businesses started by entrepreneurs. The accounting for these proprietorships includes only the records of the business—not the personal financial records of the proprietor of the business. Alert! Don’t Mix and Match: The financial records of … Read more