I am NOT a CPA- this is just for my reference and I wanted to
share it with you. I am one of those people who has to know a little of
everything. And Accounting is one of those little things.There are
basically three important terms associated with Accounting.
First of the terms is Assets. Assets are the resources that business owners have that in the future are expect to generate income. Assets are anything tangible or Intangible that is capable of being owned or controlled to produce value. Do not discount Non-physical assets; such as, trademarks, brands, and copyrights. Simply put, Assets represent ownership of value that can be converted into cash.
The second term is Liabilities or Debt. A Liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Not necessarily a bad thing-but it can hurt your business if your debt far outweighs your assets.
The Final term is Owners Equity. Owners equity is the dessert of the accounting field. This is the most favorite topic everybody likes to discuss, and that most businessmen, business women or entrepreneurs really like to watch as it increases. simply put, the interest that the owner has in a company AFTER liabilities are paid.
There is a simple equation to follow regarding Accounting.:
The accounting equation relates Assets, Liabilities and Owner's equity:
Assets = Liabilities + Stockholder's Equity (Owners' Equity)
It's always a good idea to analyze your debt (liabilities) to income ratio. Are you spending more than you make? Then you must cut expenses. It sounds like a simple plan; but most of us are in debt before we even start to think about operating a business.
The important message I want to convey here is to get educated or invest in that meeting with a professional account or CPA before making any major business decisions.
http://ezinearticles.com/?Crash-Course-in-Accounting&id=4581069First of the terms is Assets. Assets are the resources that business owners have that in the future are expect to generate income. Assets are anything tangible or Intangible that is capable of being owned or controlled to produce value. Do not discount Non-physical assets; such as, trademarks, brands, and copyrights. Simply put, Assets represent ownership of value that can be converted into cash.
The second term is Liabilities or Debt. A Liability is defined as an obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Not necessarily a bad thing-but it can hurt your business if your debt far outweighs your assets.
The Final term is Owners Equity. Owners equity is the dessert of the accounting field. This is the most favorite topic everybody likes to discuss, and that most businessmen, business women or entrepreneurs really like to watch as it increases. simply put, the interest that the owner has in a company AFTER liabilities are paid.
There is a simple equation to follow regarding Accounting.:
The accounting equation relates Assets, Liabilities and Owner's equity:
Assets = Liabilities + Stockholder's Equity (Owners' Equity)
It's always a good idea to analyze your debt (liabilities) to income ratio. Are you spending more than you make? Then you must cut expenses. It sounds like a simple plan; but most of us are in debt before we even start to think about operating a business.
The important message I want to convey here is to get educated or invest in that meeting with a professional account or CPA before making any major business decisions.
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