BACKGROUND
1. History
2. GAAP vs. OCBOA
3. Types of Accountants
4. International
5. Future

BASIC  INFORMATION

Assets are what you own. Liabilities are what you owe. Equity is what’s left over. It is your net worth.

Assets always equal your liabilities plus equity. If assets are less than liabilities then your equity is negative.

Assets are on the left of the balance sheet; liabilities and equity are on the right. This directly corresponds to debits and credits. Debits mean left; credits mean right.

Assets and liabilities are grouped into two main categories: current and non-current.

Current assets are those assets that can readily be converted to cash. Bank accounts are of course most readily convertible, but any assets that can be converted to cash within a short time are current assets.

Current liabilities are those liabilities that have to be paid off within a short time.

Short time for both current assets and current liabilities usually means one year or less. For some companies, it may be “the normal business cycle”.

Non-current assets are further divided into fixed assets and other assets.

Even though items of machinery and other assets may be sold in less than one year, fixed assets are still non-current. This is because they are intended to help operate the business for periods of greater than a year. If an asset is bought with the intent to sell for a profit, then it is inventory and is a current asset.

Equity consists of money invested in the company by the owners, money taken out of the company by the owners (i.e. their return on their investment), and net income.