Basics of Accounting?
Assets = Liabilities + Owner’s Equity
Every transaction, the Debits MUST EQUAL the Credits
According to
Investopedia.com - Your Source For Investing Education, Depreciation and Balance Sheet are:
Quote:
Depreciation
1. In accounting, an expense recorded to allocate a tangible asset's cost over its useful life. Since it is a non-cash expense, it increases free cash flow while decreasing reported earnings.
2. A decrease in the value of a particular currency relative to other currencies.
1. Depreciation is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn. For example, if a company bought a piece of equipment for $1 million and expected it to have a useful life of 10 years, it would be depreciated over the 10 years. Every accounting year, the company would expense $100,000 (assuming straight line depreciation), and this would be matched with the money that the equipment helps to make each year.
2. Examples of currency depreciation are the infamous Russian rouble crisis in 1998, which saw the rouble lose 25% of its value in one day.
|
Quote:
Balance Sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.
The balance sheet must follow the following formula:
Assets = Liabilities + Shareholders' Equity
Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses
It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).
The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at that point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period. Neither statement is better than the other - rather, the financial statements are built to be used together to present a complete picture of a company's finances.
|
Linear Mode
