![]() The P&L (also called an income statement) sets out revenue versus losses for the period, to show the balance once you've paid suppliers and clients have paid you. Cars, furniture and hardware all have an asset price which changes once they are no longer new. Included here may be depreciation expenses - the amount of value lost in an asset as it grows older. Once assets and liabilities have been accounted for, equity lets you measure the value of the business to its owners. If the reverse is true, you'll need to find ways to reduce your overall debt level. If your business has huge assets and relatively few liabilities (debts), you're likely in good shape. By "balancing" these against one another, you get a sense of how financially healthy the company is. The balance sheet contains the companies assets, liabilities, and equity. ![]() ![]() These relate directly to the business accounts detailed above. 3 important financial statementsīusinesses also need to track three key statements as part of the financial accounting process. These five account types help to make up your general ledger, the information hub that records every financial transaction your company makes. In many businesses, this shows the amount of equity the owners (shareholders) have in the company. What the business owner owes or has owed to them. Liability accountsĪ record of the outstanding debts your company owes, which can then be balanced against assets. Asset accountsĪll the assets the company holds, without accounting for any losses or amounts owed. Income accountsĪ record of the company's gross income - the amount of sales made in a given period. The simplest definition of expense accounts is "a running tally of your business expenses for each period." 2. Here are 5 key account types for businesses today. Companies need to keep track of a range of incoming revenues and outgoing expenses, plus a few other important financial statements.
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