From the course: Financial Accounting Part 1
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Basic equation
From the course: Financial Accounting Part 1
Basic equation
- As we begin our study of accounting we should start at the start with the fundamental financial statement, the balance sheet. The balance sheet simply lists our stuff the technical term is asset and how we've been able to pay for that stuff. Assets are economic resources owned or controlled by a company that will provide future benefit to the company. Examples include cash that certainly provides a future benefit, inventory items held to resell in the future and buildings and equipment. The hope is that these items will provide benefit to the business in the future. Now, there are two general methods used to finance our assets, liabilities and owner's equities. Liabilities are obligations that are satisfied either through payment or by providing services to someone else. We borrow money to buy assets and we have to pay that money back. Someone pays us money and we have to provide them a service. With liabilities we…
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