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To understand the basics of accounting, it is important to look at its three main components and the terminology related to these components.the basic components of accounting are companies must identify a clear approach to record-keeping,beforethey begin the accounting process.they have to det up some basic accounts in which to store information.accounts fall into following classifications assets refer to resources or items that company owns they have future economic value that can be measured and can be expressed in monetary terms.Common expenses include employee wages, payments to suppliers, equipement depreciation and factory leases .Recorded on the right side of company's balance sheet, liabilities include any payable amounts, loans, mortgages, earned premiums, deferred revenues and accrued expenses.Examples of a company's assets include investments,cash,inventory,accounts receivable, land, supplies, equipement, buildings and vehicles.
To understand the basics of accounting, it is important to look at its three main components and the terminology related to these components.the basic components of accounting are companies must identify a clear approach to record-keeping,beforethey begin the accounting process.they have to det up some basic accounts in which to store information.accounts fall into following classifications assets refer to resources or items that company owns they have future economic value that can be measured and can be expressed in monetary terms. Examples of a company’s assets include investments,cash,inventory,accounts receivable, land, supplies, equipement, buildings and vehicles.
Liabilities refer to the legal financial obligations or debts that companies incur during business operations. They can be limited or unlimited. They are settled over time through the transfer of economic benefits such as money, services or goods. Recorded on the right side of company’s balance sheet, liabilities include any payable amounts, loans, mortgages, earned premiums, deferred revenues and accrued expenses.
Equity also known as shareholder’s equity refer to the amount of money that a company must return to its shareholders after all of its assets are liquidated and all of its debt is paid off.equity is calculated by subtracting a company’s total assets to its total liabilities.
Expenses refer to the costs of operations that businesses incur to generate revenue. Common expenses include employee wages, payments to suppliers, equipement depreciation and factory leases .
Revenue refers to the income that a company generates from its normal business operations.it includes deductions and discounts for retuned products. Revenue is the gross income figure from which costs are subtracted to determine net income.
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