Bookkeeping Basics – Understanding Assets, Liabilities & Equity

Prior you opt for taking up services for bookkeeping in Salisbury, MD, it is mandatory that you understand the basic accounts of the company – assets, liabilities, and equity.

Ø  Assets – These are the things that the firm owns like its inventory and accounts receivables.

Ø  Liabilities – These are the things that the firm owes like what they owe to its mortgages, business loans and banks, suppliers (accounts payable), and any additional debt on the books.

Ø  Equity – It is the ownership that the firm owner and any shareholders have in the company.

Balancing the Books

With the intention of balancing the books, you can rely on Affordable Bookkeeping services that can ensure careful tracking of such items and be certain the transactions that handle equity, liabilities, and assets are recorded appropriately and in the correct place. “Assets = Liabilities + Equity” is an equation for accounting, which is a promising formula that the experts count on to ensure the books always balance.

This equation signifies that every asset of the firm is balanced against claims against the firm (equity and liabilities). Liabilities are claimed depending on what you owe lenders and vendors. Company owners have claims against the remaining assets (equity).

Initial Bookkeeping Terms Associated With Accounting Equation

When you hire an expert for Tax Preparation Services in Salisbury MD, one will make you aware of equity, liabilities, and assets so you’ll have a thorough understanding of what comprises each one.

Ø  Liabilities – Both long-term and current liabilities are incorporated in the liability accounts on a balance sheet. Current liabilities are typically accruals and payable accounts. Accruals will be composed of taxes owed such as Medicare tax on the employees that are usually paid quarterly, and sales tax owed and federal, state, social security. Accounts payable are typically what the business owes to its bank loans, credit cards, and suppliers.

Ø  Assets – If you take a look at the format of a balance sheet, you’ll notice the equity, liability, and asset accounts. Asset accounts typically begin with the cash account and the marketable securities account. Then, inventory accounts receivable, and fixed assets like buildings, land, and equipment and plant are listed. These are substantial assets that you can really touch. Firms even have insubstantial assets like goodwill of customers.

Ø  Equity – The equity accounts consist of the entire claims the owners have against the firm. Evidently, the owner of the firm has an investment, and it may be the sole investment in the company. If the company has taken on additional investment, which is considered here also.

So, hiring a veteran for bookkeeping in Salisbury MD will help you understand the entire basics!