2. Assets on the Balance Sheet
Current Assets are “used up”, “expended” or converted into cash within 12 months
Some expenses are Prepaid in advance. These become an ASSET

3. Assets on the Balance Sheet
Non-current Assets are “used up” or “expended” in a period longer than 12 months
Non-current Assets do not have a category title, they are just listed after Current Assets

4. Liabilities on the Balance Sheet
Current Liabilities are “discharged” or “paid off” within 12 months.

5. Owners’ Equity on the Balance Sheet
Owners’ Equity is the difference between Assets and Liabilities.
The value remaining in the company for the owners.
Not a pool of cash
Revenues increase Owners’ Equity; Expenses decrease it.
Invested Capital = Voluntary investment of funds
Retained Earnings = residual value from profit-seeking activities
Retained Earnings help the business to grow

7. Double-entry Bookkeeping
Newton’ Third Law of Motion
For every action there is an equal and opposite reaction
Accounting rules
For every Debit there is an equal and opposite Credit recorded in the accounting records

8. Double-entry Bookkeeping
Double-entry bookkeeping is the accepted accounting mechanism for recording and classifying the monetary events of a business entity
The T-account format:
For every monetary event there is at least one entry on the debit side of at least one account and the credit side of another account.
Title and Account #
+ Debit side
+ Credit side

9. Double-entry Bookkeeping
A = L + OE
Asset + - =
Liabilities
Owners’ Equity
Account Type
+ Debit Effect
+ Credit Effect
Assets
Increase
Decrease
Liabilities
Owners’ Equity

10. The Journal

11. Chart of Accounts

12. The Ledger

13. The Cycle at Work