Senior Auditor Test Preparation FPSC

ledger

A "book" containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account balances for the general ledger account Accounts Receivable.

balance sheet

a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.

Accounting Equation Formula

$Assets$=(Liabilities+Owner’s Equity)

Assets

Assets include cash and cash equivalents or liquid assets, which may include Treasury bills and certificates of deposit. Accounts receivables are the amount of money owed to the company by its customers for the sale of its product and service. Inventory is also considered an asset.

Liabilities

Liabilities are what a company typically owes or needs to pay to keep the company running. Debt including long-term debt are liabilities as well as rent, taxes, utilities, salaries, and wages as well as dividends payable.

Shareholders' Equity

Shareholders' equity is a company's total assets minus its total liabilities. Shareholders' equity represents the amount of money that would be returned to shareholders if all of the assets were liquidated and all of the company's debt was paid off.