3 Financial Areas to Balance: Assets, Liabilities, and Equity
Every business has three key financial parts that you, as the bookkeeper, must keep in balance: assets, liabilities, and equity. Following are the descriptions of these three terms:
Assets include everything the company owns, such as cash, inventory, buildings, equipment, and vehicles.
Liabilities include everything the company owes to others, such as vendor bills, credit card balances, and bank loans.
Equity includes the claims owners have on the assets based on their portion of ownership in the company.
The formula for keeping your books in balance involves these three elements:
Assets = Liabilities + Equity