Oh, that’s probably why its easy for us to find our past transactions from bookkeeping! Oh, income statement right…
Bookkeeping is records from all your business transactions.However, don’t worry since we have computers, we have accounting software that records and helps track financial information.
Yeah! Please if don’t mind. Ok what are assets and liabilities?
Well I could help you my dad used to be an accountant for a big company and I use to help once a while.
Liabilities are things you may owe and legal financial debts. For example, loans, account payable, mortgages.
Wow. You are lost. Well assets are things you own and share some sort of value. For example, your building, office supplies and equipment.
Oh, that makes sense. But what is owner equity mean?
Oh I think I get this now. But my boss said he wanted financial statements? What are those?
Owner equity is the difference between the value of assets and the value of liabilities. Meaning if you own a car and it is $25,000 however, there is a $5,000 loan against that car the car now represents $20,000 of equity.
Since now you understand assets, liabilities and owner equity your going to prepare a balance sheet for your boss. Balance sheets summarizes and organizes your assets liabilities and owner's equity.