Assets+Liabilities= Equity

Date: Monday, September 29,2008
Time: 11 PM
Place: Kitchen

Assets: All the things a company owns in order to successfully run its business, such as cash, buildings, land, tools, equipment, vehicles, and furniture.

Liabilities: All the debts the company owes, such as bonds, loans, and unpaid bills.

Equity: All the money invested in the company by its owners. In a small business owned by one person or a group of people, the owner's equity is shown in a Capital account. In a larger business that's incorporated, owner's equity is shown in shares of stock. Another key Equity account is Retained Earnings, which tracks all company profits that have been reinvested in the company rather than paid out to the company's owners. Small unincorporated businesses track money paid out to owners in a Drawing account, whereas incorporated businesses dole out money to owners by paying dividends (a portion of the company's profits paid by share of common stock for the quarter or year).