Assets, liabilities and capital, the accounting equation, and how transactions keep it in balance.
Accounting records, summarises and reports a business's financial transactions. It all rests on one equation.
Assets, liabilities and capital
- Assets: items the business owns (cash, inventory, premises, vehicles, money owed by customers — trade receivables).
- Liabilities: what the business owes (loans, money owed to suppliers — trade payables).
- Capital: what the owner has invested (the business owes this back to the owner).
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