A simple guide to better understand accounting!

Financial reports can sometimes be a difficult swamp to swim through, here are some simple tips to help you understand basic accounting terms

 

Balance Sheet

This basic form gives a glimpse of the company’s assets, or what it owns, and what it owes, such as liabilities and equity.

 

Asset

An asset is anything a company owns.  Cash, buildings, equipment, cars, they all count as an asset.  If your company bought a car and that car contributes to running your business, then it is an asset.

 

Liabilities

Are you hiding the electric bill under your mattress, hoping it will go away?  No matter where you’ve stashed it, it’s a liability: loans, bonds, other unpaid bills –  they’re all considered a liability.

Equity

Equity is a fancy synonym for “worth.”  To determine a company’s equity, one must add the value of your assets, subtract the liabilities, and you have your company’s equity.  If you have more assets than liabilities, then you’re doing pretty good.

Income Statement

The income statement says a bit more about what’s coming in, versus what’s going out during a specific period of time.  Subtract costs of goods sold and the expenses from your revenue, and you’ll get a bottom line.  Basically, it tells you if you’re making money or losing it.

Need some help?

If you’re still unsure with any of these terms or other accounting buzzwords you’ve heard around our Bangkok accounting company office, get in touch with B-Accounting today, we’re happy to help with all your accounting needs. Call us on +66 (0)2 234 4889 (available in both Thai and English).