COOL ACCOUNTING

ASSETS are items owned by an individual or business. But, they are more than this. To be classified as a business asset an item must:

  1. Be of future economic benefit to the business
  2. Be under the present control of the business
  3. Arise from a past transaction

LIABILITIES are amounts owed by an individual or business. For an item to be classified as a business liability:

  1. There must be a present obligation to pay money or provide goods or services in the future
  2. This obligation must arise from a past transaction

OWNERS EQUITY is the net worth of a business, it is also known as capital. The owners equity of a business equals the assets less the liabilities.

Examples

ASSETS LIABILITIES OWNERS EQUITY
Bank Mortgage Owners Equity
Motor vehicles Accounts Payable

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