kitz
Accounting Outline
Five Basic Accounts
1. Assets: things you own
2. Liabilities: things you owe
3. Equity: overall net worth
4. Income: increases value
5. Expenses: decreases valueThe Equation
Assets - Liabilities = Equity (aka Net Worth) Things you own minus things you owe equals your net worth. Consider all financial actions in the light of increasing your net worth.
Assets - Liabilities = Equity + (Income - Expenses)Assets
Cash/Checking
Some Mutual Funds
Other Mutual Funds/Stocks/Bonds
Retirement Savings
Car
House
Talent and goodwill
*Accounts Receivable*Capital Gains in here?
Liabilities
Accounts Payable
Debt
Taxes Net Worth
The guiding lightIncome
Salary
Bonus
Gifts
Interest & Dividends
OtherExpenses
Fixed:
Debt Service
Physical Plant / Utilities
Insurances Variable / Discretionary:
Food
Clothing
Hobbies
DonationsCapital Gains
Resellable assets, such as stocks, bonds, houses, or cars, can change value over time. Some assets could increase in value, some could decrease in value. Capital gains are the profits from selling an asset.