Introductory Terms for Accounting

Intro to Accounting Terms

• On Friday, we discussed three introductory terms for accounting1. Asset2. Liability3. Equity (Net Worth)

ASSETS

• Assets – Anything tangible or intangible that is capable of

being owned or controlled to produce value and that is held to have positive economic value is considered an asset.

– Examples of something a business would own that would help it make money?

LIABILITIES

• Liability– an obligation of a business arising from past

transactions or events, the settlement of which may result in the transfer or use of assets (often cash), provision of services or other economic benefits in the future.

– Examples?

EQUITY

• The amount of money that a business is worth once a company has paid off all of its liabilities

• In other words

Equity = Assets – Liabilities

This is known as the accounting equation

The Accounting Equation

Bart’s Yard Sale

Net Worth Activity Sheet