Accounting Equation

The accounting equation is a rule or you can say formula to calculate the total asset of a company/entity. There are there accounting equations.

  • Assets = Liabilities + Owner’s Equity
  • Assets = Liabilities + Shareholder’s Equity (For Corporation )
  • Assets = Liabilities + Net assets (For Non-Profit Organizations like NGO)

The Balance sheet prepared using this rule. Double entry bookkeeping system formed on the basis of the accounting equation.

Accrued Liabilities

Accrued liabilities usually referred to those transactions which are incurred by an entity but yet not have been paid or receive an invoice.

There are two types of accrued liabilities i.e. short-term accrued liability and long-term accrued liability. Short term accrued liabilities are daily basis transactions which happen on a regular basis. Long-term accrued liabilities which happen very rarely but for a longer period of time.

Examples: Accrued wages, accrued pension liability, accrued interest on loan payable etc.

Balance Sheet

A balance sheet is an important financial statement prepared by a company at a specific date on a regular basis to showcase its financial situation.

The balance sheet includes cash-flow statement, income & expense statement, asset and liability details. In short, it shows all transaction details.

A balance sheet is the main point interest for a shareholder, company advisor, business partner etc.

The Balance sheet abides by the following rule:

Assets = Liability + Shareholder’s Equity

Financial Accounting

Financial accounting is the process of preparing financial reports for both internal and external use of a business. Financial report includes balance sheet, cash flow & income & expense, equity & liability statement.

This kind of report needs at the time of tax filing, company valuation etc.

Trial Balance

Trial balance is a way of bookkeeping to ensure all ledger inputs are correct. In trail balance all credit balances entry under credit balance head and debit inputs under ledger balance head. If credit and debit balance found to be identical then we could conclude that there is no error in accounting entries.

Trail balance prepared in a regular period to minimise accounting error. In companies point of view, it’s an important task needs to do regularly. It would help to prepare company’s financial statements with zero error.