The accounting equation, financial statements and ratios.
Financial accounting records and reports what a business owns, owes and earns. Everything rests on the accounting equation, Assets Liabilities Equity, and on double-entry bookkeeping, where every transaction affects at least two accounts so the equation always balances.
The course builds from journal entries to the three main statements. The income statement shows revenue and expenses over a period, the balance sheet shows the position at one date, and the cash flow statement explains how cash changed. Ratios such as gross margin and the current ratio turn those statements into comparisons between companies.
Accounting is the language of business. Managers, investors, lenders and small-business owners use these statements to judge profitability and risk, and anyone running a side business or reading a company report benefits from understanding them.
Recording transactions and reading financial statements. (College)
Every business transaction is recorded against one identity: Assets = Liabilities + Equity. Assets are what the business owns or controls, such as cash, inventory and equipment. Liabilities are what it owes to outsiders, such as loans and unpaid bills. Equity is the owners' claim on what is left.
Three statements summarise a company's finances. The income statement shows revenue minus expenses over a period, ending in net income. The balance sheet is a snapshot of assets, liabilities and equity at one moment. The cash flow statement tracks actual cash moving in and out from operating, investing and financing activities.
Long-lived assets such as machines, vehicles and computers wear out or become obsolete. Depreciation spreads an asset's cost over its useful life, so each year's income statement carries a fair share of the cost rather than all of it in the year of purchase. Land is not depreciated.