Learn about the golden rule of how accountants keep track of assets, liabilities, and equity.
- All of accounting is governed by the golden rule,…the accounting equation.…Simple name, simple equation, lots of implications.…You'll generally see it written as…assets equals liability plus owners' equity.…It can also be re-arranged to say that…owners' equity equals assets minus liabilities.…It's fairly common to see it both ways.…You know that assets are resources,…such as cash, inventory, and equipment.…
They're things that will produce benefits in the future.…Liabilities are obligations that need to be paid,…such as loans and accounts payable.…These are generally accrued…because a business needs to raise money…to buy assets or pay employees.…The owners' equity portion of the equation…accounts for capital contributed by owner's…and also retained earnings.…Let me give you an example of how this works.…I can pull the balance sheet for LinkedIn on Google.…In Q3 of 2016,…LinkedIn showed total assets of 7.56 billion.…
The company also showed total liabilities of 2.68 billion.…So you can assume that the equity is around 4.88 billion.…
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- Explain the four different types of financial statements.
- Distinguish between the types of moving averages.
- Determine a seasonal adjusted trend.
- Break down pro-forma financial statements.
- Identify cash flows, and what increased liabilities and decreased earnings generally indicate.
- Tell what a regression is.
- Outline the naive approach.