Financial statements are the final product of the accounting process. They provide information on the financial condition of a company. The balance sheet, one type of finance statement, provides a summary of what a company owns and what it owes on one particular day.
Asset represent everything of value that is owned by a business, such as property, equipment, and accounts recievable. On the other hand, liabilities are the debts that a company owes-for example, to suppliers and banks. If liabilities are subtracted from assets (assets-liabilities), the amount remaining is the owners' share of a business. This is known as owners' or stockholders' equity.
One key to understanding the accounting transactions of a business is to understand the relationship of its assets, liabilities, and owners' equity. This is often represented by the fundamental accounting equation: assets equal liabilities plus owners' equity.
ASSETS = LIABILITIES + Owners' EQUITY
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