This document provides definitions and examples of key financial accounting terms: - Assets are economic resources owned that have positive value, like inventory, property, and cash. Liabilities are obligations owed, like loans and payables. Owners' equity is the net worth left for shareholders after using assets to pay liabilities. - Revenue is income from normal business activities like sales, while expenses are money spent like salaries, rent and depreciation. Financial statements report on a company's income statement, statement of changes in equity, and statement of financial position.

1. FINANCIAL
ACCOUNTING
Introduction to financial
concepts.
Income statement,
Statement of Changes in
Equity, Statement of
Financial Position.
1

2. IMPORTANT DEFINITIONS
You need to know these definitions by heart!
2
Assets Liabilities
Reven
ue
Owners
equity
Expen
se

3. 3
Assets-is an economic resource. 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 assets trade receivable, inventory, property, plant and equipment, cash it self.

4. Liabilities – it is an obligation of a entity arising from past
transactions or events, its anything that the entity owes.
The word ‘payable’ gives you clarity.
Examples, Bank Loans, Mortgage payable, Accounts Payable,
4

5. Owners Equity – the piece left for shareholders, after paying all liabilities, using their
assets. The left over for the shareholders.
For example AA ltd ones a big transportation company. They have 25 share holders on
board who have invested certain amounts to help with the companies capital. AA ltd
made a profit of 50000 for the year ended 31 December 2015. after taking into
accounts all the liabilities, and expenses. The total profit was 35000.
Note!! The 3500 is what is left for the business to share for the shareholders .
Components of owners Equity
Retained Earnings, Preference shares * dividends
5

6. 6

7. Revenues- revenue is income that the entity receives for its normal business activities,
usually from sale of goods and services to customers.
For example, Game stores will receive cash for sale of goods and record that as
revenue.
The University will receive Tuition as revenue.
7

8. 8

9. Expenses- it an outflow of money fro from person or company to another person or
company. Cost associated with doing business.
For example, Rent expenses, salaries expense, depreciation, utilities expense.
To be continued financial statements format…
9