Glossary · 3 terms

Accounting, in plain English

Plain-English definitions of the accounting, bookkeeping, and finance terms that matter for your business.

A

Accounting EquationThe accounting equation is a fundamental principle in accounting that forms the basis for financial statements. It establishes a relationship between a company's assets, liabilities, and equity. Essentially, it states that a company's total assets must always equal its total liabilities plus its total equity.Accounting for Income TaxesIncome taxes are levies imposed by governments on individuals and businesses based on their taxable income. These taxes form a significant portion of government revenue. Accounting for income taxes involves the proper recognition and measurement of these taxes in financial statements.

B

Balance SheetThe balance sheet is a financial statement that shows what a company owns, what it owes, and what belongs to its owners at a specific point in time. It gives a snapshot of financial position rather than performance over a period, which is what the income statement does.

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