Accounting can be very complicated. But the basics are pretty easy to comprehend.

QUESTION.
I've heard of the following formula as it relates to accounting:

ASSETS = LIABILITIES + NET WORTH

Can you explain this formula to me? I'm trying to learn a little about accounting before I start a small business this summer.

ANSWER.
Assets are things you own. For example a computer, a car, a bank account, or goodwill (like a customer base). Liabilities are things you owe. For example, a debt, an IOU, a loan, or an unpaid judgment. And net worth (or equity) is the difference between the two. For example, you have $1000 in the bank, own an $800 computer, and you owe $500 on the computer. In this case you have a net worth of $1800 minus $500 equalling $1300.

You may get a little more information on this subject by visiting the following link. See LEARN ABOUT ACCOUNTING, BOOKKEEPING AND QUICKBOOKS.

I hope my comments are helpful to you. Good luck! Regards, -Jeff

Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com