Obviously, internal management also uses the financial position statement to track and improve

operations over time.

 Financial statements reveal information about a company, including its net profit or the
revenue remaining after paying all expenses.
 Sales and revenue growth are critical to a company's financial performance and determining if
sales have increased or decreased.
Assets can be grouped into two major classes: tangible assets and intangible assets.
Tangible assets contain various subclasses, including current assets and fixed assets
Current assets /non-fixed assets include cash, inventory, accounts receivable,
Current assets are cash and others that are expected to be converted to cash or consumed either in a
year or in the operating cycle (whichever is longer), without disturbing the normal operations of a
business. These assets are continually turned over in the course of a business during normal business
activity. There are 5 major items included into current assets:
1. Cash and cash equivalents – it is the most liquid asset, which
includes currency, deposit accounts, and negotiable instruments (e.g., money orders,
cheque, bank drafts).
2. Short-term investments – include securities bought and held for sale in the near
future to generate income on short-term price differences (trading securities)
3. Receivables – usually reported as net of allowance for non-collectable accounts.
4. Inventory – trading these assets is a normal business of a company. The inventory
value reported on the balance sheet is usually the historical cost or fair market value,
whichever is lower. This is known as the "lower of cost or market" rule.
5. Prepaid expenses – these are expenses paid in cash and recorded as assets before
they are used or consumed (common examples are insurance or office supplies). 
while non-current/fixed assets include land, buildings and equipment
Also referred to as PP&E (property, plant and equipment), these are purchased for continued and
long-term use to earn profit in a business. This group
includes land, buildings, machinery, furniture, tools, IT equipment (e.g., laptops), and certain wasting
resources (e.g., timberland and minerals). They are written off against profits over their anticipated life
by charging depreciation expenses (with exception of land assets). Accumulated depreciation is shown
in the face of the balance sheet or in the notes.

Intangible assets lack physical substance and usually are very hard to evaluate. They
include patents, copyrights, franchises & licenses, goodwill, trademarks, trade names, etc. These assets
are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.
Websites are treated differently in different countries and may fall under either tangible or intangible
assets.
A debit is an accounting entry that12345:
 Increases assets (what your business owns)
 Decreases liabilities (how much your business owes)
 Increases the balance of an asset, expense or loss account
 Decreases the balance of a liability, equity, revenue or gain account
 Is recorded on the left side of an accounting journal entry

A debit is an accounting entry that results in either an increase in assets or a decrease in liabilities
on a company’s balance sheet. In fundamental accounting, debits are balanced by credits, which
operate in the exact opposite direction.
Debits increase asset or expense accounts and decrease liability, revenue or equity accounts. Credits do
the reverse. When recording a transaction, every debit entry must have a corresponding credit entry for
the same dollar amount, or vice-versa.

Asset Accounts
Assets are items that provide future economic benefits to a company, such as cash, accounts receivable,
inventory, and equipment.
Liability Accounts 
Liabilities are obligations that the company is required to pay, such as accounts payable, loans payable,
and payroll taxes. 
Equity Accounts
In accounting, owner’s equity (or shareholders’ equity) represents the money or property that could be
returned to owners (or shareholders) if all of the company’s assets were liquidated and all of its debts
were paid off. 
Revenue Accounts
Revenue accounts are accounts related to income earned from the sale of products and services. 
Expense Accounts
Expenses are the costs of operations that a business incurs to generate revenues. Examples include
advertising, rent, and wages.
debit is an accounting entry that either increases an asset or expense account, or decreases a
liability or equity account. It is positioned to the left in an accounting entry.
 Sale for cash: Debit the cash account | Credit the revenue account
 Sale on credit: Debit the accounts receivable account | Credit the revenue account
 Receive cash in payment of an account receivable: Debit the cash account | Credit the
accounts receivable account
 Purchase supplies from supplier for cash: Debit the supplies expense account | Credit the
cash account
 Purchase supplies from supplier on credit: Debit the supplies expense account | Credit
the accounts payable account
 Purchase inventory from supplier for cash: Debit the inventory account | Credit the cash
account
 Purchase inventory from supplier on credit: Debit the inventory account | Credit the
accounts payable account
 Pay employees: Debit the wages expense and payroll tax accounts | Credit the cash
account
 Take out a loan: Debit cash account | Credit loans payable account
 Repay a loan: Debit loans payable account | Credit cash account

Credits
A credit is an accounting entry that either increases a liability or equity account, or decreases an
asset or expense account. It is positioned to the right in an accounting entry.