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assets, like land and buildings and equipment, which are not converted to cash, but used in the generation of cash.

Liabilities are what you owe people accounts payable is what you bought "on account" with the expectation you would pay for them rather quickly (usually within 30 days) and debt, money you borrowed to buy things like buildings and equipment. With any luck, the assets of a business exceed the liabilities and the owners have positive equity in the business.

In the old-style presentation, assets were presented on the left side of the page and liabilities and equity were on the right side of the page and the books were considered to be "in balance" if the sum of all assets equaled the sum of all liabilities and equity, kind of like a scale. Nowadays, with the really good bookkeeping systems, it is all-but-impossible for the formula to not work because they will not let the Debits and Credits be entered unless they balance.

Speaking of Debits (abbreviated by the CPA as Dr.) and Credits (Cr.), they do not mean plus or minus, they mean left (Debit) and right (credit), which corresponds to two sides of the balance sheet. This fact alone would have made my life a lot more bearable during my first accounting class perhaps the instructor said it, but I missed it and it took until after Thanksgiving for me to finally get it.

A few simple entries:

When you start the business, you generally open a checking account. The accounting entry is to Dr. Cash and Cr Equity for the cash put into the company. This causes some confusion with people because when you make a deposit into the bank, you use a deposit or "credit" advice, just the opposite of what you do in your books. This is because when you put the money into the bank, the bank now owes you the money it represents a liability of the bank. They Dr. Cash and CR. Liability to depositor. Then they lend your money to someone else. (dr. Notes receivable, cr. Cash).

When you buy inventory, you write a check (forget about buying "on account" for now), which reduces cash- the entry is Dr. inventory and Cr. Cash.

When you sell the product, you have two entries to make: Dr. Cost of sales and CR. Inventory for the cost of the product you just sold and Dr. Cash (assuming you did not sell it "on account") and Cr. Revenues.

This brings us to the income statement. The top line is usually something like "revenues" or "sales", which we have seen from the sample entries, is the result of the sale of product. The next line is typically

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