Basic Elements of Accounting

There are Five Basic Elements of Accounting and Financial Statements:

|Assets |Economic resources owned by the company which are expected to provide future |
| |benefits. Historically, assets have been accounted for at cost. However, current |
| |accounting guidance is moving towards more fair value asset valuation models. |
| | |
| |Examples: Cash, A/R, Inventory, Property, Plant and Equipment (PPE) |
|Liabilities |Obligations of the company requiring a future outlay of assets. Liabilities |
| |represent creditors’ claims against the assets of the company. |
| | |
| |Examples: A/P, Notes Payable, Mortgages Payable, Bonds Payable, Anything Payable |
|Owner Equity |The amount of capital invested by the owners of the company. |
| | |
| |Examples: Common Stock, Preferred Stock, Retained Earnings |
|Revenue |What is earned for goods and/or services provided by the company. Revenues are |
| |recorded with the goods and/or services are provided independent of the receipt of |
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