Accounting can be termed as a means for measuring and recording the financial value of the assets and liabilities of a business. It also allows monitoring of these values as they change with the passage of time. (Ahmed Raihi-Belkaoui, 2004 p.10)
Business assets are those things that belong to the business that have a positive financial value and are used by the business for carrying out its normal activities. Examples of assets include land, buildings, machinery, vehicles, equipment, stocks,
Business liabilities are those things that belong to the business but contrasting to assets, have a negative financial value i.e. they require the payment of money by the business at some point in the future. Examples of liabilities include unpaid taxes, bills, wages, overdrawn bank accounts and creditor’s money e.t.c.
The equity of a business is the value of the assets less the value of the liabilities. So basically equity is the differential (usually monetary) value that would be left if all the assets were sold and used to pay off all the liabilities. (Ahmed Raihi-Belkaoui, 2004 p.11)
The equity along with assets and liabilities are financial dimensions that are time specific. The financial statement that presents this information is known as the balance sheet. Therefore the balance sheet is a statement of the assets, liabilities and equity of a business at a particular point of time. (Donald E. Kieso. 2006 p.38) ...