To help people undertand upcoming posts: An intro to accounting!
Accounting assumes an entity(firm, business, corporation, club etc) are made up of:
Balance sheet items:
Assets, Liabilities, Equity
Profit and loss items:
Revenue and Expenses.
The balance sheet is a snapshot, a photograph of a firms performance. It captures values for assets, liabilities and equity for one point in time. Assets are things you own, Liabilities things you owe and Equity is defined below.
The profit and loss is a video or movie of the firms performance. It captures changes in values of assets and liabilities over time which are known as revenues and expenses. The sum of the revenue and expenses is the profit (or loss if expenses are greater). Accumulated profits from successive accounting periods (financial year) are called Equity. Equity is a sum of profits at a point in time, and is hence recorded in the balance sheet.