Accounting Questions and Answers

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The purpose of the profit and loss account is to: Show whether a business has made a PROFIT or LOSS over a financial year. It describe how the profit or loss arose – e.g. categorizing costs between “cost of sales” and operating costs.

A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.

The net working capital formula is calculated by subtracting the current liabilities from the current assets. Here is what the basic equation looks like. Typical current assets that are included in the networking capital calculation are cash, accounts receivable, inventory, and short-term investments. current assets - current liabilities = working capital

Examples of Real Accounts. The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.)  Stockholders' equity accounts (common stock, retained earnings, etc.)