A typical set of accounts and what they mean
Assets
Cash in the bank or invested? Cash & Equivalents
Who owes you money? Accounts Receivables
Have you paid an advance bill covering future months? Prepaid
What products do you have to be sold in the future? Inventory
What is the value of your property and equipment? Fixed Assets
Total Assets – resources of your organization to pave the way to profitability
Liabilities
What do you owe vendors or on credit cards? Accounts Payable
Are there payables that you have not been billed for? Accrued Expenses
Do you owe wages or benefits (Incl PTO) to staff? Payroll liabilities
Do you owe taxes to government entities? Taxes Payable
Have you borrowed money or financed equipment? Loans, Notes Payable
Total Liabilities: Can be considered the share of the organization that is owed to those outside your organization
Capital
Assuming your assets are greater than your liabilities, the net amount is the positive investment in your business. This is the amount of the organization that you actually own.
Once the balance sheet accounts are all in order, we can trust the revenue and expenses that have been recorded.
Income Statement
Revenue What has the world paid you / promised you for the work you do?
Costs What did it cost you to complete the work you sold
Expenses What did it cost for you to keep your organization running?
Net Profit or Loss Did your organization make or lose money?