Liabilities and Equity

Learn about the second half of the balance sheet—liabilities and equity—and how these accounts are used to finance a company's assets.

Course Progress

Course Description

In the seventh lesson of our "Accounting 101" series, “Liabilities and Equity,” you will examine liabilities and equity, completing your understanding of the balance sheet through the fundamental accounting equation: Assets = Liabilities + Equity. This equation highlights that a company's assets must be financed by an equal amount of liabilities and equity. You will explore liability financing, which involves borrowing money with interest, and equity financing, where investors provide funds in exchange for ownership and future earnings. The course will also cover the differences between these financing types, including their implications for taxes, risk, and costs.

By the end of this course, you will able to answer questions such as:

• What does a company’s balance sheet reveal about its business?
• What are the most common types of assets and how are they accounted for?
• How does depreciation work?

Introduction to Liabilities

Examples of Common Liabilities

Notes Payable

Interest Calculation

Accounts Payable

Unearned Revenues

Introduction to Equity

Cost of Capital

Retained Earnings and Dividends

Priority in Liquidation

The Balance Sheet Equation

Course Review

Course Quiz

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