All accounting transactions need to be recorded in systematic recordkeeping system. This recordkeeping system has 5 basic categories in which these transactions are recorded. The 5 categories come from the 2 financial reports, the Income Statement and Balance Sheet, which we prepare at the end of the accounting periods.
THE BALANCE SHEET
Company A
December 31, (Year)
Assets = Liabilities + Owner's Equity (Net Worth)
1st Category - Assets
2nd Category - Liabilities
3rd Category - Owners' Equity (Net Worth)
THE INCOME STATEMENT
For the Month Ended December 31, (Year)
4th Category - Revenue
5th Category - Expenses
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