Pillars of Accounting are 5 explained below one by one:
1. Assets
Asset is any kind of resource that can add to growth of business. Any item become asset when you own It or the permission to use it. It could be tangible or intangible.
E.g., if you run a stitching unit then the machinery, the building and other furniture is your asset.
2. Revenue
Income coming from the sale of good or the service provided by the company are the revenues. It is the entire income coming from sales without removing any expenses.
E.g., if a company sale a vehicle at a rate of 1 lac. 1 lac would be the revenue.
3. Expenses
Money company spend to make the business going. The expenses are unavoidable but can be reduced by proper channelizing the needs.
E.g., Purchasing items so company can produce desired products or paying salary, fuel of vehicles or any company purchase are all expenses.
4. Liabilities
Liability is the obligation, or we can say anything that a company owes to others directly or in the form of loan.
E.g., Salaries of employees or the loan taken for some product purchase
5. Equity or Capital
Owner’s equity is the capital by the owner of the business to conduct his business activities. Owner’s equity includes all the ways through which the resources make the business function properly. Basic accounting formula is:
Owner’s equity = Assets – Liabilities
