Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof. The basic accounting equation is assets = liabilities + stockholders' equity. This is the balance sheet. The foundation for the balance sheet begins with the income statement, which is revenues - expenses = net income or net loss. This is followed by the retained earnings statement, which is beginning retained earnings + net income - dividends = ending retained earnings or beginning retained earnings - net loss - dividends = ending retained earnings. The current ratio is current assets divided by current liabilities. The debt to total assets ratio is total assets divided by total liabilities.
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