Current liabilities are those that will need to be paid off within 12 months or less. The most common example of a current liability is Accounts Payable. Notes Payable that are paid off over a period of time are split up on the balance sheet so that the next 12 months’ payments are shown as a current liability, while the remainder of the note is

In other words, owners’ equity (the part that often confuses people) is just a plug figure. It’s simply the leftover amount after paying off the liabilities/debts.

Assets: All of the property owned by the company.

Liabilities: All of the debts that the company currently has outstanding to lenders.

CHAPTER TWO The Balance Sheet

My Asset is Your Liability

Owners’ Equity (a.k.a. Shareholders’ Equity): The company’s ownership interest in its assets, after all debts have been repaid.

The accounting equation states that at all times, and without exceptions, the following will be true: Assets = Liabilities + Owners’ Equity

Assets = Liabilities + Owners’ Equity, …it might be easier to think of it this way: Assets – Liabilities = Owners’ Equity