Accounting 101: How To Interpret Your Networth?

How To Interpret Your Networth?

One of the important things to remember in Accounting 101 is that we know how to read or interpret what the numbers are telling us.

Typically, it is a G-O-O-D sign when…

Our Networth are bigger than our Liabilities.

It spells D-A-N-G-E-R when…

Our Liabilities are bigger than our Networth.

How Is Your Networth Look Like?

Accounting 101: What Is A Networth?

What Is A Networth?

Capital, in accounting is referred to as “Networth.” It is what is left when we deduct the Liabilities from our Assets.


In Accounting, the formula of a Balance Sheet is this:

Assets = Liabilities + Capital (or Networth)

Acoounting 101: What Is A Capital?

What Is A Capital?

Capital, in accounting is referred to as “Networth.” It is what is left when we deduct the Liabilities from our Assets.

Accounting 101: What Is A Liability?

What Is A Liability?

Liabilities are those putting away the money or value from your container, basket or pocket.

Accounting 101: What Is An Asset?

What Is An Asset?

Assets are those putting money or value in your container, basket or pocket.

Accounting 101: CashFlow Statement

What is a Cash Flow Statement?

It is a financial statement where we see the flow or story of our cash or money. This tells our Cash Flow In and Cash Flow Out.

The Cash Flow In is the cash or money we receive.

The Cash Flow Out is the cash or money we disburse.

The formula of the Cash Flow Statement is this…

Cash Flow IN – Cash Flow OUT = Net Cash Flow

Accounting 101: Income Statement

What is an Income Statement?

It is the financial statement which expresses your operations or activities in financial terms for a given period. It is also called as Profit and Loss Statement or simply, PnL.

The elements of an Income Statement are Revenue or Gross Income, Costs or Expenses and Net Income or Net Profit.

The Sales, Rentals we earn or Professional Fees paid by our clients is the so-called Revenue or Gross Income.

The Costs or Expenses are those we expended or the spendings.

The Net Income or Net Profit is what remained when we subtract the Costs or Expenses from the Revenue or Gross Income.

The formula of an Income Statement is as follows:

Revenue – Expenses = Net Income

Accounting 101: Balance Sheet

What is a Balance Sheet?

In layman’s term, Balance Sheet is the financial statement that shows your Networth (Ari-Arian) as of a certain period of time.

The elements of the Balance Sheet are Assets, Liabilities and Capital or Networth.

Assets are those putting money or value in your container, basket or pocket.

Liabilities are those putting away the money or value from your container, basket or pocket.

Capital, in accounting is referred to as “Networth.” It is what is left when we deduct the Liabilities from our Assets.

In Accounting, the formula of a Balance Sheet is this:

Assets = Liabilities + Capital (or Networth)

Accounting 101: Financial Statements

The basic Financial Statements that everyone should know or be aware of are the following:

• Balance Sheet
• Income Statement or the Profit and Loss Statement
• Cash Flow Statement

Above statements are discuss separately, see the following posts

• Accounting 101 - Balance Sheet
• Accounting 101 - Income Statement
• Accounting 101 - Cash Flow Statement

Accounting 101: Basics - The least we need to know

It is important that non-accounting people must learn at least the basics of accounting.

We do not have to know how to journalize a transaction (if you do not understand, please don’t mind. Anyway, it is the initial phase of accounting cycle).

The least we need to know are the basic Financial Statements (FS), namely, the Balance Sheet, the Income Statement and the Cash Flow Statement.