2 ms·
I think the rules may differ in Europe (the way things are classified) Nope. Sales is NOT a liability, and there is no accounting fiction. Sales are also not a
by drindox 16y ago
I think the rules may differ in Europe (the way things are classified)
Nope. Sales is NOT a liability, and there is no accounting fiction. Sales are also not an asset. They are an income. The money earned from the sale is the asset. I think you may be confusing ledger credits with liabilities.
All credits are not increases in liabilities, but all increases in liabilities are credits.
Good background on Wikipedia:
[ http://en.wikipedia.org/wiki/Debits_and_credits http://en.wikipedia.org/wiki/Debits_and_credits ]
[ http://en.wikipedia.org/wiki/Double-entry_accounting_system http://en.wikipedia.org/wiki/Double-entry_accounting_system ]
[ http://en.wikipedia.org/wiki/Accounting_equation http://en.wikipedia.org/wiki/Accounting_equation ]
- Vivtek 16y agoAh - finally I found the balance sheets I was thinking of (some Deutsche Bank stuff from 2009). Turns out I was misremembering; it was equity capital that falls under liabilities, which is counterintuitive to me. Capital is, after all, something I have - but I suppose since it's an investment, it represents something I owe. And I see capital is shown in the balance sheet in the original post as well - but what struck me as counterintuitive in the original post is representing sales as, effectively, a cash flow towards the customers. If not a fiction, surely you have to grant it's an abstraction.
- drindox 16y agoEquity is on the same side of the balance sheet as liabilities because of the accounting equation: Assets = Capital + Liabilities. See this tutorial as well: http://www.principlesofaccounting.com/chapter%201.htm http://www.principlesofaccounting.com/chapter%201.htm