Assets, liabilities, capital, income and expenses
1 min read
Updated 03 Oct 2026
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AI summary
The five building blocks of every set of accounts, with examples.
2 sections
The five elements
| Element | Meaning | Examples |
|---|---|---|
| Assets | What the business owns or is owed | Cash, bank, stock, debtors, machinery, GST input credit |
| Liabilities | What the business owes to outsiders | Creditors, loans, GST payable, outstanding salary |
| Capital (equity) | What the business owes to its owners | Owner's capital, retained profit |
| Income | Earnings that increase capital | Sales, interest received, commission received |
| Expenses | Costs that reduce capital | Purchases, rent, salary, electricity, depreciation |
How they connect
Income − Expenses = Profit. Profit is added to capital. Assets always equal liabilities plus capital.
Tip: GST you pay on purchases (input credit) is an asset until used; GST you collect on sales (output tax) is a liability until paid.
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