Equity is the net worth of a company. This represents the difference between what you owe (liabilities) and what you have (assets). If you sold all your assets today, and if you paid off your liabilities with the money received from the sale of your assets, the money you would have left would be equity.
Your equity represents the health of your business since it is the amount of money left after all of your debts are satisfied.
Equity comes from two sources:
- Money invested in your company
- Profits or losses from your business
Of course, an owner can also take money out of the company. Such withdrawals, called owner’s draws, reduce the company equity.
The accounts payable account is one that QuickBooks will create automatically for you when you set up the program.
Account type
The record of the outstanding bills of a business. Accounts Payable is called A/P for short. (Even though the word accounts is plural, QuickBooks uses a single account on the chart of accounts to track all outstanding bills.)
Accounts Payable account
An account that QuickBooks automatically adds to your chart of accounts the first time you enter a bill. QuickBooks uses this account to track the money your business owes to others. When you enter a new bill, or pay off outstanding bills, QuickBooks records the transaction in the register for your Accounts Payable account.
Your chart of accounts lists the type of this account as “Accounts Payable.” If you need to use more than one of this type of account in your business, you can add additional “accounts payable” accounts to the chart. When you have more than one accounts payable account, QuickBooks lets you choose the account you want to use when you enter and pay bills.
