Questions answered by tax and business professionals.

Owner's equity is the residual interest in a business after subtracting liabilities from assets. Contributions, profits, distributions, and losses can change it.

A liability is an obligation the business owes, such as a loan, unpaid bill, or accrued payroll. It is generally reported on the balance sheet.

An asset generally provides future economic benefit; an expense is a cost recognized in current operations. The accounting treatment depends on the facts and applicable rules.

Customers may pay slowly, inventory may tie up funds, or debt payments may come due before receipts arrive. Profit and available cash measure different things.

A cash flow statement explains cash moving into and out of operating, investing, and financing activities during a period.

A balance sheet reports assets, liabilities, and equity at a specific date. It is a snapshot of what the business owns and owes.