Stock and Flow Equations
Accounts track financial activities and summarises the financial state of the company.
Stock accounts describe financial states at a single point in time.
Flow accounts aggregate financial activities over the accounting period.
Updating Stocks
| Equations | |
|---|---|
| Accounts Receivable (new) | AR (old) + Credit Sales - Collection of Receivables |
| Inventory (new) | Inventory (old) + Credit Purchases - Cost of Goods Sold |
| PPE (new) | PPE (old) + Equipment Purchases - Depreciation |
| Accounts Payable (new) | AP (old) + Credit Purchases - Payment of Payables |
| Bank Loans (new) | Bank Loans (old) + New Loans - Loan Repayment |
| Mortgages (new) | Mortgages (old) + New Mortgage Loan - Principal Repayment |
| Mortgage Payment | Interest Expense + Principal Repayment |
| Cash (new) | Cash (old) + Cash Sales + Collection of Receivables - Payment of Payables - Equipment Purchases - Dividends + New Mortgage Loan + New Bank Loans - Loan Repayment - Mortgage Repayment |
| Owners Equity (new) | Owner's Equity (old) + Retained Earnings |
| Retained Earnings | Net Income - Dividends |
| Total Revenue | Credit Sales + Cash Sales |
| Total Expenses | Cost of Goods Sold + Depreciation + Interest Expense |
| Net Income | Total Revenue - Total Expenses |