Accounting can be much easier when you know some basic rules and tips. This accounting tutorial and tips will help you get started with learning accounting or just brushing up on your accounting skills.
We also have a accounting course that offers you a more detailed explaination and allows you to get a professional designation to back up your new accounting skills.
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If you want to start a accounting business it is not goint to be a breeze without help! You may have pictured doing just what you had been doing as an employee, but with no boss and for more money.
However, if you have been in business for any time, you now realize that it can be a great life, but it requires a lot more hats, including that of an accountant. Did you ever get a Basic Accounting Tutorial? Most of us probably should have.
Over 500 years ago, but still applicable today, a man by the name of Fra Luca Pacioli wrote that three things are needed to be successful in business. In this accounting tutorial we would like to discuss them:
1.You've got to have sufficient cash
2.You must be comfortable with the numbers side of business
3.You need to have a system of organizing your financial information. Today, we call this accounting.
The need for accounting isn't anything new. In fact, as competition has increased, it's even more important today than it was back then.
So what do you need to do to ensure it's working for you? You first need to understand what all those accounting terms mean and how they fit together. For that reason, you can find a complete list of accounting glossary terms here. As you understand the different terms, you'll be much more able to see their relevance to you, and talk to the bankers with greater confidence.
Secondly, you need to see how accounting fits into your daily business life. Simply put, every transaction you make in your business will result in an entry to your company books. This includes checks, deposits, sales invoices, purchase orders, and cash receipts. Individually each of these transactions may be unimportant, but when you systematically organize them, you get a picture of your business.
Metaphorically, we can compare your accounting system to that of a puzzle. Each individual piece is likely undecipherable and unimportant. But, when placed in it's proper location and connected with the other information, it gives you a bigger picture that is of value.
You need to also understand that there are two rules that we don't break in double-entry accounting. One is "Debits" always equal "Credits". For every transaction there will be at least two entries into the books (hence "double-entry" accounting): one for a debit, the other for a credit.
The other rule is called the "Accounting Equation". It states that Assets equal Liabilities plus Capital. Frankly this is just another way of stating rule one, since Assets are Debit balance accounts and both Liabilities and Capital are Credit balance accounts.
The accounting system is divided into "Categories", and each category is divided into "Accounts". There are two types of categories: Balance Sheet, and Profit and Loss.
A Debit entry will be an increase to some accounts while decreasing other accounts. Conversely, a Credit entry will also increase or decrease accounts. Here's a simple chart.
Balance Sheet Accounts
•Assets (Debits increase, Credits decrease)
•Liabilities (Credits increase, Debits decrease)
•Capital (Credits increase, Debits decrease)
Profit and Loss Classifications
•Sales (Credits increase, Debits decrease)
•Cost of Goods Sold (Debits increase, Credits decrease)
•Expenses (Debits increase, Credits decrease)
In assigning debits and credits, I like to consider what you got from the transaction, and where it came from.
Let's look at a couple of examples:
Imagine that you perform accounting services and that you charge a client $500 for doing his monthly books. You "got" cash, and it came from a sell of a service. Your entry would be to Debit an Asset account (probably the Bank Account), and Credit Sales. This would be an increase to both accounts.
Here's another example: You purchase office supplies for your accounting service. You "got" office supplies, and it came from your Bank Account. In this case you will decrease, or Credit your Asset account (again, probably the Bank Account), and Debit your Expenses (probably Office Supply Expense account).
Obviously to expect that you are an accountant now, even after reading through the Glossary, and this simple example of the fundamentals would be foolish. But, through considering these important rules, you become ready to understand more about the accounting model.
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