In this section, you’ll learn the basics of accounting—from the basic accounting equation to the different account types, and what debits and credits are. Trust me, it’s easier to grasp the basics than you might think!
If you’re new to accounting, you might think it’s a very confusing and complicated set of rules and numbers with a lot of jargon. For larger and complex businesses, it kind of is!
Lots (maybe most) websites and textbooks make accounting so much more complicated than it needs to be. Yes, at some point you will need to know about GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) etc.
Once you have some experience, those principles and standards can help to fill in the blanks. But for actually learning what accounting is and how to actually do accounting, the below articles will cover everything you need to know.
Below you’ll find lessons for all the most basic, basic, basic, fundamental things you need to know. Once you know these fundamentals you can put them into practice and learn by doing your own journal entries, preparing your own financial statements, and so on.
Learning these absolute basics of accounting, and learning them deeply, will give you such a good core knowledge that everything you learn afterwards will seem like a piece of cake.
I’ve listed these topics in order of how I think you need to learn them. I encourage you to go through each lesson (even if you think you know some of them). It never hurts to brush up on your basic accounting knowledge!
- Financial Accounting
- Basic Accounting Equation
- Expanded Accounting Equation
- Accounting Ledger Format
- Chart of Accounts
- Asset Accounts
- Liability Accounts
- Equity Accounts
- Contra Accounts
- Revenue Accounts
- Expense Accounts
- General Ledger
- Debits and Credits
- Double-Entry Bookkeeping
- Business Events
- General Journal
- Trial Balance
1. What is Accounting?
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions.
2. What is the purpose of accounting?
The purpose of accounting is to accumulate and report financial information about the performance, financial position, and cash flow of a business to interested users. The information is used to make informed business decisions about how to manage and grow the business.
3. What are the types of accounting?
There are seven primary types of accounting: financial accounting, management accounting, government/not-for-profit accounting, public accounting, forensic accounting, tax accounting, and internal auditing.
4. What are the basic accounting principles?
The basic accounting principles are the fundamental rules that govern financial accounting. They are based on the double-entry bookkeeping system, which ensures that all financial transactions are accounted for and balanced.
5. What are the different types of financial statements?
There are four primary financial statements: the balance sheet, the income statement, the cash flow statement, and the statements of shareholders' equity. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time. The income statement shows how much revenue a company has earned over a period of time and how many expenses it has incurred. The cash flow statement shows how much cash a company has generated and used over a period of time. The statements of shareholders' equity show the changes in a company's equity over a period of time.