Business Guidance and Knowledge for the Small Business Entrepreneur
A series of lessons introducing bookkeeping. Theses lessons cover the basic principles involved and the corresponding terminology used in bookkeeping. The series covers basic debit and credit entries and explains the dual entry system.
There really is no undergraduate degree program for bookkeeping. Nobody has a college diploma from an accredited institution for bookkeeping; accounting yes, bookkeeping no. There are some programs in community colleges. They teach basic accounting principles, dual entry, payroll and lightly touch on the chart of accounts.
There are multiple positive benefits of QuickBooks for the business and directly for the bookkeeper too. In addition many of the various issues covered in Lessons One through Twenty-Five are distinguishable in the features offered in QuickBooks.
In the previous 25 lessons I covered a lot of different terms and this lesson is merely a summary of the various terms a bookkeeper encounters.
Generally Accepted Accounting Principles (GAAP) advocates using the accrual basis of accounting over cash basis. The difference between the two methods is important to understand as a bookkeeper.
The accounting equation is a simple formula used frequently in business. The formula is: Assets = Liabilities plus Equity OR Equity = Assets minus Liabilities.
In accounting there are books (journals) and ledgers for source entry of information. A trial balance is used to monitor the types of accounts. With the use of parent-child accounts and control accounts bookkeepers can generate a wide array of reports. Unfortunately this still lacks the breath of supporting information needed. The profession uses schedules to augment the reports.
Control accounts are used when there are multiple third parties interacting with the business in regards to similar function. Control accounts reduce the workload for bookkeeping by using subsidiary accounts or schedules *. The aggregated value is reported as one line of value on the financial report.
The income statement presents information over a period of time. This time period is referred to as an accounting cycle. Most small businesses use a monthly cycle for regular reporting purposes and an annual cycle for reporting to outside creditors and the government.
The balance sheet serves as an historical report. It identifies the accumulated change in value since inception. The balance sheet is organized into two halves and both sides must be equal in value. In addition, the balance sheet is a snapshot of the financial condition at a single moment in time along the lifetime timeline of the company.
In accounting sometimes an extraordinary event occurs. When this happens the associated revenue and expense is recorded in the expense type of accounts. There are two different methods used to record this transaction – gross or net.
