Accounting includes a number of basic concepts in order to follow Generally Accepted Accounting Principles, also known as “GAAP.” In accounting you have 4 basic Financial Statements, which include the Income Statement, Balance Sheet, Statement of Capital and Statement of Cash Flows. Further, accounting requires an understanding of key terms that include, assets, liabilities, revenue, expenses and profit. We are glad to provide you with this information in our online accounting tutorial.
What are Assets?
Assets includes items such as buildings, cash on deposit, equipment, inventory, and land. These are considered tangible assets because they are items that can be touched (objects). Now assets that can’t be touched are considered intangible assets and include items
such as accounts receivable, bonds, brand names, contracts and copyrights.
What are Liabilities?
Liabilities are debts and can include items like a companies accounts payable, also known as A/P, accrued expenses, accrued interest, and notes payable. Accrued expenses includes money owed to a 3rd party but not paid for, such as a businesses wages payable. Notes payable could be loan on a company vehicle or piece of equipment.
What is the Income Statement?
The Income Statement reports the businesses profit level for a time period such as 12 months, 1 month, 15 weeks, etc. The Income Statement is made up of the following sections:
Revenues – Funds earned via sale of good and/or services.
Expenses – Include the Cost of Goods Sold, also known as COGS, and interest expenses.
What is the Balance Sheet?
Most Accountants refer to the Balance Sheet as a statement of the financial position for a company. Its shows the company’s position as the end of a certain date and a snapshot of the business in a point and time. For example, a Balance Sheet with the date of 12-31-16 displays the transactions through December 31st that have been recorded by the company.
Accounting can be easily broken down into small steps but it just takes time, as shown in this accounting tutorial. We recommend taking a look at some of the literature out there such as Accounting For Dummies.
Another option is simply downloading the free trial offer of QuickBooks, as it will teach you the basics of accounting completely free.