Accounting Concepts

Accounting Concepts

Accounting is the language of business. Through a systematic series of steps known as accounting cycle, it gathers information about business transactions and generates reports about the entity.

This section offers free online tutorials of accounting basics.This course aims to build and solidify one's knowledge of the fundamentals which are vital in pursuing higher accounting studies, in building a career in accounting, or in managing a small business; a primer for beginners and a refresher for those who already have an accounting background.

Chapter 1: Introduction to Accounting

This chapter provides a fresh look into accounting. We will define accounting and break the definition down into simple points; learn about the role of accounting in the financial world, its branches, areas of accounting practice, and the types and forms of business.

1. What is Accounting? Its Definition and Meaning
2. Purpose of Accounting – Why It is Important
3. Users of Financial Statements / Accounting Information
4. Types of Accounting (Branches / Fields of Specialization)
5. Areas of Accounting Practice
6. Types of Business and Forms of Ownership
7. Summary of Topics Covered
8. Quiz and Answers

Chapter 2: Fundamental Accounting Concepts

This chapter covers the core concepts in accounting that you need to know before moving on to the more intricate topics. The concepts here will serve as the foundation upon which your accounting knowledge will build upon.

1. Basic Accounting Principles
2. Elements of Accounting: Assets, Liabilities and Capital
3. The Accounting Equation and How It Stays in Balance
4. Accounting Equation: More Examples and Illustration
5. Expanded Accounting Equation: The Spread-Out Version
6. The Double Entry Accounting System
7. Accounting Cycle: 9-Step Accounting Process
8. Summary of Topics Covered
9. Quiz and Answers

Chapter 3: The Financial Statements

The preparation of the financial statements is the seventh step in the 9-step accounting cycle. However, we decided to present this first before getting into the whole process for you to have a picture of what we are trying to produce in an accounting system.

1. Introduction to Financial Statements: An Overview
2. Income Statement a.k.a. Profit and Loss Statement
3. Statement of Changes in Owner's Equity
4. Balance Sheet: Statement of Financial Position
5. Statement of Cash Flows

Chapter 4: Analyzing, Recording, and Classifying

This chapter deals with the first 4 steps of the 9-step accounting cycle. The first four steps actually represent the analyzing, recording, and classifying phases of accounting.

1. Understanding and Analyzing Business Transactions
2. Rules of Debit and Credit: Left versus Right
3. The Chart of Accounts: Explanation and Example
4. Journal Entries: Recording Business Transactions
5. More Journal Entry Examples
6. Posting to the Accounting Ledger
7. Trial Balance: Checking the Equality of Debits and Credits
8. Correcting Entries for Errors Discovered

Chapter 5: Adjusting Entries

Adjusting entries are made to update the accounts in the accounting system. Some accounts are not up-to-date hence requiring adjustments to get them to their correct balances. Adjusting entries are made for accrual of income, accrual of expense, deferrals, prepayments, depreciation, and allowances.

1. Introduction to Adjusting Journal Entries
2. Adjusting Entry for Accrued Income
3. Adjusting Entry for Accrued Expense
4. Adjusting Entry for Unearned Income
5. Adjusting Entry for Prepaid Expense
6. Depreciation Expense
7. Bad Debts Expense
8. Adjusted Trial Balance

Chapter 6: How to Prepare Financial Statements

Most businesses today have automated accounting systems. Financial statements can be prepared with a few clicks of a button. However, as accountants, we need to know how to prepare them manually and make it a part of our system. We will also be able to interpret and analyze financial statements better.

1. How to Prepare an Income Statement
2. How to Prepare a Statement of Owners Equity
3. How to Make a Balance Sheet

Chapter 7: Closing Entries

Closing journal entries are made at year-end to prepare temporary or nominal accounts for the next accounting period. The amounts of nominal accounts in one period should be closed or brought to zero so that they won't be mixed with those of the next period.

Chapter 8: Post-Closing Trial Balance

The last step in the accounting cycle is to prepare a post-closing trial balance. A post-closing trial balance is prepared after closing entries are made and posted to the ledger. It is the third trial balance in the accounting cycle.

Chapter 9: Reversing Entries

Preparing reversing entries is an optional step in the accounting cycle. Reversing entries are made at the beginning of the new accounting period to enable a smoother accounting process.