Where can I learn to understand the concept of Accounting?
by John Burleson
I'm a student in an online Accounting class and completely underwater from the start. I know accounting is a logical process (I am logical) but I can't grasp the logic. So after a long online search for truth, I discovered your website which is closest to what I'm looking for. I've been a small businessman and did my own form of accounting which gave me a clear understanding of where I stood (money in plus money owed vs money out). But this is different. Help!! I need to understand what the order of entries is when I get a buck in my hand or when I let a buck go. Is it journal. ledger, spreadsheet, trial balance, financial statements, commitment papers? My Warren/Reeve/Duchac book doesn't address this issue anywhere.
I'm glad you found my site! I'm not sure if you're looking to become an accountant, or just be able to keep your own books, but I can hopefully help you out either way.
Are they teaching you the "Cycle of Accounting"?
Here it is:
You have a business transaction (a sale, a purchase, etc.) which you enter into a Journal. At the end of each month, the Journals are totalled and posted into your General Ledger. The General Ledger is then used to prepare your Financial Statements.
Now, let me give you a few definitions.
A Journal is an excel spreadsheet or a piece of 13-column accounting paper that you enter your business transactions into - for example a Cash Receipts Journal, Cash Disbursements Journal, Sales Journal, Payroll Journal, etc. You can keep separate journals or combine several into one.
The General Ledger is a book (actual book or computerized system) with a page for each account from your Chart of Accounts.
Financial Statements are your Income Statement (aka Profit & Loss Statement) and your Balance Sheet.
This is the major concept in Accounting. Yes, there's a lot more to it, but the Cycle of Accounting is the place to start.
Hopefully this helps.
I've written two e-books that I'll soon be listing on this site that may help you out. I have one on Basic Accounting for the small business owner, which expounds on the info I gave you above, and another is Setting up a Manual Accounting System.
If you'd be interested in either of these, I'd let you read these in exchange for a review. Let me know.
Send me an email at firstname.lastname@example.org