Basic Accounting Secrets

Explore the core accounting concepts: the economic entity assumption and double-entry principle, recognizing that every transaction has two effects on financial statements, including accounts payable and receivable.

Learn how the accounting equation links assets to liabilities and equity, with real-world examples of owner investments and loans balancing the books.

Apply the accounting equation to real transactions, balancing assets, liabilities, and equity, including initial capital, loans, revenue, and expenses that affect equity.

Learn the structure of journal entries, including debits and credits—the left and right sides—and how to balance entries across at least two accounts using assets, liabilities, equity, revenue, and expenses.

Master how t-accounts work by linking journal entries to assets, liabilities, equity, revenue, and expenses, and see how debits and credits shape balances.

Learn the revenue recognition principle in lesson 1 of basic accounting secrets, focusing on when revenue is earned by delivery and payment, guided by the revenue chart.

Work through a series of revenue transactions, identify when to recognize revenue, record cash or accounts receivable, and adjust unearned revenue as delivery occurs.

Discover the adjusting concept in basic accounting and how it shapes understanding of essential financial records.

Apply accrual concepts by recording accounts receivable for earned revenue and adjusting unearned revenue, illustrating two scenarios that show how to debit unearned revenue and credit revenue.

Explore expense related adjusting entries by recording liabilities like utilities, wages payable, interest payable, and income tax payable, and adjust short term assets and depreciation for end of period accuracy.

Explore the trial balance formats—unadjusted, adjusted, and post-closing—and how debits and credits organize color-coded accounts for the balance sheet, retained earnings, and income statement.

Prepare the income statement, the statement of retained earnings, and the balance sheet in the correct order, using the trial balance as the source.

Explore the cash flow statement, outlining financing, investing, and operating activities, and practice mapping inflows and outflows from notes payable, equity, and long-term assets.

Analyze investing activities by tracking cash inflows from equipment sales and outflows for new equipment, and learn to reconcile beginning and ending asset balances in cash flow statements.

Analyze operating activities and their link to the income statement, focusing on accounts receivable and sales. Explore the direct method, including cash inflows from customers and cash outflows for expenses.

Explore the indirect method for operating cash flows: start with net income, adjust for non-cash items (depreciation, amortization, gains), and changes in accounts receivable and accounts payable.

Close revenue and expense accounts and transfer balances to income summary. Use the statement of retained earnings to update retained earnings and prepare post closing trial balance.