Financial Accounting & Bookkeeping: From Beginner to Pro

Define a business and its three core forms—manufacturing, merchandizing, and service—and explain capital needs and the two financing paths: debt and equity.

Compare debt and equity financing, noting debt repayment and ownership. Distinguish financial accounting for external users from managerial accounting for internal decision making.

Examine the general purpose financial statements—balance sheet, income statement, and cash flows—and how generally accepted accounting principles ensure comparability and credibility for investors and creditors.

Compare proprietorships, partnerships, and corporations, focusing on liability, taxation, formation, and governance via boards of directors and stockholders.

Define revenues as inflows from selling goods or services and expenses as asset outflows; show net income as revenues minus expenses, illustrated by the Stephen's Sweet Shop example.

Master how to read and prepare financial statements, comparing beginning and end of year balance sheets, income statements, retained earnings, and cash flows using current vs long-term classifications.

Apply the accounting equation to determine assets: with liabilities of 100,000 and owner's equity of 45,000, assets balance at 145,000.

Explore how to record transactions through journal entries and ledger accounts, updating cash, inventory, revenue, cost of goods sold, and retained earnings to balance the accounting equation.

Apply the accounting equation to determine liabilities: assets total 160,000, owner's equity totals 95,000 (capital stock and retained earnings), yielding liabilities of 65,000.

Construct the income statement to calculate net income, starting with sales minus cost of goods sold for gross profit, then subtract operating expenses, interest, and taxes.

Identify assets, liabilities, and equity accounts and connect the balance sheet to the income statement by calculating ending retained earnings from beginning retained earnings, net income, and dividends.

Apply the accounting equation to determine the change in retained earnings from beginning balances, net income (revenue minus expenses), and dividends, resulting in a $420 decrease.

Apply the accounting equation to compute beginning retained earnings. With revenue 1500, expenses 1900, net income -400, and dividends 200, ending retained earnings 700, beginning retained earnings are 1300.

Apply the accounting equation by using changes in assets, liabilities, and owner's equity to solve for revenues and net income, with careful attention to signs and back-substitution for accuracy.

Classify accounts on a trial balance into assets, liabilities, and equity, then compute net income and ending retained earnings from revenue, expenses, and dividends.

Learn to analyze and record business transactions using debits and credits, building journal entries that impact assets, liabilities, and owners' equity, including cash, revenues, expenses, and dividends.

Post journal entries to the general ledger to summarize transactions by assets, liabilities, and owners' equity accounts using debits and credits; computers automate this, while manual posting teaches the process.

Explore the accounting cycle from identifying transactions to posting, learn how a trial balance ensures equal debits and credits, and prepare income statements, retained earnings, and balance sheets.

Record the cash payment by debiting accounts payable and recording inventory purchases, while crediting cash to reflect outflows and reducing liabilities.

Record two journal entries for a sale: recognize revenue with a credit to sales revenue and cash or accounts receivable debit, then debit cost of goods sold and credit inventory.

Practice problem demonstrates recording journal entries for inventory purchase, sales on account, cost of goods sold, and cash collections, updating inventory, revenue, and receivables.

Explore the language of business through financial accounting, examining asset, liability, and equity balances, cash with negative balances, and retained earnings versus losses.

Explore how accrual basis accounting uses the revenue recognition and matching principles to recognize revenues when earned and expenses when incurred, contrasting with cash basis timing.

Explore adjusting entries, including prepaid expenses and unearned revenues, and apply the matching and revenue recognition principles to accrual basis accounting with concrete examples.

Close the books by transferring nominal accounts to retained earnings, distinguishing real accounts on the balance sheet from nominal income statement accounts, and illustrating closing entry techniques for accrual-basis reporting.

Learn accrual accounting by recognizing revenue when earned and expenses when incurred, illustrated by 7.2 million revenue, 200k depreciation, and a 7.0 million net income.

Classify each account as asset, expense, liability, or revenue and apply debit versus credit balance rules; conclude that total debit balances equal 29,200.

Identify and classify accounts as assets, liabilities, and equity, and recognize revenue and expense accounts on the income statement, then sum assets to reach 2100.

Classify accounts into assets, liabilities, and owner's equity to prepare an income statement. Compute net income by subtracting COGS and operating expenses from revenues, yielding a net loss of 370.

Classify accounts as assets, liabilities, and equity, identifying accounts payable, long-term debt, and unearned revenue as liabilities. Sum liabilities to 1405.

Print a hard paper copy of the financial practice set or obtain the optional packet, then complete the work in pencil on the hard copy.

Prepare and analyze a hands-on financial practice set for Hot cars Inc., using manual bookkeeping, subsidiary ledgers, and special journals to generate and compare income statements and balance sheets.

Explore how accounts receivable, accounts payable, and inventory subsidiary ledgers feed the general ledger with perpetual posting, T accounts, and posting references, plus special journals for recording transactions.

Record a cash disbursement to vendor 3 on accounts payable, post to the cash disbursements journal and accounts payable subsidiary ledger, and prepare end of period general ledger posting.

Record and post complex transactions, including equipment purchases and notes payable, to cash disbursements and general ledgers. Demonstrate sales journal entries and cost of goods sold with inventory postings.

Explore how revenues are defined and recognized, and how cash discounts, returns, and credit card payments affect revenue, accounts receivable, and net sales through real examples.

Understand sales returns and allowances, net sales, and gross margin; learn how to record returns with a contra revenue account and compute markup on cost.

Explore uncollectible accounts and bad debt expense, estimating allowances for doubtful accounts using income statement and balance sheet approaches, including aging of accounts receivable and write-off practices.

Describe credit card sales, how banks process them, the fees merchants pay, and the cash versus revenue impact with journal entry examples.

Analyze accounts receivable and the allowance for bad debt to determine cash collections from credit customers, using beginning balances, write-offs, and aging data.

Analyze accounts receivable and the allowance for bad debt using an aging method under a balance sheet approach, incorporating beginning balances, write-offs, and credit sales.

Use aging of accounts receivable under the balance sheet approach to determine bad debt expense and record the journal entry: debit bad debt expense, credit allowance for bad debt.

Using an aging method under the balance sheet approach, compute the ending allowance for doubtful accounts of 51,360 to derive net accounts receivable of 440,640.

Analyze accounts receivable and the allowance for doubtful accounts to calculate bad debt expense using beginning balances, credit sales, cash collections, and the year-end balances.

Use the balance sheet approach (indirect method) to estimate the allowance at 7% of ending accounts receivable, and record the adjusting entry for bad debt expense and the allowance.

Explore perpetual inventory accounting, and see how purchases, sales, and cost of goods sold are tracked on-hand by computerized systems with a subsidiary ledger for real-time decisions.

Explore perpetual inventory accounting for purchase discounts and returns, adjusting inventory cost, accounts payable, and cost of goods sold to reflect true unit cost and timing of payments.

Explore inventory cost flows and how specific identification, fifo, lifo, and weighted average affect cost of goods sold, ending inventory, and gross margin under gaap.

Explore how inflation and deflation affect cost of goods sold, net income, and taxes under FIFO and LIFO, using simple graphs to compare ending inventory outcomes.

Explore a practical wholesale inventory example applying FIFO, LIFO, and moving weighted average cost flow assumptions to calculate ending inventory and cost of goods sold.

Complete a physical inventory to verify perpetual records, detect pilferage, and adjust books under GAAP; apply cost methods such as specific identification, FIFO, LIFO, or weighted average.

Record a purchase on account with a debit to inventory and a credit to accounts payable for $1,000, and explain the 4% discount for paying within ten days under net 30.

Use fifo to allocate 800 units between cost of goods sold and ending inventory. Then calculate gross margin as 5,000 in sales minus 4,000 cost of goods sold equals 1,000.

Use LIFO to allocate costs between cost of goods sold and ending inventory, yielding 3600 for cost of goods sold and 2500 for ending inventory from 800 units.

Compute ending inventory and cost of goods sold under the average cost method: total cost 6100 for 800 units, cost per unit 7.625, with 500 sold and 300 ending inventory.

Explore how inflation and deflation affect inventory costing using LIFO and FIFO. Compare cost of goods sold, net income, taxes, and ending inventory under rising and falling prices.

Learn how a multiple-step income statement shows net sales, gross margin, operating income, and the role of operating expenses and other revenues, with a look at internal controls.

Explore payroll taxes, including employee withholdings (FICA, federal and state taxes) and employer payroll taxes (Social Security, Medicare, unemployment insurance), with wage and sales tax remittance entries.

Record a payroll journal entry for 400,000 gross pay, withhold 24,800 Social Security, 5,800 Medicare, and 40,000 federal and state taxes, yielding 329,400 net pay; employer match occurs separately.

Explain how payroll allocates employee and employer responsibilities, detailing Social Security and Medicare withholdings, federal/state tax withholding, and the summary journal entry that ties compensation expense to cash.

GAAP requires capitalizing all direct or incidental costs to acquire a long-term asset or prepare it for its original use, including tax, shipping, and prep.

Apply gaap rules to decide whether costs are expensed as normal repairs or capitalized as improvements to property, plant, and equipment, and adjust depreciation for extended life.

Record the sale or disposal of a long-term asset by removing its book value, determine gain or loss from the sale price minus book value, and adjust via journal entries.

Explain how to record and capitalize costs for a used long-term asset, compute depreciation (straight-line and units-of-production), adjust for partial years, and analyze gains or losses on disposal.

Learn how goodwill arises when a price exceeds the fair value of net assets, how it is recorded, amortized, and tested under GAAP.

Explain capitalization of a 100,000 machine, calculate depreciation using historical cost minus salvage value over 10 years, and record year-one adjusting entry of 3,750 and year-two depreciation of 9,000.

Record the machine at 100,000, depreciate 9,000 annually (adjusted to 3,750 in year one), yielding a year three book value of 78,250 and clarifying book vs fair value.

Explain amortizing a 100,000 patent over ten years, with 7,500 in year one and 10,000 annually thereafter; year three records a 10,000 December 31 adjusting entry.

Record a business combination using a journal entry: pay 90,000 cash and assume 70,000 liabilities to acquire assets valued at 50,000, recognizing 110,000 in goodwill.

Calculate year two depletion by updating the mine’s book value for improvements, recomputing depletion rate with salvage value and remaining ounces, and applying it to 2,000 ounces to yield 10,600.