The Ultimate Accounting Refresher Course

Section 2 goes into the nuts and bolts of understanding all of the elements of accounting transactions.  It starts off with the accounting equation and then Justin discusses a simple 4 step framework for how the learn double entry 'debits' and 'credits'.  The top transactions within each element of the accounting equation are discussed in a lot more detail with a more detailed look into retained earnings as well.  

By the end of this section you will have a thorough understanding of how to translate ordinary transactions into a format that forms the basis of all financial statements in business today.  At the same time you'll have a deep understanding of what it actually means by following through with an experienced accountant, as opposed to just rote learning a bunch of concepts.

The accounting equation is the basis of all accounting transactions and the underlying 'language of business' when you look under the hood of all transactions in any type of business.  In this lecture we will explore in detail the accounting equation and the typical elements that make up these individual items and their definitions.  By the end of the lecture you'll be looking at the world differently in terms of Assets, Liabilities and Owner's Equity.

Most students learning accounting for the first time have a hard time getting their head around the sheer volume of possible transactions that could occur and how you classify these into a two sided transaction with a debit and credit.  In this lecture we will explore a simple 4 step process to easily define a transaction into its two components.  

When learning for the first time it's a process of elimination to narrow down each side until you understand all of the possible combinations.  This method will make learning double entry accounting transactions much easier.

This lecture introduces the T-Account or Ledger account for the first time.  This is the method of recording transactions in practice and all accounting systems are built upon the fundamental principles based on ledger accounts. Remember debits on the left and credits on the right.  T-Accounts are used to keep a tally of the opening balance, increases and decreases of transactions throughout the period and finally a closing balance which will then be brought forward to a trial balance to create financial statements.

In this lecture we explore assets or 'future economic benefits' and will go into detail the mechanics behind the most typical types of asset transactions.  Assets are the benefits that drive cash into the business and generate revenue.  By the end of the lecture you will have a detailed understanding of asset accounts and how you would create transactions into its two components.

In this lecture we talk about the contra assets which have negative future benefits and they all follow a very similar pattern on how they work in practice.  They are essentially reducing the book value of an asset to its net book value.  Some examples include Allowance for doubtful debts, Provision for Stock Obsolescence and Accumulated Depreciation / Amortisation.  They are effectively writing down the asset based on events that reduce the likelihood they will result in a future economic benefit to the business.

In this lecture we explore liabilities or 'future economic sacrifices' or monies we owe to pay in the future.  They are a necessity to running any successful business and not all debt should be frowned upon.  We will go through the typical types of transactions that occur in practice in regards to liabilities and by the end of the lecture you will have a reasonable understanding of which transactions to be looking out for that affect liabilities.

In this lecture we will be exploring owner's equity or equity, which is the share ownership and also any current or historic profits left over in the business.  This is really the business's value of what is left to re-invest.  We will be going through the key categories and whilst the transactions are too complicated, the applications of this in practice are massive.  Most employees and managers in practice are working very closely with P&L's and classifying transactions into revenues or expenses and also have to manage them profitably.

We will be exploring in more detail the retained earnings account and the components that make up this account.  Understanding retained earnings is the key to the link between a balance sheet and profit/loss statement. This is one of the most important concepts to be understood if you want to prepare and understand financial statements.  The components are relatively simple and straightforward but the concept isn't widely understood in the real world.

We will explore the 'General Journal' and how these are used in a practical sense.  We will go through the format of a general journal and translating how you take a debit and credit simple transaction and put this into a general journal format that an accounting could use.  These are used extensively by accountants and are the basis on how data is entered into financial systems globally.

This case study is an opportunity for you to put your accounting skills into practice.  You'll work through a series of transactions with Justin and learn how to build up a picture of the overall business's position and performance from just a bunch of transactions.  You will be working with the worksheet method as well as creating general journals and T-Accounts.  

It is recommended to download the case study so you can follow along for the next few lectures.  You can even give it a try for yourself once you feel confident enough.

We will be working through the Shortville Automotive case study using the worksheet method.  The worksheet method is a easier way to create a trial balance for beginners from a series of transactions.  In this case study you can follow along as Justin explains how to think through each transaction so you can put all of the theory you have learnt into practice.

We will be building up the transactions from the Shortville Automotive case study into general journals.  This is a more advanced method and is one step further than using the worksheet method.  This is the method used in practice by accountants and also the method taught when studying for accounting degrees at University.  As a beginner it may be more challenging to grasp but persevere with the method and you'll understand exactly what is required to create general journals from scratch.

This lecture continues on from Part 1 in the Shortville Automotive case study and looking at general journals.  Follow along with Justin as he completes the case study and you can learn of how to think about turning transactions into general journals based on the accounting equation and your understanding of accounting transactions.

We will be continuing our discussion on ledger accounting as we create T-Accounts based on the general journals we have just completed in prior lectures.  The T-Accounts represent what accountants and how accounting systems are built in practice.  We will work through the Shortville Automotive case study and translate this into T-Accounts in preparation to create a trial balance.

We introduce the Trial Balance which is the first summarised and aggregated version of all the individual transactions at a point in time. The trial balance is used in the early stages of how financial information is prepared to make accounting adjustments and closing entries. You can see elements of the Trial Balance or 'TB' that would form part of a balance sheet or profit and loss statement.  After all the adjusting entries have been made you have an 'Adjusted Trial Balance'.

In this lecture Justin explains how a Trial balance is put together based on Worksheet Method and/or from T-Accounts.  The Trial Balance is the fundamental step prior to preparing financial statements.  Coming up with a balanced trial balance ensures that you have captured all of your transactions both the debit and credit side.  But make sure you have copied the figures across correctly, otherwise you'll be searching for where you made the error.  Once you have a trial balance you are in a position to start making adjusting and closing entries.

In this lecture Justin explains adjusting entries and the purpose of them.  He simply breaks down the concept of 'adjustments' into 3 simple yet effective types in which to think about when you are preparing a financial period close.  They are based on the accrual system of accounting and are based on the concepts of 'earned', 'incurred' and 'assets consumed'.  If you get this idea it will make understanding adjustments very easy to digest.

In this lecture we continue with the Shortville Automotive case study and make the necessary adjustments in order to come up with an adjusted trial balance.  These adjustments are quite typical of what to expect in practice and an understanding of accrual accounting is a fundamental skill which you will be developing.

In this lecture Justin explains the concept around the closing entry and how in order for a balance sheet to balance you need to include this missing component to ensure the financials have integrity.  The concept is quite simple in that your opening retained earnings does not include any profits for the current period or any dividends declared or paid.  So in order to ensure you have a proper 'balanced' balance sheet you need to transfer these balances into retained earnings.

In this lecture we look at the Unadjusted trial balance and explore how this gets translated into the balance sheet and profit and loss tabs.  We also explore through the Shortville Automotive case study how the closing journals are made to ensure the retained earnings balance is correctly classified so the balance sheet is balanced and works.  Follow along with Justin and learn how this works in practice.

We will be exploring the 'Balance Sheet' or 'Statement of Position' which is a snap shot of a businesses position at a point in time.  This looks at all the Assets, Liabilities and Equity in a business and is organised into a format based on the accounting equation and into current and non-current categories for Assets and Liabilities and a Net Asset position that will need to balance to the Equity balance.  This statement is the most important record of a business and will determine its overall value or net worth to be used by relevant stakeholders in particularly if the business is to be sold or its position reviewed.

We will be exploring the 'Profit and Loss Statement', 'P&L' or 'Statement of Financial Performance' which is looking that a businesses performance over a period of time.  In particularly this is looking at the current financial period and is a breakdown of all the businesses revenues and expenses into various categories or sub-categories to help identify them.  It is ultimately coming up with a Net Profit or Operating Income that will end up in the Retained Earnings account once closing entries have been completed.  P&L statements are used extensively within businesses on a regular basis and by functional managers across many different facets.  They are also used by all the relevant stakeholders to make decision around profitability and the types of returns they can expect.

We will be exploring the world of the Statement of Cash Flows or Cash Flow statement.  It is probably the least understood piece of financial information in practice, however it is the most useful.  Cash is king as the saying says and Cash cannot lie.  So with this valuable document you can understand the story of how a business has used its cash over a period of time.  The cash is put into 3 different core 'buckets' of operating cashflows, investing cashflows and financing cashflows.  The operating cashflows is to do with the day to day operations of the 'core business' and these cash items generally flow through all the current asset and current liability accounts.  The investing activities are unique to the business of what the owners or managers want to invest the business's excess cash. These items can be seen on the balance sheet through Non-Current Assets.  Finally the financing activities are how the business funds its operations and growth through debt or equity.

This is a final wrap up of The Ultimate Accounting Refresher Course.  Congratulations on completing the course!  We wish you all the best on your accounting journey and please don't forget to give us a 5 star rating if you have got something out of this course.