Free Bookkeeping Course
This page contains our free online bookkeeping course. It will teach you the basics of bookkeeping, including double-entry bookkeeping.
The Course Covers:
The basics of double-entry bookkeeping
Fundamental bookkeeping terminology
Understanding debits and credits
How to compile basic bookkeeping reports
To start the bookkeeping course, scroll down
This course is FREE, and no registration is required!
FREE Online Bookkeeping Course
Part 1: An Introduction to Bookkeeping
An Introduction to bookkeeping
Why bookkeeping is needed
What is a bookkeeper?
A bookkeeper keeps a record of the financial/accounting transactions of a business, company, or other entity. These records are called the accounts or the "books", hence the term bookkeeper or book-keeper.
Accounts can be referred to as "books", as traditionally, accounting transactions were manually recorded in various books or ledgers - a sales book, a purchases book, a cash book, etc.
What is bookkeeping?
Bookkeeping is the term used to describe the recording of financial/accounting transactions of a business, company, or other entity.
When someone does the bookkeeping, they keep financial records and organise all financial transactions related to sales, revenue, expenses, purchases, bank accounts, liabilities, and assets.
Why do you need a bookkeeper? Why does bookkeeping need to be done?
Accurate bookkeeping is needed for many reasons. Here are the three main reasons:
It is a legal requirement. Governments require that businesses keep accurate financial records.
Financial analysis. With accurate and up-to-date accounting records, it's possible to analyse the financial health of an entity, including an entity's profitability, money owed to suppliers, money owed from customers, sales performance, growth forecasts, etc.
Taxation. Accounting records make it possible to calculate any taxes owed to governmental bodies.
An accurate set of accounts is compiled using a bookkeeper and accountant unless you understand bookkeeping or accounting yourself.
What is an accountant?
The terms 'bookkeeper' and 'accountant' are sometimes used interchangeably. Still, accountants generally focus on an entity's year-end financial statements and tax calculations, whereas bookkeepers keep records of the day-to-day transactions of an entity.
Part 2: Financial Terms Explained
An introduction to bookkeeping terminology
What is capital?
Capital is the money a business owner has personally invested into a business or entity. Capital is also referred to as equity. Capital and equity are amounts the company owes to the business owner.
What are assets?
An asset is an item a business or company owns that has value. Typical assets include office furniture, computer equipment, vehicles, property, machinery, debts owed to the entity, and cash.
Assets do not have to be tangible - they can be intangible - but most assets are tangible. Examples of intangible assets are websites, software, and patents.
What are liabilities?
A liability is something that a business owes. They are usually in the form of debt - debts owed by the company.
Typical liabilities include bank loans, credit cards, finance and lease agreements, taxes, and money owed to suppliers.
Part 3: Double-Entry Bookkeeping Explained
An introduction to double-entry bookkeeping
Double-entry bookkeeping definition
Debits and credits explained
Purchases, assets, liabilities, sales, expenses
What is double-entry bookkeeping?
Double-entry bookkeeping is an accounting method which entails at least two entries for every financial/accounting transaction. These entries consist of debits and credits - every accounting transaction will have a debit entry and a corresponding credit entry.
What are debits and credits?
The terms 'debit' and 'credit' refer to the different sides of accounting transactions. Every financial transaction of an entity will have at least one debit entry and one credit entry.
Debit and credit examples
A payment for an expense from the company bank account:
Debit expense account
Credit company bank account
A payment received from a sale into the company bank account:
Debit company bank account
Credit sales account
A payment for office equipment from the company bank account:
Debit asset account
Credit company bank account
A loan received into the company bank account:
Debit company bank account
Credit liability account
Part 4: T-Accounts Explained
Debits and credits continued
Sales and expense accounts
Asset and liability accounts
What are t-accounts?
T-accounts are the accounts that debits, and credits are posted to.
Expenses, sales, assets, and liabilities are categorised into specific items. For example, the expense accounts will have particular accounts for all the company's expenses, such as electricity, stationary, travel, rent, etc. Each of these accounts is a t-account.
T-accounts are also named nominal accounts. All the nominal accounts combined are called the nominal or general ledger.
A company's general ledger may look something like this:
General Ledger Example
Office equipment account
Motor vehicle account
Company bank account
Bank loan account
Shop sales account
Website sales account
Staff wages account
Bank charges account
Part 5: Financial Statements Explained
Profit and loss statement
Compiling financial statements
What is a profit and loss statement?
A profit and loss statement shows a company's profitability for a selected period. It lists the entity's sales and expenses.
A profit and loss statement often shows gross and net profit, often called gross margin and net margin.
The equations for gross and net profits are:
Gross profit = Sales minus Cost of Sales
Net Profit = Gross Profit minus Expenses(Overheads)
A profit and loss statement's primary purpose is to display an entity's overall profitability (financial performance).
What is a balance sheet?
A balance sheet lists an entity's assets, liabilities and equity at a selected date.
The primary purpose of a balance sheet is to display what an entity owns and owes (financial health).
See our other free bookkeeping and accounting courses
Recommended Course: Management Accounts Course
Recommended Course: The ULTIMATE Bookkeeping Course
*Recommended Book: Bookkeeping and Accounting for Dummies*
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