Free Bookkeeping Course
This page contains our free online bookkeeping course. It teaches the basics of bookkeeping, including double-entry bookkeeping principles.
The Course Covers:
The basics of double-entry bookkeeping
Fundamental bookkeeping terminology
Understanding debits and credits
How to compile basic bookkeeping reports
Everything you need to start bookkeeping!
Course Modules:
Lesson 1: An Introduction to Bookkeeping
Lesson 2: Bookkeeping & Accounting Terms
Lesson 3: Double Entry Bookkeeping Basics
Lesson 4: Using and Closing T Accounts
Lesson 5: Financial Statements
To get started, scroll down.
This course is FREE, and no registration is required!
Jump to:
An Introduction to Bookkeeping
Bookkeeping Terminology Explained
Double-Entry Bookkeeping Explained
FREE Online Bookkeeping Course
Part 1: An Introduction to Bookkeeping
Module overview:
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An Introduction to Bookkeeping
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Bookkeeping definition
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Accountant definition
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Why bookkeeping is needed
1.1 What is a bookkeeper?
A bookkeeper keeps records of a business's financial/accounting transactions. These records are called the accounts or the "books", hence the term bookkeeper or book-keeper.
Accounts are called "books" because, traditionally, accountants manually recorded transactions in various books or ledgers, such as a sales book, a purchases book, and a cash book.
1.2 What is bookkeeping?
Bookkeeping is the process of recording a business's, company's, or other entity's financial/accounting transactions.
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.
Pitstop Practice!
Explain:
What is a bookkeeper?
What does a bookkeeper do?
Okay? Continue!
1.3 Why do you need a bookkeeper? Why do you need bookkeeping?
Accurate bookkeeping is needed for many reasons. Here are the three main reasons:
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It is a legal requirement. Governments require businesses to maintain accurate financial records.
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Financial analysis. With accurate, up-to-date accounting records, you can analyse an entity's financial health, including profitability, money owed to suppliers, money owed by customers, sales performance, growth forecasts, etc.
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Taxation. Accounting records let you calculate any taxes owed to government bodies.
Bookkeepers and accountants compile accurate accounts. Businesses may use internal or external bookkeepers and accountants. Small businesses typically outsource their bookkeeping and accounting to external bookkeepers and accountants.
1.4 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 an entity's day-to-day transactions.
Part 2: Financial Terms Explained
Module overview:
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An introduction to bookkeeping terminology
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Capital
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Assets
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Liabilities
2.1 What is capital?
Capital is the money a business owner has personally invested in a business or entity. Capital is also called equity. Capital and equity are the amounts the business owner owes to the company.
2.2 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, accounts receivable (money owed by customers), and cash.
Assets don't have to be tangible; they can be intangible, but most are tangible. Examples of intangible assets are websites, software, and patents.
2.3 What are liabilities?
A liability is something that a business owes. They are usually in the form of debt, money the company owes.
Typical liabilities include bank loans, credit cards, finance and lease agreements, taxes, and money owed to suppliers.
Pitstop Practice!
Explain:
What is capital?
What are assets?
What are liabilities?
Okay?
If not, ensure you rewatch this video
Part 3: Double-Entry Bookkeeping Explained
Module overview:
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An introduction to double-entry bookkeeping
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Double-entry bookkeeping definition
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Debits and credits explained
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Purchases, assets, liabilities, sales, expenses
3.1 What is double-entry bookkeeping?
Double-entry bookkeeping is an accounting method that requires at least two entries for every financial transaction. These entries consist of debits and credits; every accounting transaction has a debit entry and a corresponding credit entry.
3.2 What are debits and credits?
The terms 'debit' and 'credit' refer to the two sides of an accounting transaction. Every financial transaction of an entity will have at least one debit entry and one credit entry.
3.3 Debits and credits explained
The easiest way to understand debits and credits is to use the PEARLS acronym:
P = Purchases
E = Expenses
A = Assets
R = Revenue
L = Liabilities
S= Sales
PEA are debit entries, and RLS are credit entries. So, a sale (S) is a credit, and an expense (E) is a debit.
Some key things to remember are:
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Money into the business bank account is a debit. Money out is a credit.
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Bank balances (cash) are considered assets.
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Debit expenses incurred, but credit expenses owed (liabilities).
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Credit sales, but debit accounts receivable (sales owed to the company).
Watch the video for a detailed explanation.
3.4 Debit and credit examples
A payment for an expense from the company bank account:
Debit the expense account
Credit the company bank account
A payment received from a sale into the company bank account:
Debit the company bank account
Credit the sales account
A payment for office equipment from the company bank account:
Debit the asset account
Credit the company bank account
A loan received into the company bank account:
Debit the company bank account
Credit the liability account
Pitstop Practice!
Explain:
What is capital?
What are assets?
What are liabilities?
Okay? Continue!
If not, consider my Accounting Mentor Program
Part 4: Nominal Accounts Explained
Module overview:
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Debits and credits continued
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Nominal accounts explained
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Sales and expense accounts
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Asset and liability accounts
4.1 What are nominal accounts (T-accounts)?
Nominal accounts are the accounts to which debits and credits are posted. They are traditionally called T-accounts.
Expenses, sales, assets, and liabilities are categorised into specific items. For example, expense accounts include separate accounts for the company's expenses, such as electricity, stationery, travel, and rent. Each of these accounts is a T-account.
T-accounts are also named nominal accounts. All nominal accounts together are referred to as the nominal or general ledger.
A company's general ledger may look something like this:
4.2 General Ledger Example
Asset Accounts
Office equipment account
Tools and machinery account
Motor vehicle account
Company bank account
Liability Accounts
Bank loan account
Suppliers account
Sales Accounts
Shop sales account
Website sales account
Expenses Accounts
Rent account
Stationary account
Staff wages account
Electric account
Travel account
Software account
Bank charges account
Bank interest account
Training account
Part 5: Financial Statements Explained
Module overview:
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Financial statements
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Profit and loss statement
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Balance sheet
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Compiling financial statements
5.1 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 typically displays gross and net profit, often referred to as 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).
5.2 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).
Next Step: The Ultimate Bookkeeping & Accounting Course
or
Learning Accounting in 7 Minutes (free)
Debits and Credits Explained in 7 Minutes (free)