health and control functions through various statements. In most businesses, the bookkeeper operates under the accountant. In small businesses, the accountant may be the owner or Chief Financial Officer (CFO), or the accounting function may be outsourced.
A big part of understanding the bookkeeping of a business consists of nothing more than learning the language. In Module One, you will learn the basic terms; you will then be well prepared to make sense of basic written reports, communicate with others about important financial information, and cope with a common business problem: imprecise or even wrong use of financial terminology.
In Module Two of bookkeeping class, you will learn about two accounting methods:
- Cash Method
The cash method is the more commonly used method of accounting in small businesses. Under the cash method, you will learn that income is not counted until cash (or a check) is received, and expenses are not counted until paid.
- Accrual Method
Under the accrual method, you will learn income is counted when the sale occurs, and expenses are counted when you receive the goods or services.
Keeping Track of the Business
In Module Three, you will learn about accounts payable, accounts receivable, the journal, and the general ledger.
You will learn this type of record is used to keep track of debts owed by a business to creditors for purchased goods or services on an open account. Though the business will likely be billed regularly by its creditors for the balance on the account, having your records will allow the business to be aware of its financial standing with the creditors at any given time.
You will learn this type of record is used to keep track of money owed to a business. Such money can come from extending credit to a customer who purchases the business’s products or services. The best way to keep track of these records is to set up a separate accounts receivable record for each customer.
You will learn the journal is the way to keep track of all inputted information or data concerning a business to allow the books to be properly balanced.
The General Ledger
You will learn the general ledger is a record of all the accounts of a business. Each account is recorded on separate sheets in a book or binder. In total, it is called the general ledger and is considered a permanent, classified record for each business account.
Understanding the Balance Sheet
In Module Four, you will learn that the balance sheet will help balance your business. It helps keep everything organized and on point.
A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity at a specific time. Assets and liabilities are usually listed first, followed by equity, which is the difference between the assets and the liabilities. The balance sheet will provide a snapshot of the company’s financial condition.
You will learn the accounting equation, double-entry accounting, types of assets, liabilities, and equity.
In Module Five of bookkeeping class, you will learn about the income statement, cash flow statement, capital statement, and budget versus actual. These terms all involve money or the use of money in some form. When we are finished, you will better understand how these methods will help your business run more efficiently.
Income or Profit and Loss Statement
You will learn an income statement is a financial statement that summarizes the amounts of revenue earned and the expenses incurred by a business or entity over a period, which measures the financial performance of a business. This statement summarizes how a business typically incurs revenues and expenses over a fiscal quarter or year. A Statement of Revenue and Expense is also used for the income statement.
Cash Flow Statement
You will learn that the Cash Flow Statement is a part of four statements, including a Balance Sheet, Income Statement, and Statement of Retained Earnings. The cash flow statement shows the cash flow within the business, where that money came from, and how that money may have been spent during a certain period. This statement can prove very important because it allows the company’s cash flow to be tracked from its origin by indicating which types of transactions help create cash flow.
You will learn Owners’ Equity is the net worth of a company. It shows the business’s value breakdown if not publicly traded and the par value of common and preferred stock and retained earnings of publicly traded companies. The stock value shows how much of the company’s current value is in shareholders’ hands.
Retained earnings are the accumulated net income retained by the company over time and show what the company currently holds for possible reinvestment or other financial purposes. The statement shows the change from beginning equity to ending equity.
You will learn the Capital Statement is a statement concerned with or keeps track of the items that will last for longer than one year, like the company’s long-term assets (e.g., buildings).
The Capital Statement’s major duty includes keeping track of the owner’s account before the current and ending balances. It also serves as a connector between the income statement and the balance sheet. Capital Statements are usually checked monthly or annually.
Budget vs. Actual
You will learn the primary purposes of a budget are to plan for the future and control a company’s long-term operations and spending. The budget may be adjusted if needed or changed since the budget was created. Past financial statements are often used when creating a budget. These allow one to see what has worked in the past and has not.
In Module Six, you will learn the many terms that involve dealing with your business’s financial aspects. We will also discuss the accounting methods and terms used about your employees by going over the following terms: gross wages, net wages, employee tax withholdings, employer tax expenses, salary deferrals, employee payroll, employee benefits, tracking accrued leave, and government payroll returns and reports.
In Module Seven, you will learn basic knowledge about depreciating your assets, reconciling cash, reconciling investments, working with the trial balance and bad debt, and posting adjustments and corrections.