ACCOUNTING · FREE FOUNDATIONS COURSE

Accounting & Bookkeeping Foundations

Start with the accounting equation, double-entry records, journals, ledgers, reconciliations and basic statements. Use fictional business records only; this course does not provide tax or individualized financial advice.

6 lessonsPractice LabFinal assessmentCompletion certificate

0/6 lessons complete · Best assessment: 0% · Project pending

01 · The accounting equationOpen lesson

A business owner reviews bookkeeping records beside cash and office tools. — The accounting equation · Original lesson illustration

Assets = liabilities + equity. Assets are resources controlled by a business; liabilities are obligations; equity is the residual interest after liabilities. Every properly recorded transaction preserves this relationship. Owner investment is different from revenue earned by providing a service, even though both can increase cash.

Worked example

A business has $8,000 assets and $3,000 liabilities. Equity is $5,000. The equation is 8,000 = 3,000 + 5,000.

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Use the Equation Lab to solve for equity at different balances.

Assets $12,000 less liabilities $4,500 gives equity of?$4,500$7,500$12,000$16,500

02 · Accounts and account typesOpen lessonLocked — complete previous lessons

A bookkeeper sorts business documents into separate account folders. — Accounts and account types · Original lesson illustration

A chart of accounts organizes asset, liability, equity, revenue and expense accounts. Use consistent names and enough detail to explain the business activity without making the records needlessly complex. A bank deposit needs a reason: it may be revenue, owner investment, a loan or repayment of a receivable. The bank movement alone does not identify its accounting meaning.

Worked example

Cash is an asset; a bank loan is a liability; service fees earned are revenue; ordinary rent used for the period is expense.

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Classify cash, accounts payable, owner capital, sales revenue and rent expense.

Money borrowed from a bank is normally recorded as?Revenue onlyA liabilityA customer discountA rent expense

03 · Debits, credits and balanced entriesOpen lessonLocked — complete previous lessons

A bookkeeper records entries in a ledger beside invoices and office supplies. — Debits, credits and balanced entries · Original lesson illustration

Debit means the left side and credit the right side. They do not universally mean increase and decrease. Assets and expenses normally increase with debits; liabilities, equity and revenue normally increase with credits. Total debits and credits must be equal for an entry, but balance alone cannot prove that the correct accounts or amounts were chosen.

Worked example

Buying $200 of supplies on credit: debit supplies $200 and credit accounts payable $200. Assets and liabilities both rise.

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Write the entry for paying $100 of an already-recorded supplier balance: debit payable $100, credit cash $100.

A normal increase in an asset is recorded as?A debitA credit alwaysNo entryA note without an amount

04 · Journals, ledgers and trial balancesOpen lessonLocked — complete previous lessons

A bookkeeper reviews a journal, ledger and trial-balance worksheet. — Journals, ledgers and trial balances · Original lesson illustration

A journal records transactions with dates, accounts, amounts and explanations. A ledger groups entries by account so balances can be calculated. A trial balance lists account balances to check total debits against total credits. An omitted transaction or posting to the wrong account may leave the trial balance balanced, so supporting documents and review are still necessary.

Worked example

Two $100 entries posted to the wrong expense account can leave debit and credit totals equal while misclassifying the cost.

Try it yourself

Create a small journal and post its cash entries to a simple ledger.

What does an equal trial-balance total prove?Every transaction is correctOnly that listed debit and credit totals agreeNo reconciliation is neededAll expenses are deductible

05 · Cash, accruals and statementsOpen lessonLocked — complete previous lessons

A business owner reviews work records, invoices and bank documents. — Cash, accruals and statements · Original lesson illustration

Under accrual accounting, revenue and expenses are recognized according to the activity and applicable rules rather than only cash movement. Receivables and payables explain some timing differences. An income statement summarizes revenue and expenses over a period; a balance sheet shows assets, liabilities and equity at a point in time. Cash flow information describes cash movement.

Worked example

A service is earned in June and paid in July. Under an accrual model, June may record revenue and a receivable; July collection reduces the receivable rather than earning the same revenue again.

Try it yourself

Explain why a profitable business can temporarily have little cash.

Which statement reports assets, liabilities and equity at a date?Income statementBalance sheetPurchase orderInvoice register

06 · Reconciliation and a reliable closeOpen lessonLocked — complete previous lessons

A bookkeeper compares bank records with a cash ledger and supporting receipt. — Reconciliation and a reliable close · Original lesson illustration

Reconciliation compares records with independent evidence and explains differences. For a bank reconciliation, deposits in transit and outstanding checks can explain timing differences; bank fees or errors may require book adjustments. Keep supporting records, review unusual balances and correct errors through documented entries. Do not force agreement by inventing an amount.

Worked example

The bank shows a $12 fee not yet recorded in the books. Record the fee according to the business policy, then complete the reconciliation.

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Finish your five-transaction project and explain one potential timing difference.

What is a good response to an unexplained reconciliation difference?Invent a balancing expenseInvestigate and document the causeIgnore it indefinitelyDelete the bank statement

Accounting & Bookkeeping Foundations

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