Accounting is a discipline that studies the measurement, elucidation or information assurance that will help all decision-makers such as managers, tax authorities, and investors to make resource allocation decisions within companies, organizations, and government agencies. Unfortunately, some people still find it challenging to master accounting because many things and points about accounting must be memorized and applied as if accounting is a dizzying science. If you already know the accounting keys, accounting is no longer complicated for you. Therefore, here we are going to find out the easy way to understand basic accounting for beginners.
The Keys to Learn Accounting for Beginners
One of the vital business success factors is the accuracy of the record of its financial transactions. No matter how small or big a company or business, accounting management is the key to get the next level. You may also know that almost all large companies employ a lot of accounting talents. Instead, some of them are doing business with an independent auditing firm. If you are running a small store, you may employ only a single bookkeeper. When your company is getting more extensive, you may also use an accounting software program to record all financial transactions. So, accounting is vital in almost all of the business aspects.
What is Accounting?
To learn to account, of course, a beginner must understand the meaning and intent of accounting. Besides, there’s no doubt that it is essential to know and understand what accounting is. In general, accounting means recording, classifying, summarizing, processing, and presenting data, transactions, and events related to finances so that it can be used by a person who is being concerned, easily understood for decision making, and many other purposes. If the understanding of accounting has been adequately understood, it will be easy to learn the next accounting points. So, understanding accounting meaning is a must to learn accounting for beginners.
Account Name and Number with Its Normal Balance
Accounting consists of many account names. In which, each account name has an account number along with its normal balance. The function of the account is to facilitate in preparing the financial statements systematically. At the same time, its normal balance is the balance that places an account in a debit or credit position. The following are some accounts that every accounting learner must memorize.
Asset 1 Debit
Debt 2 Credit
Capital 3 Credit
Income 4 Credit
Cost or Expense 5 Debit
The above account numbers will evolve to match the type of transactions and company requirements. For example, a ‘Cash’ account that is part of an asset, company A gives account number ‘101’, or ‘Revenue Lease’ account, then, company B assigns ‘405’ as the account number of the income. In general, those account numbers are divided as follows:
- Asset Accounts are generally using 100 to 199 account numbers.
- Debt Accounts usually are using 200 to 299 account numbers.
- Capital accounts usually are using 300 to 399 account numbers.
- Revenue Accounts usually are using 400 to 499 account numbers.
- Costs or Expenses Accounts usually are using 500 to 599 account numbers.
Those account numbers memorizing is the easy way to learn accounting for beginners.
Understanding the Basics of Accounting
The summary of the crucial points of accounting is in the basics of accounting. The basics of accounting must be completely understood in order to become a reliable accountant. So, an excellent way to learn accounting for beginners is to understand the basics of accounting. Accounting basics include the concept of debit-credit, journalizing, posting the journal to the ledger, making trial balance, and presenting financial statements. In addition, you also need to understand the basic of the accounting equation. The basic of the accounting equation is the relationship between assets, debts, and the capital owned by the company. The purpose of the basic of the accounting equation is as the basis for recording in the accounting system which means that every time a transaction occurs, it should be recorded in two aspects, namely the left side (assets) and the right side (liabilities).
The basic of the accounting equation is the balance between the assets side and the liabilities side. If there are changes due to the occurrence of financial transactions, then the balance should also be maintained. This is the basis for being able to work on accounting starts from the journal entry to the presentation of financial statements.
Understanding the Accounting Cycle
Another primary learning point of accounting for beginner is to understand the cycle of accounting. Accounting Cycle is the steps that you must pass to produce accounting information in the right and systematic financial statements. Learn how to create a financial statement. The meaning of accounting cycle is the process of preparing financial statements that can be accountable and acceptable. The accounting cycle consists of 3 groups of stages. They are;
- Recording and Classification
- The Preparation of Financial Statement Summary
- The Preparation and the Presentation of Financial Statements
In fact, understanding the basics of accounting for beginners is not as difficult as it has been commonly imagined by students who are in the early stage to learn to account. Moreover, nowadays, there are much free accounting software available to either facilitate every manager or businessperson in carrying out the actual accounting process as a learning tool of accounting for beginners. Using an accounting software program helps you easily carry out the accounting process, quickly, accurately, and comfortably. You can keep books, journals, to financial reports anywhere and anytime with an accounting software program. However, whether they are managers, businesspersons, or even in the early stage in learning basic accounting for beginners, you need to know and understand the accounting core subjects.
Steps to Learn Accounting for Beginners
So, to learn accounting for beginners must be passing the steps of accounting basics “This following is the list of the learning steps to master accounting for beginners;
- Accounting Learning Preparation
- Learn General Journal
- Learn General Ledger
- Learn trial balance
- Learn Adjusting Entries
- Updating the Ledger
- Learn Income Statement
- Learn Closing Entries
- Updating the Ledger (again)
- Learn Capital Statement
- Balance Sheet
In general, the easiest way to learn accounting for beginners is to understand examples and practices. Learning with a very thick accounting book will, of course, be difficult, and most likely can forget too. So, looking at the examples of bookkeeping and at the same time practising it would be easier to learn accounting. Accounting books can be used as a reference to learn accounting and practices and the guides for managers in finance careers.