TeachUcomp, Inc.

 MY CART
  • VIDEO COURSES
    • All-Access Subscriptions
    • Business Licensing
    • Course List
      • Accounting
      • Adobe
        • Acrobat
        • Lightroom Classic
        • Photoshop
        • Photoshop Elements
      • Crystal Reports
      • Employment Skills
        • Interview Skills
        • Resume Skills
      • For Lawyers
        • Excel for Lawyers
        • Outlook for Lawyers
        • QuickBooks for Lawyers
        • Word for Lawyers
      • HTML
      • JavaScript
      • Microsoft Office
        • Access
        • Excel
        • Microsoft Office Suite
        • OneNote
        • Outlook
        • Outlook on the Web
        • PowerPoint
        • Publisher
        • Word
      • Microsoft Project
      • Microsoft Teams
      • QuickBooks Online
      • QuickBooks Pro
      • Sage
        • Peachtree
        • Sage 50
      • SQL
      • Windows
    • Video Course Options
  • SUBSCRIPTIONS
  • MANUALS
    • Adobe
      • Acrobat
      • Lightroom Classic
      • Photoshop
      • Photoshop Elements
    • Crystal Reports
    • For Lawyers
      • Excel for Lawyers
      • Outlook for Lawyers
      • QuickBooks for Lawyers
      • Word for Lawyers
    • HTML
    • JavaScript
    • Microsoft Office
      • Access
      • Excel
      • OneNote
      • Outlook
      • Outlook on the Web
      • PowerPoint
      • Publisher
      • Word
    • Microsoft Project
    • Microsoft Teams
    • QuickBooks Online
    • QuickBooks Pro
    • Sage
      • Peachtree
      • Sage 50
    • SQL
    • Windows
  • REFERENCE CARDS
    • Adobe
      • Acrobat
      • Lightroom Classic
      • Photoshop
      • Photoshop Elements 2025
      • Photoshop Elements 2024
      • Photoshop Elements 2023
      • Photoshop Elements 2022
      • Photoshop Elements 2021
      • Photoshop Elements 2020
      • Photoshop Elements 2019
      • Photoshop Elements 2018
      • Photoshop Elements 15
    • Google
      • Google Classroom for Teachers
      • Google Docs
      • Google Drive
      • Google Forms
      • Google Sheets
      • Google Slides
    • Mac OS
      • Mac OS Keyboard Shortcuts
    • Microsoft Office
      • Excel Formulas and Functions
      • Excel Keyboard Shortcuts
      • Excel Tables PivotTables and Charts
      • Microsoft 365
        • Access for Microsoft 365
        • Excel for Microsoft 365
        • Microsoft Office 365
        • Outlook for Microsoft 365 Classic Edition
        • Outlook for Microsoft 365 (New Outlook)
        • PowerPoint for Microsoft 365
        • Publisher for Microsoft 365
        • Word for Microsoft 365
      • Microsoft Office 2021
        • Access 2021
        • Excel 2021
        • Microsoft Office 2021
        • OneNote for Windows 10
        • Outlook 2021
        • PowerPoint 2021
        • Publisher 2021
        • Word 2021
      • Microsoft Office 2019
        • Access 2019
        • Excel 2019
        • Microsoft Office 2019
        • Outlook 2019
        • PowerPoint 2019
        • Publisher 2019
        • Word 2019
      • Microsoft Office 2016
        • Access 2016
        • Excel 2016
        • Microsoft Office 2016
        • OneNote 2016
        • Outlook 2016
        • PowerPoint 2016
        • Publisher 2016
        • Word 2016
      • Microsoft Office 2013
        • Excel 2013
        • Microsoft Office 2013
        • OneNote 2013
        • Outlook 2013
        • PowerPoint 2013
        • Word 2013
      • Microsoft Office for iPad
        • Microsoft Office for iPad
      • Word Keyboard Shortcuts
    • Microsoft Teams
      • Microsoft Teams
    • QuickBooks Online
      • QuickBooks Online
    • QuickBooks Pro
      • QuickBooks Pro 2024
      • QuickBooks Pro 2023
      • QuickBooks Pro 2022
      • QuickBooks Pro 2021
      • QuickBooks Pro 2020
      • QuickBooks Pro 2019
      • QuickBooks Pro 2018
      • QuickBooks Pro 2017
      • QuickBooks Pro 2016
      • QuickBooks Pro 2015
      • QuickBooks Pro 2014
    • Sage
      • Sage 50 Accounting
    • SQL
      • SQL
    • Windows
      • Windows 11
      • Windows 11 and 10 Keyboard Shortcuts
      • Windows 10
  • STICKERS
    • Chrome OS
      • Chrome OS for Chromebooks
    • Mac OS
      • Mac OS
    • Microsoft Office
      • Word and Excel (Mac) 2022
      • Word and Excel (PC/Windows) 2021-2016 and 365
    • QuickBooks Desktop
      • QuickBooks Desktop (PC/Windows) 2024
      • QuickBooks Desktop (PC/Windows) 2023
      • QuickBooks Desktop (PC/Windows) 2022-2015
    • Windows
      • Windows 11 and 10
  • SUPPORT
    • Company
      • About Us
      • Blog
      • Contact Us
      • Our History
      • Our Philosophy
        • Customer Service
        • Mission
      • Policies
      • Testimonials
    • Contact Us
    • FAQ
    • Help
    • Lost Password
    • Register a Product
  • LOGIN
    • Manage My Account
    • Member Login
    • My Courses
Shop Now

Small Business Accounting- Accounting Basics and Methods

by Keeley Byrnes / Wednesday, July 24 2013 / Published in Small Business Accounting

Understanding accounting is a very useful skill to have when it comes to managing a small business. The better a manager understands financial data, the easier it is for them to make a decision. In this post, we will discuss some basic accounting terms as well as accounting methods that are relevant to small businesses.

 

 

 

 

Understanding Accounting Basics

Accounting is an information system that records, identifies, and communicates the economic events of an organization or business to interested users. Accounting is very important for a business to stay organized, and for managers to make decisions. The ultimate purpose of financial information is to provide data to users for decision making.

Users of accounting can be internal users or external users. Internal users include managers, directors, officers, and supervisors. External users are investors, customers, creditors, suppliers, and taxing authorities. The best accounting practices lie in selecting the correct accounting method and financial statement to use in order to best display information for the selected users. For example, a manager may want to know the liquidity of the business in order to see how much working capital the business has. A specific type of ratio (the Current Ratio) is best used in this situation.

Accounting is fundamental to the success of any business and it’s important that users filling out financial information do so in a legal and ethical way.

 

Accounting Methods

There are many different forms and financial statements that can be used to record economic events in a business. There are also ratios and formulas that can be used to check the financial health and the current status of a business or organization. We will discuss these ratios and formulas in later lessons in this tutorial. However you should be aware of some basic terminology.

In accounting, we use the terms assets, liabilities, and stockholder’s equity to describe different economic events and transactions that need to be recorded. An asset is any resource owned by a business. Assets can take the form of buildings, land, vehicles, and cash. A liability is any amount owed to creditors in the form of debt and other obligations. Liabilities can be notes payable, bonds payable, or stock. Stockholder’s Equity is the owner’s claim to the assets (sometimes called owner’s equity).

In the basic accounting equation, the amount of assets must equal a company’s liabilities + the stockholder’s equity (or claim to the assets).

Assets= Liabilities + Stockholder’s Equity

This equation is important because assets must always balance with the claims to assets (liabilities and stockholder’s equity).

 

For example, if an individual asset is increased, then

  • another asset must decrease, or
  • a liability must increase, or
  • An increase in stockholder’s equity.

This concept of balancing both sides of an equation or financial statement is essential to reporting accounting transactions.

For example, if XYZ Inc purchased an asset, another asset must decrease. Let’s say XYZ purchased office supplies for $400 with cash. This would mean that the “supplies account” would increase $400, while the “cash account” would decrease $400.

Other economic events may mean that assets increase while liabilities increase. For example, if XYZ Inc borrowed $1,000 from the bank, a liability would increase while an asset (let’s say cash for example) would increase as well. If XYZ then purchased supplies with that money, another economic event would occur, prompting XYZ to have an increase in the “supply” account and a decrease in the “cash” account.

Besides companies using different financial statements to show users different types of information, there are also two separate types of accounting systems in general. These accounting systems help the company determine when to make entries (or record financial/economic events.) These two systems are called the cash system, and the accrual system. The accrual basis system of accounting means that companies will record financial actions in the period in which the events occur. Cash basis accounting means that companies record economic events when they receive payment.

 

 

 

* For more information on this topic and other accounting topics, refer to our Accounting Tutorial.

Tagged under: accountant, accounting, accounting system, balance, basic accounting equation, basics, CPA, cpe, credit, debit, equation, managerial accounting, managers, method, quickbooks

About Keeley Byrnes

Keeley is our Director of Marketing and has been with TeachUcomp since 2010. Keeley manages all aspects of our Marketing Department, acts as liaison for our reseller and affiliate partners and also authors courses in software and taxation.
Save $150! One Year Online Entire Library $49. Click here for more info.

 

Categories

  • GET SOCIAL

© 2001-2025 Copyright TeachUcomp, Inc. All rights reserved.

TOP

Latest Release: New Outlook Quick Reference Guide    < Buy Now >