Accounting is the collection of information and analysis regarding the financial endeavors of a business. Accountants analyze the business transactions in order to calculate income, liability, owner's equity, assets, and cash flow. As an accountant, you also should know the general concepts and principles of financial organization. The process of accounting involves the creation of tables and other methods of recording financial information. In order to learn accounting step-by-step, take an accounting course, find an accounting book, take notes as you read, learn the general concepts and principles of accounting, comprehend the basic equations, and learn the typical bookkeeping procedures.
Take an accounting course. One of the best ways to learn accounting step-by-step is to take an accounting course. Such a course will provide you with the information you need in order to understand accounting. You can take an accounting course online or at a community college.
Obtain an accounting book. You should look for an introductory book that explains the general nature of accounting. Read a chapter of different accounting books in order to find one that explains the information clearly. Look for a book with visual aids and explanations. You can find an accounting book online, at the library or at the bookstore.
Read a portion of the accounting book each day. Take notes as you read. Taking notes in outline form will help you to organize your information. For example, when you arrive at a chapter about economic designations, you can put "Economic Designations" as the heading. Any information about economic designations that you want to put in your notes can be in bullet form underneath the heading.
Learn the basic accounting vocabulary. Studying accounting vocabulary will help you to understand the subject better. Some of the basic accounting terms consist of accounting period, appreciation, assets, audit, book value, capital, equity and liability. The accounting period is the time period for profit calculation. Appreciation is the increase in value. Assets are the elements that a business owns. An audit is when you review financial records. Book value refers to the number generated when the liabilities are subtracted from the assets. Capital is the money that owners invest in a business. Equity refers to the share of the owners in a business. Liability is the amount of money a business owes to others. Write these words and definitions down and review them each day.
Learn the general assumptions of accounting. The assumptions of accounting consist of the monetary unit assumption and the time period assumption. The monetary unit assumption describes how only stable forms of currency should be used in economic records. The time period assumption refers to the use of designated time periods in order to analyze information about the financial activities of a business.
Learn the general principles of accounting. The generally accepted accounting principles, or GAAP, facilitate the organization of finances. These principles include full disclosure principle, the revenue recognition principle, the matching principle, the cost principle, the conservatism principle and the materiality principle. The full disclosure principle states that incomplete transactions and lawsuits must be included in within financial statements. The revenue recognition principle asserts that you do not recognize the revenue until the service is completed. The matching principle emphasizes that costs and revenue should be included within the same financial statement. The cost principle affirms that you do not revalue assets that you already acquired. The conservatism principle states that you should record the less optimistic outcome when creating an estimate. The materiality principle stresses that you should not record insignificant monetary values.
Comprehend the basic accounting equation. The basic accounting equation involves assets, liabilities, and owner's equity. The assets represent the addition of the liabilities and owners equity. For example, if the liabilities is $100, and the owner's equity is $50, then the assets is $150.
Learn the typical bookkeeping procedure. Bookkeeping involves the creation of a balance sheet, or the financial state of the business at a designated time. In order to create a balance sheet, make two columns. On the right column, list all of the assets. On the left column, list all of the liabilities and capital. Add the numbers of the left column, and the numbers of the right columns. The total amount of liabilities and capital should equal the total amount of assets.
Do practice exercises in your work book. Most introductions to accounting books have exercises or questions that relate to each chapter. Do these questions in order to learn accounting step-by-step. If you answer any of the questions incorrectly, reread the chapter that relates to the question and try to find your mistake.
Mara Pesacreta has been writing for over seven years. She has been published on various websites and currently attends the Polytechnic Institute of New York University.