Accounting Fundamentals
Build a sound accounting habit from the start: learn how transactions change assets, liabilities and equity, then record them with clear double-entry logic.
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Accounting Fundamentals
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About this course
This course suits beginners building a practical accounting foundation. You will classify everyday transactions, explain why the accounting equation balances and create simple double-entry records. At work, you can check a journal entry against the underlying event and spot a broken balance before it reaches a report. This module builds your instinct for the fundamental identity of accounting: Assets = Liabilities + Equity. You will follow the opening month of a small café, recording each real-world event twice so both sides of the equation always balance. By the end, the double-entry habit will feel less like a rule and more like a reflex. Following Café Aroma through a full month of trading, this module records cash sales, credit sales, supplier purchases, rent, and payroll as journal entries, showing how each transaction flows through debits and credits. The accrual principle is applied throughout: revenue is recognised when earned and expenses when incurred, regardless of when cash moves, so Accounts Receivable and Accounts Payable capture the timing gap. A two-part test—cost above the capitalisation threshold and useful life beyond one year—determines whether a purchase such as a commercial espresso machine is recorded as equipment on the balance sheet or expensed immediately. This module builds a four-part control system for managing money in and out of a small business: legally valid invoices, an accounts-receivable aging report that ranks unpaid debts by how long they have been outstanding, a supplier payment calendar that preserves cash by paying on the due date rather than early, and a monthly bank reconciliation that explains every difference between the books and the bank statement line by line. A fixed collections escalation sequence—reminder, firm follow-up, demand letter, stop supply—turns overdue-account chasing into a routine procedure. Starting from Nova Studio's unadjusted trial balance, this module walks through the complete month-end pipeline: posting four adjusting entries for depreciation, accrued salaries, earned deferred revenue, and expired prepaid insurance, then rebuilding the trial balance before drafting the income statement and balance sheet. The income statement covers a period and shows net income flowing into equity on the balance sheet, which captures the business's position at a single moment. Using the café's closing balances, this module calculates liquidity, solvency, and profitability ratios—current ratio, quick ratio, debt-to-equity, gross margin, net margin, and return on equity—and interprets each one against the business's own prior month rather than in isolation. A ten-step month-end close checklist, from transaction cutoff through bank reconciliation, adjusting entries, and document archiving, turns the close into a repeatable process that takes days rather than weeks. Results are then translated for a non-accountant audience using a one-headline, three-driver, one-decision structure that replaces accounting vocabulary with plain language.
What you'll learn
- Explain the accounting equation and why it must always balance
- Classify everyday business events as changes to assets, liabilities, or equity
- Record transactions using double-entry logic without breaking the equation
- Build a running balance sheet from a sequence of transactions
- By the end of this module, you'll be able to record credit sales and their subsequent cash collection as two separate journal entries, correctly applying the accrual principle so that revenue appears only on the date the service is delivered.
- By the end of this module, you'll be able to apply the two-part capitalization test — cost above threshold and useful life exceeding one year — to classify a purchase as either an immediate expense or a long-lived asset on Café Aroma's books.
- By the end of this module, you'll be able to journalize supplier purchases made on 30-day terms by debiting the appropriate expense account and crediting Accounts Payable, then record the separate cash payment without recognizing a second expense.
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