by Bean Counter's Dave Marshall
Copyright © 2004-2009 Bean Counter
Bean Counter's Main Site
|Introduction||Lesson 1||Lesson 2||Lesson 3||Lesson 4||Lesson 5||Lesson 6|
This tutorial is geared to business owners, managers, and individuals who have not had any formal bookkeeping training or on the job experience and need or want to learn the basics of bookkeeping. In other words, this tutorial is for beginners (newbies) and is only an introduction into the world of accounting. They say a little knowledge is a dangerous thing. Well my goal is to make you dangerous.
What's Covered ?
Lesson 1 General Ledger, Control Accounts, Subsidiary Ledgers & Special Journals reviews the General Ledger and explains and discusses Control Accounts, Special Journals, and Subsidiary Ledgers.
Lesson 2 General Journal discusses the purpose of the General Journal, what information is recorded, and provides examples and illustrations of the types of entries that are normally recorded in this journal. Closing Entries are also discussed and how and why closing entries are prepared and posted.
Lesson 3 Cash Disbursements (Payments) & Purchases Journals discusses the purpose of these journals, what information is recorded, and provides examples and illustrations of the types of entries that are normally recorded in these journals.
Lesson 4 Cash Receipts & Sales Journals discusses the purpose of these journals, what information is recorded, and provides examples and illustrations of the types of entries that are normally recorded in these journals.
Lesson 5 Sales & Purchase Return Journals discusses the purpose of these journals, what information is recorded, and provides examples and illustrations of the types of entries that are normally recorded in these journals.
Lesson 6 Review Of Major Concepts provides an overview and review of bookkeeping and some useful charts, tables, sample worksheets, and reminders to use in your day to day bookkeeping tasks.
Journals are often called or referred to as the books of original entry. The reason is that this is the first place that business transactions are formally recorded. Specialized Journals are journals used to initially record special types of transactions such as sales, cash disbursements, and cash receipts in their own journal. All these journals are designed to record special types of business transactions and post the totals accumulated in these journals to the General Ledger periodically (usually once a month).
You can think of a Journal as a Financial Diary.
The General Journal is used to record unusual or infrequent types of transactions. Type of entries normally made in the general journal are depreciation entries, correcting entries, and adjusting and closing entries.
The Cash Payments Journal is a special journal that is used to record all cash that is paid out by a business except for payroll. Columns are set up for types of transactions that occur frequently enough to warrant a separate column. Some examples are Accounts Payable (Payments on Purchases and Services Charged) and Cash Purchases.
The Cash Receipts Journal is a special journal that is used to record all receipts of cash. Columns are set up that indicate the sources of the cash. Two of the major sources of cash for a business are Cash Sales and Collections of Customer Charge Sales. These and other categories that have a lot of activity (transactions) have their own column.
The Sales Journal is a special journal where sales of services and merchandise made on account (business's customer is allowed to charge purchases) are recorded.
The Purchases Journal is a special journal that is used to record all purchases and various expenses and other charges from suppliers that a business has an open account with (supplier allows the business to charge purchases).
The Payroll Journal is a special journal that is used to record and summarize salaries and wages paid to employees and the deductions for taxes and other authorized employee withholding amounts. This introductory tutorial does not cover the payroll accounting process and records.
The Sales Return & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise sold on account.
The Purchase Returns & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise purchased on account.
Transaction analysis is really a simple task that with experience a bookkeeper performs without even thinking about it. Let's break it down into Bean Counter's seven simple steps:
Since Transaction Analysis actually begins the bookkeeping process, we're going to analyze some transactions and prepare journal entries before we begin our in depth study of the Special Journals. For this exercise we'll assume that all our transactions are recorded in the General Journal. In the next lesson you'll see why this is not the case in the real business world. In this excerpt, we'll also assume that you are Headnocker Bookkeeper for XYZ Cleaning , a sole proprietor janitorial service on the accrual basis of accounting, and that you have the responsibility of accurately recording the transactions that affect this business. The transactions are for the months of January and February xxxx.
Your First Step To Maintaining A Useful Set Of Books
You can create an account for anything you want to track or keep up with. By creating a good chart of accounts you can see where your money's going and coming from. If you lumped all your expenses into a miscellaneous account your books would balance but tell you very little about your business's financial activities. If you're like me, I want to know what I'm spending my money for. Take the time to prepare or have an accountant help you prepare a chart of account that fits the needs of your business.
Your Simplified Chart of Accounts for XYZ Cleaning and this exercise follows:
Headknocker let's Analyze and Record some transactions.
In my Introductory Tutorial So you want to learn Bookkeeping, I held your hand while we were analyzing and recording transactions. Sorry Headknocker, this time I'm leaving you in the "office" by yourself.
Read through all of the transactions and give them some thought. If you feel ambitious get out a pencil and piece of paper and try recording the transactions.
If you decide on giving it a try use this format for your entries.
See there, I'm a nice guy. I did the first transaction for you. Remember each transaction will have a debit and credit amount. That ole double entry accounting rule.
At the end of the list of the following transactions click on the link In The Office By Myself to see what you know.
January xxxx Events
1.January 2, xxxx we receive invoice # 805 dated January 1, xxxx from Super Buffer Company in the amount of $2,500 for the purchase of 5 new buffer machines. We have an open account with Super Buffers that allows us to take up to 30 days to pay.
2. January 3, xxxx wrote our check # 2500 for $1000.00 to Slum Landlord Enterprises for January rent (we're just a little guy and can't afford a fancy complex).
3.January 5, xxxx we received a notice that our loan that we requested for $2,500 in order to have the funds available to pay for the buffers purchased from Super Buffer Company was approved. We also received our signed Note dated January 3, xxxx along with a copy of our deposit slip dated January 3, xxxx where the bank had deposited the funds to our checking account.
4.January 5, xxxx we billed our customer XXX Movie Theater $500.00 on our Invoice # 1050 dated January 5, xxxx for cleaning services we provided. We like the owners (they give us free tickets) so we have an open account set up for them that allows them 30 days to pay us.
5.January 6, xxxx we visited JJ's Office Supply and bought copy paper, pens & pencils, and ink cartridges. JJ gave us his bill, invoice # A765 dated January 6, xxxx for $125.00 and we wrote him our check, number 2501, for the total amount of the purchase.
6.January 7, xxxx we received an invoice from our smart accountant
Bean Counter's Dave Marshall dated January 2, xxxx in the amount of $25.00 for
8 hours of consulting (cheap aren't I). His bills are due upon
receipt. We think he's great so we immediately wrote him check # 2502 dated January 7, xxxx.
7.January 7, xxxx wrote check # 2503 for $200.00 to Jack Ofalltrades who occasionally helps us clean our customer's businesses.
8.January 8, xxxx received invoice # 89 from Cleaning Supplies Inc. dated January 7, xxxx in the amount of $300.00 for supplies we purchased. We have an open account with Cleaning Supplies that allows us 30 days to pay.
9.January 10, xxxx we billed Mel's Diner on our invoice # 1051 dated January 10, xxxx $200.00 for cleaning services we provided. Mel's food is not that great so his payment terms are due upon receipt. Mel has not yet sent us a check.
10.January 15, xxxx we received our telephone bill from Cheap Calls dated January 10, xxxx in the amount of $125.00 due in 10 days.
11.January 17, xxxx we received our monthly utility bill (electricity) from Shock Us dated January 12, xxxx in the amount of $250.00 due in 10 days.
12.January 20,xxxx visited our local newspaper Community Gossip and placed an ad to try to drum up some new customers. Wrote our check # 2504 in the amount of $50.00 dated January 20, xxxx and received receipt number # 1-20-505 from their representative.
13.January 25,xxxx Big Boss (our boss and owner) hands us a paid bill from our local fancy restaurant Yummy For The Tummy where he and hopefully his wife (maybe girl friend) enjoyed a wonderful dinner and drinks. On the bill he noted that he paid this bill with company check number #2505 for the amount of $500.00 dated January 24, xxxx. Based on the amount I hope they had a nice time !
14.January 28, xxxx we received a signed contract in the mail from Big Office Complex for us to provide monthly cleaning services to them at the rate of $2,0000 a month beginning in February, xxxx.
15.January 31, xxxx received our monthly statement dated January 28, xxxx from Got Gas in the amount of $700.00 for gasoline we purchased for our company vehicles during January. Payment terms are due in 10 days.
Now that you've had a chance to think about and review the above transactions, let's see how you did.
Click In The Office By Myself to find out.
How did you do being left in the office by yourself ? Hopefully, not too badly. If you did pretty well, congratulations.
In my So, you want to learn Bookkeeping! Introductory Tutorial I attempted to provide you with a solid foundation in the basic bookkeeping principles and rules so that you have a solid foundation that we can build on. Hopefully, if did my job, we're now ready to expand our knowledge of bookkeeping and learn about some other "tools" (Special Journals and Subsidiary Ledgers) that expedite and are necessary for recording business transactions.