In order to discuss your business with your accountant, bookkeeper, banker, or other business associates you need to understand the language. Think back to when you were first learning to read and write. Hopefully for you it's not as long ago as it is for me. You began learning your ABC's.
After mastering your alphabet and doing a little off key singing, you moved on to learn to use these letters to make words. You then proceeded to learn to make sentences from words and then on to paragraphs, documents, and even term papers. This tutorial is going to use this same approach for introducing you into the world of bookkeeping.
Learning definitions and terminology is about as much fun as watching grass grow; but, it is necessary to the understanding of bookkeeping.
All I can say is hold your nose, take your medicine, and swallow. After completing the lesson, if you need to, take two aspirin and go to bed.
Your ABC’s for this lesson are the terminology and definitions used in the Bookkeeping Language. No not ALL of them; just the ONES that you need for this tutorial and those that will enable you to PARTICIPATE and UNDERSTAND when you are discussing financial matters concerning your business.
If you’re anything at all like me, you like things simple. People also don’t need to dazzle and impress me with their wealth of knowledge by using big words that I don’t understand. I don’t think I’m one that could dazzle you even if I wanted to.
Some of the definitions and terminology you will be presented will have a formal and an informal definition. The formal definition is a definition you would find in an accounting textbook or formal course. The informal definition is my attempt to simplify.
In addition, in instances where additional clarification is needed, I’ll try to provide an example(s) that you can relate to that will help you attach this term to one of your many brain cells. If you were paying attention, you will have noticed that I did say many. Even though you don’t know bookkeeping yet ,I’m sure you’re a smart gal or guy.
Let's start with our Major Categories that are used to organize our financial information.