Bookkeeping Basics

Name: Bookkeeping Basics
Author: Anna Bull

Any organization that wants to succeed financially will utilize certain processes. It’s important to understand the different types of financial statements and…

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(bright music) In order to implement successful bookkeeping tactics you must first have a strong understanding of the basics of bookkeeping. In the following lessons, we will identify several accounting methods for businesses based on their needs and type of operation. You will also learn the basic accounting terms and generally accepted accounting principles or GAAP. When it comes to accounting, most businesses are categorized as either for-profit or nonprofit. Both for-profit and nonprofit businesses have inflows and outflows of cash and resources such as revenue, expenses, equipment or land that must be financially managed but they also have crucial differences. These differences will be identified by how either type uses accounting practices within specific industries. Let's talk about nonprofit businesses. These businesses are often tax exempt and we see them all around us as organizations involving religion, education social services, healthcare and the arts. Nonprofit businesses start the accounting process by looking at their total expenses to operate. They attempt to forecast how much these expenses will be in order to continue to offer their services to the public. Then they average how much they need to obtain through fundraising, donations, grants or other sources in order to meet their costs. For-profit businesses earn their profits by offering goods or services. This type of business uses accounting methods to measure their financial performance in order to ensure that all their resources are being used as efficiently as possible. We can further categorize for-profit businesses by the type of products or services they provide. Let's take a look at three types of for-profit industries. First, there are manufacturing businesses. Manufacturers create specific products from scratch. So it's necessary for them to monitor costs associated with every step of the process. For example, Proctor and Gamble produces shampoos to sell to retailers such as CVS Pharmacy or Walgreens. These businesses also have to operate production sites which generates further costs such as utilities. Another for-profit industry is merchandising. You've probably seen merchandising businesses in your local area because these businesses are very common. Merchandising businesses purchase finished products and then resell those products to their customers for a profit. Consider your local Costco and Lowe's as prime examples of merchandising businesses. Here's an example, a retailer purchases tube of toothpaste in bulk from a manufacturer at the best cost. They then mark up the price to earn a profit when they resell that toothpaste to you. When it comes to bookkeeping practices, merchandising businesses have to carefully monitor the purchase price of the products they sell in order to earn the best profit. They also accrue high costs from insurance, marketing and building leases or expenses. Service businesses are the third type of for-profits. These businesses earn revenue by providing intangible products for purchase. In other words they offer a service instead of physical merchandise. These types of businesses are one of the most important players in the United States economy. Airlines, insurance companies and hospitals are examples of mass service organizations. The largest cost for service businesses are typically for administrative and personnel purposes rather than a tangible product.

Beginner Provider : Anna Bull 6 Lessons · 15m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

Any organization that wants to succeed financially will utilize certain processes. It’s important to understand the different types of financial statements and accounting methods in order to better apply them to your business. This course will cover every accounting term you need to know, the differences between businesses and how they prepare their financial statements, and guidelines from the Generally Accepted Accounting Principles.

What You'll Learn

Identify how accounting differs across specific industries
Distinguish the various types of business structures
Compare the cash and accrual accounting methods
Apply guidelines from the Generally Accepted Accounting Principles
Use financial statements to support a business
Define basic accounting terms and good accounting practices

Key Takeaways

Organizations that aim to succeed financially rely on certain established processes.
Understanding the different types of financial statements and accounting methods helps you apply them to your business.
The course covers accounting terms, how different businesses prepare their financial statements, and guidelines from the Generally Accepted Accounting Principles.
Accounting can differ depending on the specific industry and the type of business structure.
The cash and accrual methods are two different approaches to accounting.

Frequently Asked Questions

What does the Bookkeeping Basics course cover?

It covers the accounting terms you need to know, the differences between businesses and how they prepare their financial statements, and guidelines from the Generally Accepted Accounting Principles, across lessons on accounting for specific industries, types of business structures, providing services, basic accounting terms, and good accounting practices.

Who is this course for?

It is for anyone in an organization that wants to succeed financially and needs to understand the different types of financial statements and accounting methods in order to apply them to their business.

Will I learn the difference between cash and accrual accounting?

Yes. One of the learning objectives is to learn the differences between the cash and accrual methods.

Does this course explain different business structures?

Yes. It includes identifying the various types of business structures, with a dedicated lesson on Types of Business Structures.