Basic Business Accounting

Name: Basic Business Accounting
Author: Anna Bull

In this module, you will learn the basics of accounts payable and why it’s considered a liability account. You will also learn about the informal agreement…

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Course: On-Demand

(gentle music) There are several ways to implement basic business accounting. After completing these lessons, you will have a better understanding of concepts, such as accounts payable and receivable, using a journal, what goes into a general ledger, and cash management. Accounts payable are the financial obligations that business owners owe to suppliers after they purchase products or services on credit. A business can have an open credit line with a supplier. An open credit line is a business's borrowing agreement for the amount of money, supplies, or inventory they need to purchase. The option to borrow from a supplier can be exercised at any time within an agreed upon time period. An accounts payable account is a liability account, and so it normally has a credit balance. When an invoice from a supplier is recorded by a business, the accounts payable account will then be credited and another account will have to be debited. When an accounts payable balance is paid by a business, it will then be debited and cash will be credited. The credit balance in accounts payable must be equal to the amount of a supplier's invoices that the business has recorded but not yet paid. Under the accrual method of accounting, a business that has received goods or services on credit has to report the accounts payable liability no later than the date the goods or services were received. This same date must be used to record the debit entry to an expense or asset account. Keep in mind that in using the accrual method of accounting, business expenses are reported when they are incurred, not when they are paid. The process for an accounts payable account has to be done efficiently and accurately so that a business owner's financial statements are free from errors. Due to double-entry accounting, any invoice from a supplier that is omitted will cause two accounts to have incorrect amounts reported. For example, if a repair expense has not been recorded by a business when it should be, the liability will be left off the balance sheet and the repair expense will also be left off of the income statement. The accounts payable process is very important to a business because it involves nearly all of a business's payments outside of the regular payroll. Regardless of a business's size, the only accounts payable they're required to pay are bills and accurate invoices. This means that before a supplier's invoice is entered into the accounting records and a business schedules it for payment, the invoice must reflect what the business ordered along with what the business received.

Beginner Provider : Anna Bull 5 Lessons · 12m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

In this module, you will learn the basics of accounts payable and why it’s considered a liability account. You will also learn about the informal agreement between a customer and a business known as accounts receivable. These lessons will demonstrate how to maintain a general ledger and the uses of a journal in accounting. By the end of this module, you will understand the importance of cash management.

What You'll Learn

Distinguish between accounts payable and accounts receivable
Identify why accounts payable is considered a liability account
Use a journal in accounting
Identify the components of a general ledger and maintain it
Apply the principles of cash management

Key Takeaways

Accounts payable is considered a liability account.
Accounts receivable refers to the informal agreement between a customer and a business.
A general ledger has identifiable components and must be maintained, and a journal has specific uses in accounting.
Cash management is an important part of basic business accounting.

Frequently Asked Questions

What topics does this course cover?

The module covers accounts payable, accounts receivable, the journal, the general ledger, and cash management.

What will I be able to do after completing this module?

You will understand the difference between accounts payable and receivable, learn how to use a journal in accounting, and identify the components of a general ledger. By the end of the module you will also understand the importance of cash management.

What is accounts receivable in this course?

Accounts receivable is described as the informal agreement between a customer and a business.

Why is accounts payable covered as a liability?

The module explains the basics of accounts payable and why it is considered a liability account.