The Ultimate Guide to Learn Financial Accounting

This guide helps you learn financial accounting basics. This is for students learning accounting and for anyone who wants to understand financial statements.

This guide shows all the topics in a financial accounting textbook. It covers the financial accounting material in an accounting principles textbook. It covers material from the following financial accounting courses:

• financial accounting
• principles of accounting 1
• survey of accounting

Why Study Accounting?

The Harvard Business School article, Why Learn Accounting? 6 Benefits, lists the following benefits from learning accounting:

1. Manage your finances more effectively
2. Understand current events
3. Make more meaningful contributions at work
4. Prepare for entrepreneurial success
5. Receive more advancement opportunities
6. Improve decision-making capabilities

For Intermediate Accounting content, see The Ultimate Guide to Learn Intermediate Accounting

1 Introduction to Accounting

What is accounting?

Accounting is the process of recording, analyzing, and summarizing financial transactions. Accounting uses the five types of accounts to record all the transactions.

In accounting, the five types of accounts are:

1. assets: resources owned by a business; what the company owns
2. liabilities: debts of the company; what the company owes
3. equity: claim on the assets by the owners; calculated as equity = assets – liabilities; equity is the net worth of the company
4. revenues: when a business receives assets from selling products and services
5. expenses: when a business uses or consumes assets to create revenues

The goal of financial accounting, or financial reporting, is to issue financial statements.

There are four financial statements that each company prepares. The four financial statements are:

1. income statement: revenues minus expenses equal net income or net loss
2. balance sheet: lists all the assets, liabilities, and equity of a company
3. cash flow statement: cash inflows and cash outflows
4. statement of owners’ equity: shows the changes in equity on the balance sheet

Financial accounting chapter 1

• Introduction to Accounting
• 10 Tips to Make an A in Accounting.
• Accounting Concepts
• Accounting Careers and Certifications

2 Recording Business Transactions

Recording journal entries

Recording transactions in accounting uses a system called debits and credits. You need to learn the accounts and how to make journal entries into the accounts.

To record business transactions, use the debit and credit rules. All the transactions are recorded in a journal. These are called journal entries.

A journal shows all the transactions for the accounting period. These entries are posted to the ledger, which contains all the account balances.

Financial accounting chapter 2

• Recording Business Transactions
• Debits and Credits Explained: A Helpful Illustrated Guide
• What is the Accounting Equation?
• Financial Statements: A Beginner’s Guide

3 Adjusting the Accounts

Adjusting entries are entries made at the end of the period to update the accounts.

Financial accounting chapter 3

• Adjusting Entries and the Accounting Cycle

4 Accounting for Merchandising Operations

A service company sells a service to its customers. A merchandising company sells products. Accounting for merchandising companies that sell products is more complex than for service companies.

This lesson introduces companies that buy and sell inventory and the concept of cost of sales.

Financial accounting chapter 4

• Accounting for Merchandising Companies

5 Inventory and Cost of Sales

This chapter shows the accounting for buying and selling inventory.

Financial accounting chapter 5

6 Time Value of Money

The time value of money is a foundational concept in finance.

Financial accounting chapter 6

7 Cash, Fraud, and Internal Control

This lesson focuses on three topics:

1. accounting for cash
2. fraud
3. internal control

Chapter 7 resources

8 Accounting for Receivables

This lesson shows the issues of accounting for receivables.

9 Accounting for Long-Term Assets

Long-term assets include:

• plant assets
• intangible assets
• natural resources

10 Accounting for Current Liabilities

Curent liabilities are debts that are due in one year or less.

11 Accounting for Long-Term Liabilities

Long-term liabilities are debts that are due in more than one year.

12 Corporations

Accounting for corporations include the following topics:

• capital stock
• dividends
• retained earnings

13 Statement Cash Flows

Accounting for cash flows shows the cash flow statement.

14 Financial Statement Analysis

Financial statement analysis is using financial information to examine trends and financial ratios for a company.