The Ultimate Guide to Learn Financial Accounting

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This guide for students learning accounting principles. This also is helpful for entrepreneurs that want to have a better grasp of financial accounting concepts.

This guide is organized by topics typically covered in an introductory financial accounting textbook. It covers the material in the following college courses:

• Financial Accounting
• Principles of Accounting I
• Intermediate Accounting

Managerial accounting topics are on a separate page. See The Ultimate Guide to Learn Managerial Accounting.

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What is financial accounting?

Financial accounting is the process of recording, analyzing, and summarizing financial transactions. Financial 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 assets – liabilities = equity; 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 three financial statements that each company prepares. The financial statements are:

1. Income Statement – Revenues minus expense equals 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

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Lesson 1: Introduction to accounting

See Lesson 1: Introduction to Accounting

Accounting is a financial system that records transactions in accounts.

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 assets – liabilities = equity; 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

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

1. Income Statement – Revenues minus expense equals 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

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Lesson 2: Recording Business Transactions

See Lesson 2: Recording Business Transactions

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.

We use the debit and credit rules to record business transactions. These are called journal entries.

We use the debit and credit rules in recording transactions. All the transactions are recorded in a journal. A journal shows all the transactions.

See Debits and Credits Explained: A Helpful Illustrated Guide.

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Lesson 3: Adjusting Entries

See Lesson 3: Adjusting Entries

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

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Lesson 4: Accounting for Merchandising Companies

See Lesson 4: Accounting for Merchandising Companies

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.

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Lesson 5: Time Value of Money

See Lesson 5: Time Value of Money

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Lesson 6: Inventory

See Lesson 6: Inventory

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Lesson 7: Cash

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Lesson 8: Receivables

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Lesson 9: Long-term Assets

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Lesson 10: Investments

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Lesson 11: Current Liabilities

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Lesson 12: Long-Term Liabilities

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Lesson 13: Stockholders’ Equity

Jeff Mankin

Jeff Mankin teaches financial literacy. His website is FinallyLearn.com.

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