Maybe you've never studied accounting before and you're starting for the first time.
Or maybe you've been studying it for a while and you just don't get it.
Or maybe you feel like you know it pretty well - apart from a few small things.
Well, no matter who you are, if you don't understand the basic accounting concepts then you're going to have a tough time with the subject.
What Do I Mean By the Basic Accounting Concepts and Why Are They So Important?
The basic accounting concepts I'm going to list below are probably quite different to some of the other accounting websites and textbooks you've come across.
When I'm talking about basic accounting concepts I'm not talking about the official list of accounting principles from "Generally Accepted Accounting Practice" (GAAP) or the "International Financial Reporting Standards" (IFRS), etc. Those principles are nice but they're theoretical and don't form the backbone of how to actually do accounting.
When I'm talking about the Basic Accounting Concepts, I'm talking about the fundamentals of the subject - which will enable you to really understand accounting and actually put this subject into action.
I'm talking about the fundamentals. The basic stuff. The stuff you really need to know to practice as an accountant - to record transactions correctly, prepare financial reports, etc.
This is also the stuff which - if you didn't get it down early on in your accounting studies - you'd be screwed ! No matter how hard you studied for your exams - you'd fail... again and again and again.
Or instead of accounting making sense and being easy - you'd become a total accounting parrot!(This might be even worse than failing an exam - please don't become an accounting robot or parrot!!!)
That's why this section is so crucial.
Basic Accounting Concept #1: What is Accounting?
The first thing you should always do, no matter what subject you're studying, is to define the subject itself. Maybe this sounds kind of dumb, but you'd be surprised how many students don't even really know what they're studying.
It might sound strange. But it's actually true. And it's the first basic concept and lesson...
And in order to fully understand this key equation, we will be taking a detailed look at each of its three components, which are each covered in their own tutorials (lessons 3, 4 and 5 respectively in this chapter):
This quick quiz will check your understanding of the tutorials on defining accounting, the basic accounting equation and its three elements, as well as financial position.
An Additional Key Concept You'll Learn About Soon
Another very important basic accounting concept - probably the most important one after the basic accounting equation - is The Accrual Basis of Accounting.
The accrual basis of accounting is not included in this first chapter on basic accounting concepts but rather is gone over in a slightly later lesson on income.
Please note that this is a slightly more advanced topic, so if you check out this lesson and find it a bit difficult, just come back here and go through all the lessons in order. Soon enough you'll come right.