Basic Accounting Concepts


Here are the lessons in this section:

Lesson One: Basic Accounting Concepts (this lesson)
Lesson Two: Define Accounting 
Lesson Three: Basic Accounting Equation 
Lesson Four: What Are Assets? 
Lesson Five: Define Liability 
Lesson Six: What is Owners Equity? 
Lesson Seven: The Accounting Equation and Financial Position 
Lesson Eight: Basic Accounting Test




Accounting student and textbooks

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? 

Failure

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...

 So before anything else, let's define accounting. 

Read through this short tutorial, then move on through the rest of the lessons.


Basic Accounting Concept #2:
The Basic Accounting Equation

The Basic Accounting Equation is the key, key, key, key, key equation behind the entire subject.

Did I mention it's key?

If you truly understand this simple, yet often misunderstood equation, you will be leap years ahead of most accounting students! I really mean it.

You see, everything in accounting (and I mean e-v-e-r-y-t-h-i-n-g ) ...revolves around this equation!

The rest of the subject is a breeze if you get this concept.

So this is the 2nd tutorial in this chapter: The Basic Accounting Equation.

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):

By learning what each of these terms mean, and how they add up to the equation, you'll be in a perfect position to go through more complicated parts of the subject.

Finally, check out our final lesson of Basic Accounting Concepts, where we'll go over The Accounting Equation and Financial Position. 


Test Your Knowledge of the Basic Accounting Concepts

Once you're done with the lessons above, take my Basic Accounting Multiple-Choice Test to check your knowledge of this section.

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.


What's Next?

When you've gone through the tutorials listed above, click through to the next section, Basic Accounting Transactions. 

In this section we'll go over what a transaction is, as well as the ten or so different types of transactions, and how they affect the basic accounting equation.







Return from Basic Accounting Concepts to the Home Page 


Here again are the lessons in this section (I recommend doing the lessons in the order presented in order to get the maximum benefit):

Lesson One: Basic Accounting Concepts (this lesson)
Lesson Two: Define Accounting 
Lesson Three: Basic Accounting Equation 
Lesson Four: What Are Assets? 
Lesson Five: Define Liability 
Lesson Six: What is Owners Equity? 
Lesson Seven: The Accounting Equation and Financial Position 
Lesson Eight: Basic Accounting Test



Questions Relating to This Lesson

Click below to see questions and exercises on this same topic from other visitors to this page... (if there is no published solution to the question/exercise, then try and solve it yourself)

Usefulness of Accounting? 
Q: As a student, how is accounting useful to me? A: Accounting is the international "language" of business, so if you've ever thought that you may …

Assignment Help:
Accounting for a Sole proprietorship vs Corporation
 
Q: I am a business student at South University. I'm taking an accounting class right now. This is one of the questions I had for my first assignment in …

Accounting:
Important and Confusing?
 
Q: Why is this stuff so important and why is it so confusing??? A: Hi Cera, you are not the first and probably will not be the last person to find …


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