Welcome to Finance Train’s online course on Accounting Skills for Managers. You are about to learn one of the most important skills that you need to help you manage your business successfully.

As a business owner or manager, you need to understand the basics of finance and accounting. Even though you will not be directly involved in day to day accounting and record keeping, this information will help you understand your business better and help achieve the financial goals you have set for it. You will know where the money is coming from, and where it is going, which will help you make more efficient decisions. It will also reduce your dependency on others to make sense of the crucial financial information that you always need to keep a track of. Finally, you will become more confident while dealing with your accounting personnel and reduce the chances of any wastage of money, lacunae in processes, or accounting fraud within your business.

The objective of this course is to teach you how to speak the language of accounting. It will not train you to become an accountant, but it will provide you with enough knowledge in understanding how accounting is done within a business. This will complement your core business skills and other talents.

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Introduction to Accounting Skills for Managers

There are a few important concepts related to business and accounting that form the backbone of the modern accounting and financial reporting system. In this lecture, we will look at some of these concepts and how the accounting system works.

The video discusses:
<ul>
	<li>Three money questions</li>
	<li>The accounting system</li>
	<li>Finance vs. Accounting</li>
	<li>Fiscal Period</li>
	<li>Double Entry Accounting System</li>
	<li>Going Concern Concept</li>
	<li>Historical Cost</li>
	<li>Cash vs. Accrual Accounting</li>
	<li>Revenue Recognition</li>
	<li>Matching Principle</li>
</ul>

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Key Accounting Concepts

In this lecture, we will learn about how businesses conduct transactions, how these transactions affect the financial position of the business and the concept of accounting equation.

The lecture discusses:
<ul>
	<li>Business transaction</li>
	<li>Types of accounts</li>
	<li>Accounting Equation</li>
</ul>
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Accounting Business Transactions and the Accounting Equation

Let’s assume that David, a web designer, after working for many years with IT companies, has recently started a new web design company to provide website design and other related services to local businesses in his location. The company is named “Web Design Inc.”

Running a web design company can pose many challenges. You need to get involved in all the aspects of the business, including renting the place, setting up the infrastructure, buying the required software, recruiting trained staff, marketing and promoting your business, and most importantly managing their finances.

In the following lectures, we will use various transactions at Web Design Inc. to explain the various concepts of accounting.

This article provides a summarized version of these transactions and their impact on the financial statements. It is recommended that you print a copy of this document and keep it handy while reviewing the lectures.

Assumptions:
<ul>
	<li>The business was started on June 1, 2012.</li>
	<li>The business follows the accounting period April 1, 2012 to March 31, 2013.</li>
	<li>David has rented a place for work and the first rent payment will be due on the 5th day of the following month.</li>
</ul>
Transactions at Web Design Inc.
<table border="1" cellspacing="0" cellpadding="0">
<tbody>
<tr>
<td valign="top" width="83">S. No.</td>
<td valign="top" width="85">Date</td>
<td valign="top" width="257">Transaction</td>
</tr>
<tr>
<td valign="top" width="83">Transaction 1</td>
<td valign="top" width="85">June 1, 2012</td>
<td valign="top" width="257">Invest Money in the Business

Let’s start the case study from the very beginning of the business, when David started the business. The first transaction was when he invested his personal savings of $10,000 into the business. This becomes the capital for the business. The balance sheet will show $10,000 as the cash available and $10,000 as the owner’s equity.

 </td>
</tr>
<tr>
<td valign="top" width="83">Transaction 2</td>
<td valign="top" width="85">June 5, 2012 </td>
<td valign="top" width="257">Buy a New Laptop

The first expenditure happens on June 5 when David buys a new Laptop for his work. The laptop costs him $800.

 </td>
</tr>
<tr>
<td valign="top" width="83">Transaction 3</td>
<td valign="top" width="85">June 10, 2012</td>
<td valign="top" width="257">Receive your first order

A first break comes when you sign a contract to develop the website of a restaurant at the cost of $3,000. He receives an advance payment of $1,000 for the project. David will develop this website and on successful completion, he will receive the balance payment.

 </td>
</tr>
<tr>
<td valign="top" width="83">Transaction 4</td>
<td valign="top" width="85">June 30, 2012</td>
<td valign="top" width="257">Rent is due $500. </td>
</tr>
<tr>
<td valign="top" width="83">Transaction 5</td>
<td valign="top" width="85">July 5, 2012</td>
<td valign="top" width="257">Rent is paid $500.</td>
</tr>
<tr>
<td valign="top" width="83">Transaction 6</td>
<td valign="top" width="85">July 10, 2012</td>
<td valign="top" width="257">Complete the project and send the bill for the balance $2,000.</td>
</tr>
<tr>
<td valign="top" width="83">Transaction 7</td>
<td valign="top" width="85">July 20, 2012</td>
<td valign="top" width="257">Receive the payment of $2,000 from the client.</td>
</tr>
</tbody>
</table>
 The answers will be provided as we progress with the course.

Accounting Skills - Case Study

In the previous lecture, we learned  about how different transactions affect the accounting equation. We will now go more in depth into these transactions and learn about how they affect different accounts, and how to apply the rules of debit and credit in different situations.

You will learn about:
<ul>
	<li>Types of accounts</li>
	<li>Analyzing transactions</li>
	<li>T-accounts</li>
	<li>Debits and credits</li>
	<li>Debit/Credit Rules and T-accounts</li>
</ul>
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Rules of Debit and Credit

Accounting is the act of sorting and recording information.

Accounting procedures can help you manage the huge amount of information that a business can generate. Accounting records sort and categorize financial data into groups of information that are meaningful to stakeholders of the business.

A successful and active business may encounter hundreds of transactions in a single period. What's the best way to handle incoming data?

The efficiency of the accounting process starts with accurate and well-organized data; therefore a clear understanding of procedures is important. In the previous lectures, we already learned about the different business transactions and how they are to be recorded. In this lecture, we will go through these books of accounts.

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Maintaining Accounting Records

While a business conducts a variety of transactions on a daily basis, there are a few transactions that you will come across quite often. This cheat sheet provides a list of such common transactions in a business along with their accounting treatment.
<table border="1" cellspacing="0" cellpadding="0">
<tbody>
<tr>
<td valign="top" width="189">Transaction</td>
<td valign="top" width="189">Account 1 (Dr.)</td>
<td valign="top" width="189">Account 2 (Cr.)</td>
</tr>
<tr>
<td valign="top" width="189">Receiving advance from the client</td>
<td valign="top" width="189">Asset – Cash</td>
<td valign="top" width="189">Liability – Unearned Revenue&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Raising invoice to the client</td>
<td valign="top" width="189">Asset – Accounts Receivable</td>
<td valign="top" width="189">Income (Increase in Capital)&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Buying assets on cash</td>
<td valign="top" width="189">Asset (Specific category)</td>
<td valign="top" width="189">Asset – Cash&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Receiving a bill (a bill due)</td>
<td valign="top" width="189">Expense (Specific category)</td>
<td valign="top" width="189">Liability – Accounts Payable&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Paying the bill</td>
<td valign="top" width="189">Liability – Accounts Payable</td>
<td valign="top" width="189">Asset – Cash (If paid by cash)&nbsp;

Asset – Checking A/c (If paid by check)

&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Buying office supplies</td>
<td valign="top" width="189">Expense (Specific category)</td>
<td valign="top" width="189">Asset – Cash (If paid by cash)&nbsp;

Asset – Checking A/c (If paid by check)

&nbsp;</td>
</tr>
<tr>
<td valign="top" width="189">Receiving payment from the client</td>
<td valign="top" width="189">Asset – Cash (If cash received)&nbsp;

Asset – Checking A/c (If check received)

&nbsp;</td>
<td valign="top" width="189">Asset – Accounts Receivable</td>
</tr>
</tbody>
</table>
&nbsp;

<a href="https://financetrain.com/wp-content/uploads/Cheat-Sheet-Common-Business-Transactions.pdf">Download Cheat Sheet - Common Business Transactions</a>

Cheat Sheet - Accounting for Common Business Transactions

We had started our case study for explaining accounting concepts. You can view the case study introduction at the following link:

<a href="https://financetrain.com/accounting-skills-case-study/">Accounting Skills - Case Study</a>

In this part, we present the journal entries for the transactions at Web Design Inc. We have prepared a PDF document containing the transactions and their respective journal entries. These can be viewed below:

[gview file="https://financetrain.com/wp-content/uploads/Accounting-Case-Study-Journal-Entries.pdf" width:"600px"]

Accounting Case Study - Journal Entries

We had started our case study for explaining accounting concepts.

You can view the case study introduction at the following link:

<a href="https://financetrain.com/accounting-skills-case-study/">Accounting Skills - Case Study</a>

For journal entries visit:

<a href="https://financetrain.com/accounting-case-study-journal-entries/">Accounting Case Study - Journal Entries</a>

In this part, we present the General Ledgers prepared for the transactions at Web Design Inc. At the end, you will also see the Trial Balance.

We have prepared a PDF document containing the General ledger and the Trial Balance. These can be viewed below:

[gview file="https://financetrain.com/wp-content/uploads/Accounting-Case-Study-General-Ledger-and-Trial-Balance.pdf"]

Accounting Case Study - General Ledger and Trial Balance

Accounting Skills for Managers

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Accounting Skills for Managers

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