Getting started with Accounting

During my first year as a freshman at West Chester University

, I got to understand the real importance of taking accounting. Accounting opens up many doors for students like ourselves. It teaches us not only how to balance our money, but the importance of why you have to balance and keep track of money. Accounting is not as hard or as boring as most people tend to make it. But before one can start to become an accountant it is important to understand the differences between debit and credits, the basics. But to get the basics it is very important to memorize and understand one simple equation. That is Assets = liability + equity with Revenue-Expenses under equity. It is important to keep this equation balanced at all times otherwise all of your recorded information will be unbalanced and information could be lost.

When beginning is it is important to record everything in T-accounts so it can make it easier when moving onto general journals and so forth. Usually when transactions are recorded it is important to have them put into T-Accounts. T-Accounts are T shaped charts where on top of the T is the name of that account. On the left side of the T is where you would record all of your debits. On the left side of the accounts is where all of your credits are recorded.

So I am going to explain the difference between a debit and a credit in a cash account. A debit in a cash account would be considered when you receive cash from someone. For instance if your perform a service for someone for $100.00 then you would record that on the debit, left side of your T-Account, in the cash account. A credit is considered when you pay off something with cash. For example if you had to pay $100.00 for rent, then you would record that transaction on the right side of your cash account. But when recording transactions such as these, it is important to keep everything balanced. So if you received $100.00 for services performed, which is a debit, than you want to credit service revenue for $100.00. After it is recorded you have to record that transaction into a general journal to keep track of all of your transactions. The journal would be recorded debit cash for $100.00 and credit service revenue for $100.00. To keep the rent transaction balanced in your T-Accounts you would credit your cash account for $100.00 and debit your rent expense for $100.00. The journal would be recorded as debit to rent expense for $100.00 and credit to cash for $100.00.

When performing services or when paying off expense, cash is not always on hand, and that is called paying on account. So if your services performed for $100.00 was paid on account your entries into the T-accounts and the journal would be different from when you are paid with cash. If paid on account you would debit, left side, your accountants' receivable account. Accounts receivable is an account in which the company or person has done a service but is still waiting to receive the money. So after you debit accounts receivable, you would keep the credit the same, which is a credit to service revenue for $100.00. If you were to pay off a rent expense on account, you would record the debit the same as rent expense. But the credit would not be cash because you paid on account. You would credit Accounts payable for $100.00. Accounts payable is exactly how it sounds, it is a account to record all the money that you owe.

Those are just a few of the basics of debits and credits. Of course it can get a lot more complicated and confusing, but with just knowing what a debit is and a credit is can help further your understanding of accounting and give you a head start when learning accounting. It is important to record every transaction that you encounter because forgetting one transaction could result in an unbalanced book, which could mean overdrafts. An overdraft is when you take out or spend more money then you have and will most likely result in a fee. So accounting is a key subject and a good background to have even if you are not an accounting major. It is very important to know how to manage your money and who knows if your that good with managing your own money, you might be good enough to manage other peoples money.

Getting started with Accounting

By: Josh Leahy

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