Basic Bookkeeping for Non-Accountants - Part 1 Understanding the Basics
- Cash - can be classified as on hand and in bank.
- Accounts receivable - these are sales to customers on credit.
- Inventory - goods that are for sale
- Prepaid expenses - future expenses paid in advance
Liabilities - current & non-current
- Accounts payable - pertains to liabilities to suppliers. It can be classified as trade or non-trade payments.
- Short term loans - loans that are due within one year
- Accrued expenses - these are expenses incurred but not yet paid. Account is used if the company is on an accrual basis of accounting. Usual accruals are electricity, water, telephone, tax expense etc.
- Deferred revenue - refers to unearned revenue meaning the customer paid in advance but no service or goods is delivered yet.
- Owner's Capital - these are capital contributions made by the owner
- Owner's Drawings - these are withdrawals made by the owner
- Net Income/Net Loss - forms part of equity since this is the return on the investment made by the owner.
Expenses - expenses incurred by the business such as rental if any, office supplies, depreciation, taxes and licenses, repairs and maintenance, advertisements, courier and postage, freight, travel etc.