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ACCOUNTING 101: EASY BOOKKEEPING & ACCOUNTING FOR ​​BEGINNERS, ZEN OF BOOKKEEPING AND ACCOUNTING & MUSIC BY DR. DENVER

Bookkeeping and Accounting for beginners, high-school, college students and new learners. Books are available for sale on Amazon.com and seen on YouTube Videos, and music by Dr. Denver such as Covers of Christmas favorites Jingle Bells, Mary's Boy Child, Good King Wenceslas, Silent Night, Amazing Grace, Attitudes, Color Me, Love Revolution, Ode to the Sun, Sweets For My Sweet (mechanical licenses secured for cover versions where needed) etc. listed on Music and Fan Links pages, available on many online music platforms.

ACCT101: Introduction to Accounting 101: Easy Accounting and Bookkeeping

The material in the book is based on a simple framework for teaching and learning accounting and bookkeeping using activities related to the elements of a Simple Combined Chart of Accounting and Trial Balance shown on the following page and throughout the book. Beginners tend to get overwhelmed at the number of concepts and theories contained in the chapters in accounting textbooks, that they lose sight of the main reasons for studying each chapter. I hope that by including “What is the purpose of this chapter?” in the first few lines of each chapter, the reader will see its purpose....

Learning the many concepts of bookkeeping and accounting can be made easier by reviewing free videos created, owned, and published by professional instructors, including Dr. Denver Pettigrew, and made available on YouTube.

A Winning Combination: Accounting 101 & Free Bookkeeping and Accounting Videos Available online on YouTube etc.

Learning the many accounting and bookkeeping concepts in this book can be enhanced and supplemented by watching related free videos created and published online by Dr. Denver Pettigrew and other publishing organizations and  individuals on YouTube.com. New learners can learn office software products offered by Microsoft Corporation and Intuit online, and other free online resources to supplement their accounting and related computer skills.

ACCT101:

Chapter 1: Must Read Overview of Accounting and Bookkeeping

Question: What is the purpose of this chapter?

Answer: To introduce you to the objectives of an accounting and bookkeeping system and important fundamental concepts and tools.

Before we can start recording the financial activities of the firm, we must define what accounting and bookkeeping is about. Because accounting and bookkeeping activities are inter-related and sometimes used interchangeably for simplification of explanations we will use the terms interchangeably although technically they are different. Accountants must know bookkeeping and attain a much higher level, and variety, of education and certification, to provide operating and strategic expertise to different levels of managers in firms....

THREE MAIN SETS OF BOOKKEEPING/ACCOUNTING ACTIVITIES

A. RECORDING AND POSTING Business or Economic Transactions in a Timely and Accurate manner Based on a Specific Chart of Accounting (COA).

B. CLASSIFYING the Transactions Posted in Item (A) Into Five Groups of Accounting Types: (1) Assets, (2) Liabilities, (3) Equity, (4) Revenue, (5) Expenses.

C. SUMMARIZING AND REPORTING the Classified Groups in (B) for Reporting the Results to Owners, Investors, Government Agencies and Other Parties in the Form of Financial Statements (Balance Sheet, Income Statement etc.) and Special Reports.

Note: Most Accounting Software are Programmed to Automatically Complete Items (B) and (C) Once Transactions in (A) are Correctly Completed Using the Chart of Accounts (COA) and Saved.

ACCT101: Chapter 2: Business Transactions, Chart of Accounts, and General Ledger

Question: What is the purpose of this chapter?

Answer: To demonstrate how business transactions are recorded and posted in a typical accounting system.

Business transactions are activities performed on behalf of a firm that are measured or valued by money. Business transactions are expenditures (or expenses) or receipts for goods or services for cash, or contractual obligations to be paid or received at a later date—on terms. These business transactions are recorded by the accountant in the books of the business on journal entries guided by the chart of accounts. Business transactions are usually supported (evidenced) by documents such as invoices, bills, receipts, notes, cash, contracts and written agreements, shipping documents, receiving reports, and paper or digital (computer) statements etc.

It is important to distinguish between personal transactions of the owners, and business transactions on behalf of or by the business as an independent organization (entity) separate from the owners. The business is treated as a separate, non-organic, person in the eyes of the law and referred to as a business entity....

EIGHT FUNDAMENTAL SETS OF BOOKKEEPING/ACCOUNTING CONCEPTS TO KNOW

1. CHART OF ACCOUNTS: A Preset List of A Firm’s General Ledger Account Numbers and Their Related Titles Used by a Firm to Record Transactions Incurred on Behalf of the Firm in a Consistent and Systematic Manner and is the Building Block of all Bookkeeping and Accounting Systems. The Creation of a Chart of Accounts (COA) is Generally the First Major Activity Completed by Senior Management Upon Starting a Business. Most Accounting Software Contains One or More Industry-Based Chart of Accounts That can be Customized to Fit the Operating Activities of Different Firms/Businesses.

2. JOURNAL & GENERAL LEDGER: Journals are Used to Initially Record Business Transactions Prior to Posting Them to the General Ledger Accounts Shown in the Chart of Accounts (COA).

3. DOUBLE-ENTRY ACCOUNTING (DRs & CRs: Every Economic/Business Transaction Requires Recording Amounts to Two or More General Ledger Accounts to Indicate the Movement or Transfer of the Related Values Into (DR) and From (CR) One or More Ledger Accounts Based on the Chart of Accounts (COA).

4. DEBITS (DR) & CREDITS (CR): Accounting Language Used to Record/Post Transactions Amounts on the Left (DR) or Right (CR) Amount Columns of the Journal or General Ledger Accounts (See Items 2 & 3) and Based on the Chart of Accounts and Supported by Evidence Such as Receipts, Invoices, Statements etc.

5. JOURNALIZE: (See Item 4) Accounting Language Used as verb to Indicate Recording of Transactions in the Accounting Journal (Item 2) Using the Chart of Accounts (COA).

6. ASSETS, LIABILITIES, & EQUITY ACCOUNTS: Listed in the Chart of Accounts (COA), They Indicate (a) Tangible and Intangible Resources and Items Owned (Assets) by the Firm, (b) Owed by the Firm to Others (Liabilities—Debt), and (c) Owed to/by Investors and Owners of a Firm (Equity). Put Another Way, Assets are Financed by Liabilities/Debt by Third Parties and/or Equity by Owner Investors. See Accounting Equation below.

7. REVENUES & EXPENSES: Amounts Recorded in Accordance With the Accounts Listed in the Chart of Accounts (COA). They Indicate Income Earned from Sales, Services, Commissions, Interest etc. by the Firm (Revenues—CR) and Costs (Expenses—DR) Incurred by the Firm in its Operations.

Note: These are Summarized and Displayed in the Income Statement, and the Net Resulting Difference Between Total Revenues and Total Expenses, the Net Income (CR) or Net Expenses (DR) is Combined With the Total Equity Amount Each Financial Period Shown in the Balance Sheet.

8. THE ACCOUNTING EQUATION, A = L + E: Is Considered the Most Important Concept in Bookkeeping and Accounting. It Summarizes the Concepts of Double-Entry Accounting (Items 3 & 4) and Indicates that Total Assets of the Firm is Financed by Debt to Third Parties (Liabilities) and Equity Investments by Owners of the Firm (ITEM 6). The Amounts must Balance as Indicated in the Accounting Equation. This Relationship is Summarized and Displayed in the Firm’s Balance Sheet. Continued below...

ACCT101: Chapter 3: The General Ledger and Trial Balance

Question: What is the purpose of this chapter?

Answer: Provide an overview of the makeup of a typical accounting system using general ledger accounts.

The general ledger contains all the firm’s ledger accounts listed on the chart of accounts (COA). Business transactions are posted to the individual ledger accounts from the entries recorded in the journal on the same sides as recorded in the journal, and the balances in the ledger accounts updated immediately. This type of immediate updating of the general ledger account balances are called perpetual updating, as shown in the tables below.

Journal entries relating to general ledger accounts are sometimes totaled and posted periodically (weekly or monthly) as one entry in the account instead of individually....

“I read to learn; I read more to learn more." Dr. Denver G. Pettigrew, PhD, CPA, MBA

“Collaborative Learning: Superior learners seek at least two to six additional sources of information.” Dr. Denver G. Pettigrew, PhD, CPA

"If you can read, write, use a simple calculator to add, subtract, multiply, and divide, you too can learn basic accounting and bookkeeping.” Dr. Denver G. Pettigrew, PhD, CPA, MBA

An exciting new approach learning introductory Bookkeeping and Accounting specially written for high-school seniors, new college students and new learners 

The material in the book is based on a simple framework for teaching and learning accounting and bookkeeping using activities related to sections of a Simple Combined Chart of Accounting and Trial Balance shown throughout the book. Beginners are overwhelmed at the number of concepts and theories contained in the chapters in regular accounting textbooks and lose sight of the main purpose of each chapter. The first section in each chapter begins with What is the purpose of this chapter? so readers can see its main purpose.

Accountants and bookkeepers use a step-by-step set of activities to record, update, and report on the financial transactions of an organization maintained in three main sets of financial records: (1) Journals (JEs), to initially record financial or economic business transactions; (2) General Ledger accounts (GL), to post the journal entries to the appropriate accounts; and (3) Financial statements including the balance sheet, income statement, statement of retained earnings, statement of changes in the owners’ equity account, and statement of cash flows, to summarize the GL account balances and report on the operations and financial health of the organization. The terms firm, company, and organization is used interchangeably throughout the book.

As the famous far-eastern saying goes “a picture is worth ten thousand words,” I have used many examples, diagrams, and figures to demonstrate simple accounting and bookkeeping concepts and practices used in the accounting and bookkeeping profession in the real world (Barnard, 1927).


An easy step-by-step guide filled with examples ideal for beginners, including high-school seniors, new college students and other learners. Illustrations including:

Accounting 101: Easy Accounting and Bookkeeping for Beginners and The Zen of Bookkeeping and Accounting: Basic Accounting For Pre-College and New Learners are published on Amazon.com

Copyright © 2017, 2018 Denver G. Pettigrew, Ph.D., CPA, MBA

All rights reserved. Parts of this book may not be reproduced in any form without the written permission from the author with the exceptions of the following quotations: “If you can read, write, use a simple calculator to add, subtract, multiply, and divide, you too, can learn basic accounting and bookkeeping;” “I read to learn; I read more to learn more;” and “Collaborative Learning: Superior learners seek at least two to six additional sources of information.”

Sections of information in this book were previously written and published in The Zen of Bookkeeping and Accounting: Basic Accounting for Pre-College and New Learners by the author. Continued below....


Summary of Six Steps in The Accounting Process

  • Step 1: Analyze Transactions
  • Step 2: Record Journal Entries
  • Step 3: Post to General Ledger
  • Step 4: Prepare Trial Balance
  • Step 5: End-of Period Adj. Entries
  • Step 6: Compile Financial Statements

Please see chapters in the book for detailed information on each step.

The Double-entry Concept of Accounting

The double-entry concept states that every business transaction involves an equal exchange of value between the two sides of every transaction: a receiver and a giver. Business transactions are therefore referred to as give-get activities because when value is given, the same value must be received by someone on the other side of the transaction. In accounting, the give-get transactions are recorded in the journal and posted in representing general ledger accounts. The account receiving the value is debited and the account giving the value is credited for an equal amount. Accountants look at the chart of accounts to identify the general ledger accounts in which to record transactions—debiting one or more accounts receiving value and simultaneously crediting one or more accounts giving up the value.

THE DOUBLE-ENTRY SYSTEM OF ACCOUNTING: DEBITS MUST EQUAL CREDITS

DEBIT DR

CREDIT CR

DEBITS (LEFT) MUST EQUAL (BALANCE) CREDITS (RIGHT)

GET MUST EQUAL (BALANCE) GIVE

RECEIVE MUST EQUAL (BALANCE) SOURCE

IN MUST EQUAL (BALANCE) OUT

TO MUST EQUAL (BALANCE) FROM

Please see chapter 1 in the book for more detailed information. You can also find helpful videos on YouTube to assist you in learning the concepts in the book. Continued below...

The Accounting Equation

The accounting equation concept, Assets = Liabilities (debts) + Owners’ Equity, demonstrates the relationship between groups of items and their values owned by the firm for use in the business—assets, and the sources of financing for the assets—liabilities plus owners’ equity. Ledger accounts for assets usually have debit balances, and the ledger accounts for liabilities (debts) and owners’ equity (capital) normally have credit balances. It is called an equation because, if you recall the double-entry system of accounting concept discussed in the previous section, the total of the accounts with debit balances must equal the total of the accounts with credit balances.

The Accounting Equation

ASSETS = LIABILITIES + EQUITY

LIABILITIES = ASSETS - EQUITY

EQUITY = ASSETS - LIABILITIES

Please see chapter 1 in the book for more detailed information. You can also find helpful videos on YouTube to assist you in learning the concepts in the book. Continued below...

let us look at the structure of the combined chart of accounts (COA) and trial balance at the end of chapter 1 and imagine moving money (financial transactions) out of (credit) one general ledger account and simultaneously into (debit) another general ledger account. A COA is a list of general ledger accounts set up and used in business firms to identify, record, and post financial transactions conducted on behalf of the organization. Creating and setting up the COA is usually among the first set of activities done by the accountant along with setting up a new bank account for the business.

The general ledger accounts are numbered and classified in the COA:

• The Balance Sheet (BS) section of the COA contains subcategories listing Asset account numbers beginning with the number 1; Liabilities account numbers starting with the number 2; and Equity account numbers starting with the number 3. The ledger accounts in the balance sheet section are called permanent accounts because their balances are carried over from one financial period to the next.

• The Income Statement (IS) section of the COA shows subcategories listing Revenue account numbers beginning with the number 4; and Expense account numbers starting with the number 5. The ledger accounts in the income statement section are called nominal or temporary accounts because their balances are closed out to zero by transferring their totals to an income summary account at the end of each financial period. The next financial period begins with zero amounts in these accounts. Continued below...

Please see chapter 2 in the book for more detailed information.

Step 1 Analyze Financial Transactions

Using the Chart of Accounts, analyze financial transactions to determine which accounts to debit and which to credit as indicated in the sections on the Double-entry Concept and Chart of Accounts (COA). Business transactions are activities performed on behalf of a firm that are measured or valued by money. Business transactions are expenditures (or expenses) or receipts for goods or services for cash, or debt to be paid or received in the future—on terms. These business transactions are recorded by the accountant in the books of the business on journal entries using the COA. Transactions are usually supported by documents such as invoices, bills, receipts, notes, cash, contracts etc., and are generally between six main pairs of give/get categories of accounts of a business organization: (1) Assets/Assets (A/ A), (2) Assets/Liabilities (A/ L), (3) Assets/Expenses (A/E), (4) Assets/Revenues (A/R), (5) Liabilities/Expenses (L/E), (6) Assets/Owners’ Equity (A/OE), or a combination of them.

Please see chapter 2 in the book for more detailed information. Continued below...

The chart of accounts (COA) is used to analyze and record business transactions in the journal (see Step 1). The general journal is often called the book of first or prime entry because this is where the business transactions are usually first recorded in the books of the firm. Accountants use the COA to aid in analyzing business transactions, to identify the give-get relationship of the transaction, and determine which general ledger is receiving the value (debit) and its source--where the value is coming from (credit). Journalizing a transaction is the accounting jargon used to record entries in the journal and involves debiting—recording values in the debit section, and crediting—recording values in the credit section of the journal. It is important to remember the double-entry concept to ensure the journal balances.

Please see chapter 2 in the book for more detailed information. Continued below...


The general ledger contains all the firm’s ledger accounts listed on the chart of accounts (COA). Business transactions are posted to the individual ledger accounts from the entries recorded in the journal on the same sides as recorded in the journal in Step 2, and the balances in the ledger accounts updated immediately.

Please see chapter 3 in the book for more detailed information. Continued below

Step 4 Prepare a Trial Balance of All Balances in the General Ledger

A Trial Balance (TB) is a tool used by accountants to verify that the total general ledger accounts with debit balances are equal in total to the accounts with credit balances; accounts with zero balances are generally not shown on a TB (see Step 3). The TB does not verify the accuracy of the postings or amounts; only that the total debits equal the total credits of the accounts in the general ledger.

Please see chapter 3 in the book for more detailed information. Continued below...

Step 5 Make End-of-period Adjusting Entries for Other Transactions

At the end of an operating period, accountants make adjusting journal entries for unrecorded revenue and expenses to determine the true operating results for the period. This is necessary because payment for some resources used by the firm might not have been made or paid in advance, or transfers from unearned revenues to recognize actual revenues earned, might need to be recorded to determine the true profit or loss for the period. Examples of such adjustments include: payments made in advance for insurance and rent, called prepaid expense (technically prepaid assets); accruals for unpaid wages and salaries of employees; depreciation expense, estimate for bad debts; interest accrued on long-term debts; reclass from unearned revenue to revenue; and inventory adjustments and cost of sales.

Please see chapter 6 in the book for more detailed information. Continued below...

Step 6 Prepare Post-adjusted TB and Create End of Period Financial Statements

After the adjusting entries are completed and posted to the general ledger accounts (see Step 5), a post-adjustment trial balance is prepared, and the debit and credit columns totaled to check that they are equal in accordance with the double-entry accounting concept discussed earlier. A review of the Post-Adjustment Chart of Accounts and Trial Balance on the next page shows the totals of the Debit and Credit columns are equal (also referred to as footing the TB). After the accountant has reviewed the TB and is satisfied that it is in order, he or she proceeds to the next phase of the systematic steps: closing the books and creating financial statements, Income Statement, Balance Sheet etc., from the closing end-of-period General Ledger Balances.

Please see chapters 4, 5, 6 and 7 in the book for more detailed information.