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Guides - Fundamentals
Fundamentals guides.
Essential concepts and basics of chart of accounts. Long-form, open-access references — read them here, then test the ideas against a working chart in the free demo.
11 guides/Long-form reference/All open access
01The chart of accounts, explained onceThe ten concepts behind every chart of accounts, each explained on one page and never re-explained. Every industry guide on this site builds on these pages instead of repeating them.5 min readBeginner->02Account Types Explained: Assets, Liabilities, Equity, Revenue, ExpensesEvery account in your chart belongs to one of five types, and the type decides which side increases it, which statement it lands on, and which questions your books can answer. This page walks the five types through the chart, an entry, and the statements.9 min readBeginner->03Account Numbering Systems: How the Number Ranges in a Chart of Accounts WorkAn account number is not a label. It is a sorting rule that decides where every transaction lands on the financial statements. This page defines the standard ranges, shows them in a chart, and follows one number through a journal entry to the balance sheet.8 min readBeginner->04Debits and Credits: The Two Sides of Every EntryEvery transaction in your books is recorded twice, once as a debit and once as a credit, and the two totals always match. This page explains which side increases each account type, how an entry is written, and where each side lands on the statements.10 min readBeginner->05Cost of Goods Sold vs. Operating Expense: Where the Line Goes and Why Gross Margin Depends on ItEvery cost a business pays lands on one side of a line: cost of goods sold or operating expense. Gross margin is the number that line produces. This page defines the split, shows how it looks in a chart of accounts, and walks it through a journal entry and a multi-step income statement.9 min readBeginner->06Accrual vs. Cash Basis: When a Sale and a Bill Actually CountCash basis books record money when it moves. Accrual books record a sale when it is earned and a cost when it is incurred. The difference decides which accounts exist in your chart, what your monthly profit means, and whether you can see what customers owe you and what you owe suppliers.9 min readBeginner->07Fixed Assets and Depreciation: How Equipment Reaches the BooksA truck, a machine, or a building is paid for once and used for years. The chart of accounts needs four accounts to show that: the asset, its accumulated depreciation, the monthly depreciation expense, and the gain or loss when it is sold. This page walks each one from purchase to statement line.9 min readIntermediate->08Liabilities and Accruals: What You Owe Before the Bill ArrivesA liability is money you owe or an obligation you have taken on. Some arrive as invoices. Others, like wages earned this week, interest on a loan, and warranty claims that have not come in yet, have to be estimated and booked before anyone sends a bill. Here is how each kind gets into the chart, the entries that record them, and where they land on the balance sheet.9 min readIntermediate->09Parent and sub-accounts: hierarchy and granularityHow parent accounts and sub-accounts let one chart of accounts report at two levels of detail, when a split pays for itself, and when to stop splitting.8 min readBeginner->10How Accounts Become Statements: From the Chart to the Reports You ReadEvery line on the income statement, the balance sheet, and the cash flow statement is an account balance or a sum of account balances. That means the chart of accounts decides, in advance, which lines your reports can show. This page walks the path from account to statement line.11 min readBeginner->11GAAP basics for a small business chart of accountsThe four GAAP ideas that shape a chart of accounts: matching expenses to the revenue they earned, staying consistent from period to period, judging what is material, and classifying each account correctly. Not a compliance checklist.9 min readBeginner->
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