Foundations of Bookkeeping

The double-entry system, chart of accounts, debits & credits, and how financial records are organized.

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Foundations of Bookkeeping

The Accounting Equation

Assets = Liabilities + Equity

Every transaction keeps this balanced. Assets = what the business owns. Liabilities = what it owes. Equity = owner's stake.

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Double-Entry System

Every transaction touches at least two accounts -- equal debits and credits.

Transaction	Debit	Credit
Client pays $500 invoice	Cash +$500	Accounts Receivable --$500
Pay $200 internet bill	Internet Expense +$200	Cash --$200
Owner invests $10,000	Cash +$10,000	Owner's Equity +$10,000
Buy $3,000 laptop on credit	Equipment +$3,000	Accounts Payable +$3,000

Memory trick: DEAL -- Debits increase: Drawings, Expenses, Assets, Losses. Credits increase: Liabilities, Revenue, Equity, Gains.

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Chart of Accounts Structure

1000--1999  Assets         (Cash, AR, Equipment)
2000--2999  Liabilities    (AP, Credit Cards, Loans)
3000--3999  Equity         (Owner's Capital, Retained Earnings)
4000--4999  Revenue        (Service Revenue, Product Sales)
5000--5999  Expenses       (Rent, Utilities, Payroll, Software)

In QuickBooks: set this up once under Chart of Accounts. Every transaction maps here.

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Cash vs Accrual Accounting

Method	Record Revenue When	Best For
Cash	Cash received	Freelancers, small sole proprietors
Accrual	Invoice sent / service delivered	Most businesses, required for GAAP

Know which method your client uses before entering a single transaction.

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Journal Entry Format

Date: Nov 1, 2026
  Dr. Office Supplies Expense    $150
    Cr. Cash                          $150
Memo: Pens, notebooks for office use

In QuickBooks, recording expenses or invoices creates journal entries automatically behind the scenes.

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Trial Balance: First Accuracy Check

Account	Debit	Credit
Cash	$8,200
Accounts Receivable	$3,500
Accounts Payable		$1,200
Revenue		$12,000
Expenses	$1,500
Total	$13,200	$13,200 --

Unequal totals = a posting error. Find it before producing financial statements.

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Professional Standard: Confidentiality

Never discuss client financials outside of work
Use strong, unique passwords for every accounting system
Never store client data on personal devices without encryption
If you find irregularities, report to your supervisor -- not to third parties

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In this module

Double-Entry Bookkeeping

Chart of Accounts (COA)

Debit

Credit