The preceding sections of this chapter have shown you the gears and wires behind the scenes that make everything work. Now, we are ready for the show: this is how accounting answers the three big questions we introduced at the beginning of the book:
• How much money came in?—revenue or gross income
• Where did [...]

The Three Questions
Visualize to Understand
The Accounting System
Double Entry
Bookkeeping and Accounting
Financial Statements
Accounting Principles
The Fundamental Equations of Accounting
The Advantages of an Accounting System
A Few Important Details

There are a few more details of the wires and gears behind the scenes that we should mention before we close the chapter.
Compound Entries and Split Accounts
Sometimes, we write one check for several items. This requires a more complex entry: our accounts still balance, but they are spread out over several transactions, not [...]

It’s possible to run a business on a checkbook. However, you gain a lot by setting up a simple, appropriate accounting system. The reports an accounting system generates let you do these things much more easily than you can if you just keep a checkbook.
• Find errors. If a transaction is missing [...]

Do you remember the scene from the end of The Wizard of Oz where the great big voice says, “Pay no attention to that man behind the curtain!”? Accounting is kind of like that. Behind all the terms and rules and reports, there are a few levers and gears that keep the [...]

After just one job, it’s pretty easy to understand the accounts in the ledger. But when we’ve entered dozens, hundreds, or even thousands of transactions—think how many customers come into a restaurant every day—we need reports that show us what’s going on. Looking at the account ledgers would just make our eyes [...]

Many people confuse bookkeeping and accounting. They think that bookkeeping is accounting. Bookkeeping is the act of recording transactions in the accounting system. Accounting is the way we set up the system, the principles behind it, and the ways we check the system to make sure that it is working properly. Accounting [...]

The first principle of accounting we need to understand is called double-entry bookkeeping. Each transaction made in the accounting system is entered twice. No, this does not mean we are keeping two sets of books. We enter every transaction twice, to show where the money comes from and where it is going.
An Italian monk, Luca [...]

You need an accounting system that’s the right size to handle the demands of your business. It also has to be well designed so that it gives you the information you need. Many businesses can be managed successfully with nothing more complicated than a checkbook register. As volume increases, however, you may go to [...]

Start with an aerial view. Imagine your business or organization as a country. It may be a big country or a small one. You may live in a small town or the bustling capital. Your country has mountains and forests, fields and farms, rivers and lakes. Next, imagine that all the cash that [...]