QuickBooks 2005: The Missing Manual

Accounting Basics—The Important Stuff

Intuit claims that you don't need to understand most accounting concepts to use QuickBooks. However, the accuracy of your books and your productivity will benefit if you understand the following concepts and terms:

• Double-entry accounting is the standard method for tracking where your money comes from and where it goes. Following the old saw that money doesn't grow on trees, with double-entry accounting, money always comes from somewhere. For example, as demonstrated in Table I-1, when you sell something to a customer, the money on your invoice comes in as income and goes into your Accounts Receivable account. Then, when you deposit the payment, the money comes out of the Accounts Receivable account and goes into your checking account.

Note

Each side of a double-entry transaction has a name: debit or credit. As you can see in Table I-1, when you receive a payment, you credit your income account (you increase your income when you receive a payment), but debit the Accounts Receivable account (receiving a payment decreases how much customers owe you). You'll see examples throughout the book of how transactions equate to account debits and credits.

Table 1.  Table I-1: By balancing the money on each side of a double entry, you not only keep track of where your money is, but you can also catch data entry mistakes.

Transaction	Account	Debit	Credit
Receive payment	Accounts Receivable	$1,000
Receive payment	Service Income		$1,000
Deposit ...