In Bookkeeping Literacy you learned the Art of Bookkeeping revolves around Recording and Categorizing Transactions Accurately in 1 Line Journals (except for the General Journal which is a multi-line journal). (expand for a complete summary in a "nut shell"...)

• For transaction recording accuracy, you learned about Statement Reconciliation processes when third party statements existed.

• For transaction categorization accuracy you discovered the Balance Sheet report serves as a cross check mechanism in healthy software

You discovered your 1 line journal data and your general journal data gets projected into the General Ledger as multi-record entries where it can be accessed by the software for two primary reports: 1) The Income Statement (aka the Net Income Statement) and 2) the Balance Sheet (aka the Comparative Net Worth Statement).

You learned there were Two broad categories of Accounting: Tax/Financial Accounting and Managerial/Cost Accounting.

• You realize Tax/Financial Accounting is what we are educating you on first and that's easy to recognize because our first goals are the Income Statement and the Balance Sheet

• You understand that Tax/Financial Accounting is also prioritized first because it's typically required for others like the IRS, Banks or Attorneys

• You understand that Managerial/Cost Accounting, when done at all, is only done for your own reference only

You learned there are 5 "Account Types" in Accounting. Those are best remembered via the Acronym ALEIE

• Assets, Liabilities, Equity, Income and Expense

You learned the business process for Bookkeeping for Tax/Financial Accounting can initially be summed up with the following 5 Step Routine: 1) Review Prior Work 2) Record Transactions Accurately 3) Categorize Transactions 4) Review the Income Statement 5) Review the Balance Sheet

And you realized you were able to learn all this with very little effort and no relevant stress. That's that best part. You have realized you are learning this to familiarize yourself with vocabulary and tools that will come in handy frequently in life, with the goal of getting on with the rest of your life with less regular stress related to these simple concepts.

The summary above is Bookkeeping Literacy in a nutshell.

The Income Statement (aka the Net Income Statement)

The Cash Flow Statement (subtly mentioned prior but more relevant now for more in depth understanding of the Balance Sheet to follow)

The Balance Sheet (aka the Comparative Net Worth Statement)

The "Chart of Accounts" is a list of Accounts that will be used in the Score Keeping Game.

There are ONLY FIVE types of Accounts in the Accounting , and at this point it's critical to remind you that Accounting is "Score Keeping for the Game of Commerce" and games sometimes have rules that are not intuitive until you are taught a bit more about them.

The FIVE account types are best remembered with the Acronym ALEIE

1. Assets

2. Liabilities

3. Equity

4. Income

5. Expense

The confusing part about this list is that these items are not "parallel" in use or type. If I asked you to make a list of colors, all the items in the list would be a color. If I asked you to make a list of names, all t he items in the list would be names. If I asked you to make a list of Accounting Account Types, you would list these five items, but if you tried to think of each as being like the others, they are only alike in that they are called Account Types.

Think of these five accounts like Fruit in a Basket with Labeling....

Assets and Liability accounts are opposites of each other and they are related to energy coming into and out of your game of commerce. (Lemons and Limes)

Equity Accounts are a bit unique. Like Asset and Liability accounts they are related to energy coming into and out of your game of commerce, but that money flow is NOT related directly to the business operations. You are either putting money in as an investment or you are taking money out for personal use. (pineapples)

Income and Expense Accounts are opposites of each other. These are category accounts used to categorize the majority of transactions that will go into and out of the Asset and Liability Accounts. (Labels on the fruit)