Welcome to Accounting Tutor
This interactive tutor covers everything from basic accounting concepts to financial statements and ratios. Navigate through the topics on the left, use the calculator tools, and test yourself with quizzes.
📖 10 Topics
Comprehensive lessons covering core accounting principles.
🧮 Calculator Tools
Interactive calculators for common accounting formulas.
🧠 Quiz Mode
Test your knowledge with instant feedback questions.
What is Accounting?
Accounting is the systematic process of recording, classifying, summarizing, and interpreting financial transactions of a business. It provides a clear picture of a company's financial health and is essential for decision-making, taxation, and investor reporting.
🌟 Why Learn Accounting?
- Understand how businesses track money
- Read and analyze financial statements
- Make informed business and investment decisions
- Prepare for careers in finance, management, or entrepreneurship
Basic Accounting Concepts
These foundational principles guide how accounting is performed across all businesses and industries.
Key Accounting Principles
- Entity Concept: Business is treated as separate from its owners.
- Going Concern: The business will continue operations indefinitely.
- Accrual Basis: Transactions recorded when they occur, not when cash changes hands.
- Consistency: Same accounting methods used from period to period.
- Conservatism: Recognize losses immediately, but revenues only when earned.
- Materiality: Significant information must be disclosed.
- Matching Principle: Expenses matched to the revenues they help generate.
Types of Accounts
| Account Type | Description | Examples |
|---|---|---|
| Assets | Resources owned by the business | Cash, Equipment, Inventory |
| Liabilities | Obligations owed to others | Loans, Accounts Payable |
| Equity | Owner's claim on assets | Capital, Retained Earnings |
| Revenue | Income earned from operations | Sales, Service Revenue |
| Expenses | Costs incurred to generate revenue | Rent, Salaries, Utilities |
The Accounting Equation
The accounting equation is the foundation of double-entry bookkeeping and all financial statements.
Understanding the Equation
This equation must always be in balance. Every financial transaction affects at least two accounts, keeping this equation balanced.
- Assets = What the business OWNS
- Liabilities = What the business OWES
- Equity = Owner's stake (Assets − Liabilities)
Expanded Equation
Example Transactions
| Transaction | Assets | Liabilities | Equity |
|---|---|---|---|
| Owner invests $10,000 | +$10,000 | No change | +$10,000 |
| Buy equipment for $3,000 cash | +$3,000 / −$3,000 | No change | No change |
| Borrow $5,000 from bank | +$5,000 | +$5,000 | No change |
| Pay $500 rent | −$500 | No change | −$500 |
Debits & Credits
Every transaction in double-entry accounting has a debit and a credit that must be equal. Understanding debit and credit rules is essential.
The Golden Rules
- Real Accounts: Debit what comes in, Credit what goes out.
- Personal Accounts: Debit the receiver, Credit the giver.
- Nominal Accounts: Debit all expenses & losses, Credit all incomes & gains.
Normal Balances
| Account Type | Normal Balance | Increase with | Decrease with |
|---|---|---|---|
| Assets | Debit | Debit | Credit |
| Liabilities | Credit | Credit | Debit |
| Equity | Credit | Credit | Debit |
| Revenue | Credit | Credit | Debit |
| Expenses | Debit | Debit | Credit |
| Dividends | Debit | Debit | Credit |
💡 Memory Tip: DEALER
Dividends, Expenses, Assets → Normal Debit balance
Liabilities, Equity, Revenue → Normal Credit balance
Journal Entries
A journal is the book of original entry. Each transaction is first recorded here before being posted to the ledger.
Format of a Journal Entry
| Date | Account | Debit ($) | Credit ($) |
|---|---|---|---|
| Jan 1 | Cash | 10,000 | |
| Capital | 10,000 | ||
| (Owner invested $10,000 cash) | |||
Common Journal Entry Examples
| Transaction | Debit | Credit |
|---|---|---|
| Purchased inventory on credit | Inventory | Accounts Payable |
| Paid salaries | Salary Expense | Cash |
| Sold goods for cash | Cash | Sales Revenue |
| Received payment from customer | Cash | Accounts Receivable |
| Paid loan instalment | Loan Payable | Cash |
| Purchased equipment on credit | Equipment | Accounts Payable |
Ledger & T-Accounts
The ledger is a collection of all accounts. T-accounts are a visual representation used to track debits and credits for each account.
T-Account Structure
Trial Balance
After posting all journal entries to the ledger, a trial balance is prepared to verify that total debits equal total credits.
A trial balance does not guarantee the absence of errors — only that the equation balances.
Financial Statements
Financial statements are formal records of a company's financial activities. There are four main statements.
1. Income Statement (Profit & Loss)
Shows revenues and expenses over a period of time.
| Item | Amount |
|---|---|
| Revenue | $50,000 |
| Cost of Goods Sold | ($20,000) |
| Gross Profit | $30,000 |
| Operating Expenses | ($12,000) |
| Net Income | $18,000 |
2. Balance Sheet
A snapshot of assets, liabilities, and equity at a point in time.
3. Cash Flow Statement
Tracks cash inflows and outflows across three activities:
- Operating: Day-to-day business activity
- Investing: Purchase/sale of long-term assets
- Financing: Loans, stock issuance, dividends
4. Statement of Owner's Equity
Financial Ratios
Ratios help analyze a company's performance, liquidity, and financial health.
Liquidity Ratios
| Ratio | Formula | Ideal |
|---|---|---|
| Current Ratio | Current Assets / Current Liabilities | ≥ 2:1 |
| Quick Ratio | (Current Assets − Inventory) / Current Liabilities | ≥ 1:1 |
| Cash Ratio | Cash / Current Liabilities | ≥ 0.5 |
Profitability Ratios
| Ratio | Formula |
|---|---|
| Gross Profit Margin | (Gross Profit / Revenue) × 100% |
| Net Profit Margin | (Net Income / Revenue) × 100% |
| Return on Assets (ROA) | Net Income / Total Assets × 100% |
| Return on Equity (ROE) | Net Income / Equity × 100% |
Efficiency & Leverage Ratios
| Ratio | Formula |
|---|---|
| Inventory Turnover | Cost of Goods Sold / Average Inventory |
| Accounts Receivable Turnover | Net Credit Sales / Avg Accounts Receivable |
| Debt-to-Equity Ratio | Total Liabilities / Total Equity |
| Interest Coverage Ratio | EBIT / Interest Expense |
🧮 Accounting Calculator Tools
Use these interactive tools to compute common accounting values.
Net Income Calculator
Current Ratio Calculator
Gross Profit Margin
Debt-to-Equity Ratio
Break-Even Point
Owner's Equity Calculator
🧠 Accounting Quiz
Test your accounting knowledge! Answer all questions to see your score.