Learn Bookkeeping Basics & Recording Transactions with Wave (A Free Accounting Software). | Uday Gehani | Skillshare

Learn Bookkeeping Basics & Recording Transactions with Wave (A Free Accounting Software).

Uday Gehani, Dedicated to make complex topics easy!

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14 Lessons (1h 2m)
    • 1. Promo Video

      1:34
    • 2. Essential #1: Understanding the Accounting Cycle

      1:47
    • 3. Essential #2: Recording Journal Entries

      2:59
    • 4. Essential #2: Debits & Credits (The Secret Shortcut)

      5:04
    • 5. Essential #3: The Accounting Equation (Pt 1)

      3:33
    • 6. Essential #3: The Accounting Equation (Pt 2)

      3:11
    • 7. Essential #4: The Chart of Accounts

      10:49
    • 8. Congrats- Your halfway done!

      0:29
    • 9. The Various Accounting Software Available in the Market

      2:53
    • 10. An Introduction to Wave

      1:58
    • 11. Setting Up a New Wave Account

      3:32
    • 12. Setting Up a Chart of Accounts in Wave

      8:24
    • 13. Recording Transactions in Wave

      14:21
    • 14. A Goodbye of Sorts!

      1:05

About This Class

This class is a quick and easy way to learn the Fundamentals of Bookkeeping as well as give you a behind the scenes walkthrough on how transactions are categorized and recorded using Wave- A Free Accounting Software.  

If you are looking to start recording your Finances and are not really sure how to start, then this is the perfect class to get started.  

You will learn the essentials of Bookkeeping and also learn different types of journal entries to record any type of transaction in Wave. 

  

Transcripts

1. Promo Video : hi there if recording your numbers is something you run away from or if accounting or bookkeeping has ever sounded like an alien language to you Well, then you're in luck because I've got my friend Joy from Mars to help explain it. After all, better help us understand alien language than an Indian himself. But because he's really busy and needs to head back soon, we've decided to wrap this entire class up in 60 minutes. Focus of these 60 minutes is for you to learn the essentials of bookkeeping and apply your knowledge in practice on. For those of you that are new to the numbers, bookkeeping is the part of accounting. Were you to card with any transactions that happened in a business? Many accountants were argued that this is probably the most important part because after all, if you don't record the numbers in a business correctly, how in the world would you make decisions related to so in the 1st 30 minutes, I teach you the four essentials of bookkeeping, which is a great place to start. If you are a beginner and you want to get your feet with after you're done with the four essentials in the next 30 minutes, we apply your knowledge in a free accounting software core so that you get some real world use off your new farm knowledge. My objective is that by the end of this class, not only understand that hearing, but also get some practical experience with it and in the big picture, see how easy this really is. So thanks so much for taking the time to watch this video, and I hope to see you inside the class. 2. Essential #1: Understanding the Accounting Cycle: hi, guys. For a second, I want you to think about your favorite food and sorry guys. I think I got a big cattle either. Let's get back to accounts. Now let's say I told you today to prepare your favorite food for me and I, as you were nice enough to say Yes, let's go. To start you get together a list of ingredients that you need. You head down to the supermarket to buy some groceries, you come back. You assemble all the ingredients together in the kitchen. Follow the recipe and Walla. We have our favorite food. By now, you're probably wondering, what in the world does this have to do? Anything with accounting, but a lot. What you did is you just follow the process, a process to make your favorite food the same way that you follow the process to make your favorite food. There's a process which accountants used to record. Each transaction that happens in a business just like the Gola for cook is to take a bunch of ingredients, follow process and make a dish. The goal of an accountant in a business is to take a bunch of transactions are happening of business and eventually end up making financial statements in accounting. The process of steps start with collecting transactions and eventually end up creating financial statements. This process of steps is called the accounting cycle. I hope you are missing the concept. They're going to go with accounting cycle in much more detail with the next few lectures. For now, I'm gonna go get something to eat because all this talk about food has made me really hungry. Thanks. See in the next lecture. 3. Essential #2: Recording Journal Entries : Hello there. Future royalty off account. Will. The goal off our lecture today is to learn the first few steps of the accounting cycle. Do you remember my friend Joey? Well, after Joey visited us from Mars, he liked art and decided to stay on. So to pay the bills, he gotten internship in a medium sized company that manufactures laptops. And lo and behold, he ended up getting a job working in the accounts department. What a coincidence. His new boss, Phil. There's Joey that his job is to process transactions of the company and prepare financial statements. Basically, that means Joey has been put in charge of the accounting cycle. So how's Joey being trained to do his job? Well, let's go through this step by step. Step one. Joey first collects and analyzes all the financial transactions undertaken by his company. Basically, he's given invoices, receipts for disorders and whatever he needs to verify the transaction. These documents are given to him our call source documents. Transactions in his company include sail off laptops or chases supplies, payment of salaries and so on and so forth and any other financial transactions which are undertaken within the company. Step two Join takes each transaction and records a journal entry recording a journal entry in walls. An easy three step process. First, the date of the transaction is recorded on the left side. Since transactions in any business happened to walk to your, it's important to properly date each one second we identify and write down which accounts have been affected by the transaction with a brief description. Remember, each transaction always has effects on two accounts. At a minimum, one is called a debit and one is called a credit. That's why the accounting system is often referred to us a double entry system. Lastly, we write down the amount that has been deputed, an amount that has been credited with the debit side always written on top first. Now, if you're wondering, OK, but how do I know which account gets debited and which account gets catered? That's a good question. Ah, clarify light in just a second, but I want you to fully understand the three step process. First, we record the need. Second, we identify the accounts getting infected in the transaction, with the minimum off to and lastly, the input amounts as a debit and a crate. This three step process for recording transactions as journal entries works the same in a coffee business, a car dealership, Ah, hair saloon or whatever business you can think off. 4. Essential #2: Debits & Credits (The Secret Shortcut): In the last lecture, we spoke about Joey having to prepare journal entries for his new job, but he would have to debit and credit certain accounts. But the question remained. Which accounts are to be debited, in which accounts are to be credited. I wanted to keep a completely separate lecture on debits and credits because their source of so much confusion to so many people, but because their fundamental elements of accounting we should really understand them. The only thing that I request for this lecture is I would like you to keep any preconceived notions you may have about debits and credits aside and start fresh. So let's begin. I want you to think about a sport. I'm gonna be picking basketball Now. Most of us know where the basketball court looks like. As you can see, it's divided into two house. I'm going to call the left side of the basketball court, the debit side in the right side of the court, the credit side now, like in any sport, we're going to select two teams. The team on the left has a blue uniform, and the one on the right has a green uniform. Let's call the team on the left side of the building and the one on the right as the girl steam. Now let's say I appoint you as the head selector, and you're in charge of selecting any players that you want to join either team. The only criteria is diffidence. Expenses, assets and losses should always join the deal demon. The left side gains income, whatever news, liabilities and stockholders equity should always join the girls team on the right side. That's it. That's your only great area. Now what I just did in the snapshot of this basketball court is explained to you the entire concept behind debits and credits. If you know and remember this the deal demon, the left and the girl steam on the right. You should be able to solve any debit or credit journal entry that comes your way. Remember, in accounting, debit means one thing. Left hand side and credit means one thing right hand side. That's it, period. Finito. Many people think of debits and credits is good or bad, but good or bad have nothing to do with debit and credit. All never it means is left and credit means right But you may be wondering, Yeah, but left and right with respect toward good question. Do you remember we covered the accounting equation in a previous lecture, which was assets is equal toe liabilities plus Owner's Equity. An accounting rule is that this equation must balance with the left side, must always equal the right side. So debits are left. It means assets have a natural 11. Violence and credits means right means that liabilities and owner's equity always have a natural credit balance. Since debit falls on the left the asset side, it means that an acid violence will always go up by debuting it. If you think of any asset account like inventor, your cash increase, all asset accounts always will increase with the debit and reduce with a credit. The right hand side of the equation has bought liabilities and stockholders equity and has a natural credit balance. So any liability of stockholders equity will always increase. For the credit, you're probably wondering that you know how our debit and credit affects assets, liabilities and owner's equity. But what about other parts of the business that we've not covered yet, such as revenues, gains, incomes, expenses and losses. Well, when we make a sale or have a gain or a profit, what really happens anytime a sale gain or profit is made, the owners network goes up. So since gains sales and profits increase, Owners Equity and Owners Equity has a natural credit balance. They also have a natural credit balance. So anything that increases owner's equity, such as revenue income or gain, must also be credited. Now expenses do the opposite. They decrees Owner's equity. And since owners equity always decreases with a debit, any expenses or losses always decrees owners equity and therefore have a natural debit balance. I use deal for debits on the left and girls for credit on the right, as acronyms to make my life easier. But it's important for you to understand the concept. I hope this was helpful to you. Thank you so much for joining me in this lecture. I'll see you in the next one 5. Essential #3: The Accounting Equation (Pt 1): in this lecture, we're gonna go through three parts of a business the assets liabilities and owner's equity . But first, I want you to think about your own finances. If you were to sit down and write down the dollar amount of all the stuff you own, which is the cash in your wallet? The money in your bank account how much your car's worth right now, Maybe how much your home for nature's what's right now if you want a house, how much is that? What's right now? And I tell you, Total, all of these amounts up and you will come up with the dollar. Figure off the stuff that you own. Each of the things that you own is called Asset. Now let's say you're total assets over $20,000. Then I asked you to total of everything that you all right Now. Any credit card debts, any car loans may be a home loan and utility bills or fondles each of the things that you all obligations off payments that are due from your side and according liabilities. Let's say you have a total amount of liabilities, which total up to $5000. I have to take your total assets of $20,000 and minus your total liabilities of $5000 you're going to come up with a figure of $15,000 that would be your networks. Maybe you should really do this exercise and see how much your work may be pretty happy. Maybe a little said. This is the same way that you calculate the net worth of a business. In the case of a business, we tell you things that are business owns or benefits from these are called assets. Assets can be things like cash land in men, tree or buildings. They can also be things which are all of the business from a client. And this is called accounts receivable, as it can also be a for non physical nature, like copyrights, patents, trademarks or a strong brand name, which is called Google. Also, like you have your own personal credit card, It companies have liabilities which are companies data obligations. They could be borrowings such as bank loans. They could be payments due to a supplier or taxes payable to a government. If you were to take all of the assets that a business owns and minus all the liabilities that the business owes it will be left over with Warner scored the business network in accounting domes. This is also known as Owner's Equity. Now, total assets minus total liabilities equals owner's equity. This can also be written as total assets is equal to total liabilities, plus Owner's Equity. This equation is famously called accounting equation. Accountants. Prepare or present the assets, liabilities and owner's equity off a business in a snap shop, which is scored. The balance sheet likely evaluated your personal network of businesses. Balance sheet shows us all of the assets, libraries off the business and what the business is worth at any point in time. Okay, so we've covered a lot in this lecture and the wrap up. Now you must be aware of what assets are and what liabilities are and what is owner's equity. We also know about accounting location on the balance sheet. Thank you so much for joining me in this lecture. I'll see you in the next one 6. Essential #3: The Accounting Equation (Pt 2): in this lecture, we're gonna go through four parts of the business. Let's start by taking a look at your ports in life again. Let's say you have a 9 to 5 job and make a salary of $5000 a month. You also have expenses, which include things like, Are you rained? You fooled light bills, car loan payments, student loans, maybe some gifts for your girlfriend or boyfriend. Maybe you're married and your Childs birthday is coming up. Maybe you go buy gifts for your wife. Maybe you have to buy some gifts for your mother in law, but you really don't want toe. So let's see. Your revenue is $5000 a month and you have expenses, which averaged out to $4000 a month. If you take a Saturday of 5000 and minus your expenses of $4000 you're gonna have around $1000 left over. Just like in your profession, you work for a salary. Businesses generate money by providing goods and services and own a salary for themselves. The salary that a business owns for itself by providing goods or services. It's called revenue, and just as you have your own personal expenses. Ah, business has its own expenses. Businesses have their own rain salaries, which they need to pay to their employees. Utility bills marketing costs amongst many others in a business owns revenue, and its expenses are less than its revenue. It's left or with a certain amount. We call this leftover amount a profit or an income. For example, if a business makes it revenue of $50,000 a month and it has expenses of $40,000 a month, it's left or with the profit off $10,000 a month. In that case, we say the businesses made a profit income or warnings. It could also happen that a business expenses for the month have been more than the revenue it's made for the month. For example, if a business is making a revenue of $50,000 a month and it has expenses off $60,000 a month in such a case, the expensive the businesses have exceeded the revenue, and the business has made a loss of $10,000 for the month. Accountants prepare a document called Income Statement, which shows the revenue off the business and the expensive the business in the resulting profit or loss that the business has generated over a period of time. The income statement is a very important document because people run a business to make money, and if you want to know if the business is making money or losing it, you can always review the income statement. Now, if the business owner has donated a profit, sometimes they want to take the profits and put them in their pockets. In such a case, when a business owner takes the profits out of business for themselves, this is called or dividend to summarize this lecture. Now we know what revenues are and what expenses are. We know what profits on what losses are the also in order dividend is, and we know what an income statement is. Thank you so much for joining me in this lecture. I'll see you in the next one 7. Essential #4: The Chart of Accounts: when a transaction happens in a business, we can just record these transactions. Vilena Lee We need to know exactly where the transactions fit in the larger accounting system. The chart of accounts is the tool that helps us with that. So let's go wait in this video. Imagine your personal check book, where you diligently record all the checks that you write in your checkbook. Each check has a number, and you record a check with their date, the amount who the check is for and so on. Now for you, the checkbook is simply a tool to help keep your personal finances organized. Similar to your personal check book. Accountants use several tools to help them record, organize and maintain the transactions off a business. Once that stool is called the chart of accounts, the chart of accounts is simply a number Listed. Off accounts set up accountants in a business that lists all the accounts the business is likely to need. Organized in a specific order, the chart of accounts is unique to each type of business. For example, the chart of accounts set up for a supermarket will be very different from the chart of accounts for a car manufacturer, which will be very different from a company manufacturing rocket ships. Because the chart of accounts unspecific toe how the businesses operating, you're unlikely to find two businesses with the same chart of accounts. Let's take some time and talk about how chart of accounts is built manually. What you see on the screen is the order that accountants follow when preparing a chart of accounts in the order the balance sheet accounts always written, forced, followed by the income statement accounts. We'll be going through the balance sheet accounts and income statement accounts in much more detail later in the scores. But for the purpose of this lecture, all you need to know is the three main categories of balance sheet accounts are assets, liabilities and owner's equity. And the two main categories off the income statement accounts are revenues and expenses. The assets keep track off. All resource is there a company owns the liabilities, keep track off everything their company holes and the equity keeps track off all the money the owners have invested in the company as well as the money taken out of the company. The revenue accounts keep track of the money coming into the business and expense accounts track all the money that a business spends to keep running. Once accountants have listed all the categories and sub categories of account specific to the business, they decided to give each account on number based on a simple numeric system. The numbering system is used to make organization and record keeping easier. Let me explain. Based on the size of the organization, accountants assign a list of numbers to these men categories. So, let's say, for a small business, assets can be assigned the numbers between 101 299 or libraries between 201 and 299. Equity can have the numbers between 301 and 399. Revenue between 401 to 499 and expenses between 501 to 599. In bigger companies with many departments, such as a production department, marketing department and HR department and so on, you'll see that the numbers keep getting bigger. For example, instead of using 101 99 number assets like we just used accountants and bigger forms. Used numbers from 2999 insert off 200 to 99 track liabilities like we used accountants. Use 2000 to 2999. The bigger the company, the larger the numbers get. While setting up a chart off accounts, accountants will take these main categories and break them down to a granular level based on the type of business. Let me explain this very taking out forced me and category of the balance sheet assets, which we assigned the numbers 100 to 1 99 Accountant will take the assets and further subdivide them into current assets long term assets in intangible assets. Then they look up all the current assets of the business and list them out, such as cash accounts receivable in reentry and so on. After that, they take a look at each specific current asset and divide that even for the for example, cash in a business can be further divided into the cash kept in the petty cash box cash in the checking account cash in savings accounts, cash held US foreign currency in the bank and so on, they lose same thing with the long term assets where they take the long term assets of the business and preparing entire list of these, such as the buildings, the cars, the property, plant and equipment and so on for intangible assets, accountants are going to take a look at any patents, copyrights, goodwill except RA. And if necessary, I'm does as well to the list of accounts. Accountants continue the sequence and list out all the other main categories, such as the libraries, equity revenue and expenses. After doing this, it's likely they'll end up with hundreds of accounts. But that should be no surprise. The number of accounts can even end up in thousands for big organizations. Also, accountants don't need to worry if they've skipped off for garden. A few of these accounts, as these can always be added later in a business is life. Once they have a list off all accounts, they assign each account a number as a sample, they could look at the numbers given to the current asset accounts for our small business. The current assets for our small business accounts have been divided into cash accounts receivable, prepaid rained, prepaid insurance and so on all the current assets are starting with the number one, such as cash is 101. Accounts receivable is 100 too. Prepaid rent is 103 prepared insurance is 104 and the list continues. Similarly. Now take a look at the sample off liabilities that is similar to what you would find in a small organization. You'll see that all the liability accounts such accounts people, insurance, people, interest people and so on. All start with the number two. Accountant creates similar number listings for all other accounts, whether it's equity accounts, revenue accounts and expense accounts in most organisations. That expense accounts make up the longest list of individual accounts in the chart of accounts. Now, to summarize this entire process, it's pretty simple. If you're creating a manual chart of accounts of the start for business, we start with the main categories of the balance sheet, which are assets, liabilities and equity, and forward up with the main categories of the income statement, which are revenues and expenses. We keep subdividing these big categories into smaller accounts specific to the business till that can't be done anymore. After you have your entire list off accounts. We just give them a logical sequence of numbers and Walla. We have our chart of accounts. If you use a computer, a system the software uses this matter toe, prompt or automatically assign account numbers toe a company's accounts. Now, if at any stage of this process, you've gotten confused, or you may simply want to take some more time with the chart of accounts, you can always visit the resource website off the scores at www accounting superpowers dot com and type chart of accounts in the search field, and you will be able to see a written explanation off the chart of accounts with many samples off the chart of accounts. Increasing the number of digits allows accountants to have more and more accounts, with many of these accounts specific to each department. This allows accountants to be able to create reports for management specific their departments and to see how these departments are doing now. Accounts can also be added or deleted by way of adjusting entries at any time during the year. But it's wise not to do that too much since constantly changing and updating account numbers makes it very difficult. Obtain reliable, compatible financial information. Year after your planning is truly the key to success when designing your chart of accounts , as a well designed Charlie account provides a logical structure that facilitates the addition off new accounts and elation off old ones before we move on, I have a few special tips for you in case you ever find yourself in a situation where you're setting up a company chart of accounts from scratch. Number one, the company's organization chart can be a big help in the set up stage and provide a great outline for all the departments and function specific to a company number two. Many accounting Softwares provide a standard chartered accountants customized to suit different types of businesses. Therefore, you just have to build on these and do not have to start from scratch and such situations Number three. After you're done with setting up the list off accounts, make sure to distribute the list to any employees at me. Was it even employees there on North and more than the bookkeeping function may need a copy of the charter for counts if they ever court invoices or any other transactions. Thank you so much for joining me in this lecture. I'll see you in the next one 8. Congrats- Your halfway done!: hi there. But Joey and me would like to congratulate your half way done and now have the knowledge off the four bookkeeping essentials. You understand what the accounting cycle is. You have a working knowledge of journal entries, the accounting equation and the chart of accounts. It's now time for you to put your new farm knowledge into practical use but actually using it with accounting software. So let's take a deep dive into the world of accounting software in the next class. 9. The Various Accounting Software Available in the Market: the world is moving really, really fast. Smartphones, electric cars, drones, artificial intelligence. Have you ever certain thought that these devices, which have become so common in our culture today, will never even mentioned a few decades ago with technology moving so fast and affecting every industry in every area of our lives? Obviously the accounting world could not have been left behind. And personally, thesis is great news for people like you and me. Why? Because this topic, which was considered somewhat complex by many people for so many decades, has truly been simplified by modern technology. For example, accounting software has made categorization of journal entries automatic. It automatically checks for balancing errors and has eliminated a number of steps from the accounting cycle. What's even better for us as consumers is that since there are so many accounting software companies out there competing for our business, accounting software industry keeps evolving and improving, making things easier and easier for us. So when you choose any modern they accounting software, you will constantly see things improving in the interface. Constantly see improving design and easier navigation, and often you'll see new customized options for various businesses, and so much more if you're new to the accounting world. Some of the popular software options and often spoken about in accounting circles are QuickBooks fresh books, Zo zero that zero with an X Siege. Sally and Reef. Now, Like I said in the beginning, off this video, there are several accountings offers, but I have limited my list to some of the more popular ones. Apart from this, many large companies which need customization, also choose to build their own accounting systems, since they may have transactions which are just too complicated for common marketplace accounting software to handle. Okay, Now that you have some idea about accounting Softwares, let's go for a test drive. What I mean is just like before you buy a car, you drive it. I want you to take a few business transactions and see for yourself what I've been talking about So rev up your engines. Oh, I'm sorry. I mean, warm up your fingers, grab a coffee or any beverage of your choice, and let's begin our deep dive into accounting software. Thank you so much for joining me in this video. I will see you in the next one way 10. An Introduction to Wave : Hello, everyone to take our test drive with accounting software is we will be starting with an accounting software court. We've now with so many options to choose from, Why did I choose with? Well, there are many reasons, the first and foremost one of which, being that it's 100% free and I want every single person who goes through this course to actually use the software and the different people having different budgets. I do not want money to play a factor and get in the way, So I wanted to demonstrate of free one. Having said that, I also want you to know that even though it's free, there is absolutely no compromise on quality. This software is truly awesome. It's really easy to use. It has a fantastic design, which is really easy on the eyes, and it's very input. It makes money by offering payroll services in Canada and the United States, and also allows businesses to accept payments online and charges a fee for that. Oh, and I am not associated in any ways with them, so I have no reason to say that apart from just being a very happy user, so that ordered way. I have one final note. You may remember that I mentioned that accounting software is evolving all the time. Well, they've is a cloud based offer and definitely fits their description. It is always improving, and so it's interface keeps changing a bit here in there. Now I will try and keep the videos as operated as possible, but if you do come across the screen that is a big different in the screen in front of you . Please just keep going. If you just try, you'll see that it is really easy to use. But if you still can't figure it out, feel free to send me a message and I would be happy to help up. Okay, so without further delay, let's start the next lecture by setting up a brand new wave account. 11. Setting Up a New Wave Account : Hello, everyone. And welcome to the lecture on setting up a new wave A cup. Setting up a new wave account is a pretty simple process. Simply goto www dot vap Starcom and you see a sign up for free Barton on the top. Right. Make that Barton and you'll see a sign of beach pop up type in your preferred email. So, for example, I am going to take my email from your and copy and paste it and then I already have a boss word which I want to use. So I am going to take that password and type it in here, and I'm gonna click, get started. Just want to let you know before I do that, if you already have a Gmail account, you can pretty much sign up with Gmail by clicking on the sign up with Google. Barton, I could do that, but I want to walk you through the entire process for people who do not have a Gmail account. So I'm gonna click, get started once the next beads loads up, you're gonna have to Tel Aviv. What's the name of your business and what your business does. So in this case, I'm gonna select Martians Computer shop. That's the name of our business. And what our business does is it sells laptops. So I am gonna pick I D and Technical. Now, obviously, you can choose whatever you would like Toa. Now, before we move on, let me just tell you a little bit about this drop down menu. Now, as you can see, there's a lot of different types of services that you can choose from. So it doesn't matter if you're a dentist or an engineer or landlord or a manufacturer of wave seems to have it all. And what's excellent about this is the next thing that will be covering is a chart of accounts. So based on what you choose, right here, the chart off counts will come automatically feel based on the type of service that you're choosing. So let's more now I have i d technical chosen here, and I want to change my business too. U s dollar and I'm gonna change my business. Sieroty U S dollar and I am going to change my business country toe the United States and I'm gonna click, Let's go and we've is setting things up for us. And then it's asking, What do you want to achieve today? So personal invoicing, better bookkeeping or reliable people via gonna click better bookkeeping. Once the next green pops up, you'll see a number of bells and whistles that you can choose from. What we're gonna do is simply click on manage transactions once the next green opens up by click, Let's go! And there we go. A brand new reef screen. So congratulations. Now you've set up your wave account and you're ready to go with your first transaction. Thanks so much for joining me in this video. I will see you in the next one. 12. Setting Up a Chart of Accounts in Wave : I know you and me a boat super excited to jump in and the card transactions. But before we do that, let's take a moment and talk about our Chartoff accounts. Taking this time to talk about the chart of accounts is important because it is typically one of the first steps in the process of setting up new accounting software. You may remember from an earlier video on chart of accounts that I spoke about five categories of accounts that we use to set up a new chart of accounts. But for those of you that don't remember, I'm gonna quickly play you this clip from the earlier lecture just to make sure that we're on the same beach. Okay, lets refine and let me play you that quick recap. The chart of accounts is unique to each type of business. For example, the chart of accounts set up for a supermarket will be very different from the chart of accounts for a car manufacturer, which will be very different from a company manufacturing rocket ships because the chart of accounts unspecific toe how the businesses operating, you're unlikely to find two businesses with the same chart of accounts Let's take some time and talk about how chart of accounts is built manually. What you see on the screen is the order that accountants follow in preparing a chart of accounts in the order the balance sheet accounts always written forced, followed by the income statement accounts. Okay, so I hope that help jog your memory a bit. Two summaries. The chart of accounts is fundamentally based on balance sheet accounts where the assets are what you own. The liabilities are work you owe. The equity is what you have invested or the value off the business. And then we have the income statement accounts where revenue is how you make your money from your sales and expenses are what you pay out to keep your business running. Now let's quickly jumped back into wave to see the chart of accounts in Action Chart of Accounts is located under the accounting tab on the left hand side. To access the chart of accounts, we simply click on chart of accounts and our chart of accounts lords. On the top of the page, you'll be able to see the different categories of accounts that we just discussed. So, for example, you can see assets, liabilities and equity right here. And then you see our income statement accounts, which are income and expenses. You may remember when viva are setting up on new wave Accounted gave us is this question. What does your business do? And we chose ICTY Technical. Now we've has used that choice as a way to auto populate the various accounts in our chart of accounts. So, for example, if I click on expenses, you'll see that a number of these expense accounts are typically relate to an I T style business such as computer hardware, computer hosting, computer Internet, computer software and so on. Obviously, every business is unique, and you can change these as you want. You may not want so much detail, or you may want to be really granular of, and you're recording and viewing the transactions off a business. Let me give you an example. Let's say you're a business owner and you really want a monitor your marketing spend now you want specifics, So in that case, wave has given us this advertising and promotion tab, but you want to get a little bit more granular. So what you would like to do is monitor two types of promotions that you run in your business. The one type of promotion being you're actually bring to promotions ones which you do in newspapers and magazines and flyers and so on. And the other type off transaction that you would like to see is the digital category. There isn't. You wanna monitor Facebook and Google and your email marketing spend and so on. So if you wanna split this up into two categories, what you can simply do is click this pencil icon on the right. But it says, edit this account, and after advertising and promotion, you can simply add the word traditional or pink whatever you would prefer and then go ahead and hit safe. So you know that now you have a knock on which has been created, which is advertising and proportion traditional. If you want to go ahead and add a new account, what you do is click this blue button on top of the page, which says are the new account and click the account type where I can select what type of for Countess is now. I know that this is an expense account, so I will include under operating expense. My account name would be digital marketing spin. I'll explain what account I D and description is to you a little bit later in this lecture . But for right now, I just want to show you how these accounts get created. So let me hit, save. And once we scroll down here, There you go. Now you can split up your marketing Spain into advertising and promotion, traditional and digital marketing spring. You can go ahead and rinse and repeat this formula for any category that you would like. So let me show you, for example, if I click on assets and I see cash on hand. Now, when any entrepreneur keeps cash in their business, it's difficult that the only cash that they have is north just cash in hand. But they also have some cash and lets your current account cash in a savings account. Maybe this cash captain, several different accounts and various banks. So, in such a case, what I would like to do is I would like to add another cash and bank item right here. So I click. Add a new account under assets cash in bank account, name Let's say I see bank off automatic. Uh, I can't and it's a US dollar account. Now, let me explains a current I D section. You may remember from our previous lecture on the chart of accounts that I told you about how you can assign numbers to each account. For example, assets can have a number from 10121 99 liabilities from 2012 to 99 so on. And your account I D. Is the place where you add these numbers were to leave this blank for now. But remember, account it is especially helpful if you're moving Softwares or as a general reference system if you're working with someone else, truly makes things easier, especially if you have a lot of accounts. Finally, we have their description box where you can write description, such as cash held in Bank of America or whatever their description that you would like the way I want you to think about a description. Boxes don't write descriptions for yourself, but you should always think about the portion that might be using the chart of accounts When let's say you're going on holiday or for a few months vacation. So if someone takes, will it, er, bookkeeping or accounting, what would they need to truly understand? The description? That's how I would prefer to write my description. So just keep that in mind when you write the descriptions and you click save after that. And there you go under the Assets column under the cash in Bank column. You have Bank of America account. Okay, so now you understand how to create various categories and sub car degrees between your account structure, whatever type of business that you're operating, you can create as many accounts as you want. That wraps up our chart of accounts lecture. You see how simple I waas. It's time to move on to recording transactions. Thank you so much for joining me in this video. I will see you in the next one 13. Recording Transactions in Wave : hi, everyone. Now that you know how to set up a chart of accounts and we've let's talk a bit about recording transactions, I strongly encourage you to go ahead and practice each transaction in the software with me so that you get familiar with how the software works. Most accountings offer typically operate pretty close to this, so it'll be good practice for you. And no matter what software you end up working with in your professional life, this will be really good training. In this lecture, we're going to go through all five categories of transactions, which are assets, liabilities, equity income as well as expenses to give you a well rounded, holistic view off how each type of transaction looks. Let's start with an equity transaction. Let's either our friends away from Mars, who's an owner, operator and investor inside our business Martians computer shop. On Jan. 1st 2019 Joey gives $250,000 off his own money to help fund operations off Martians Computer shop. So how would be called that? Well, the first thing I want you to understand is the concept and how the accounting in creation works in relation to this. Since Joy gives $250,000 to the business, we see joys, money, increase equity side of the business to balance this out cash and pleases on the asset side of it. That's pretty simple, Right? Let's go ahead and see how we would record this invasive. So no matter what screen you are in wave, you can go ahead and add this transaction by clicking the accounting drop down. Burton selecting transactions You would see this screen appear only if it's your first transaction. So because this is our first transaction, we're gonna click add manual transactions. And this is a journal entry which effects only the balance sheets side of the business. So I'm gonna click more, add general transaction, and I'm gonna put joy ease equity in the description section. But the date that he gave it, which is Jan 1st 2019 Now, when he gives this money, he increases the cash in the bank, which is our Bank of America account by $250,000 and because this is equity which we just spoke about and that has a credit balance off $250,000 and our current immigration is in balance. Let me show you. If you were to make a manual error here, let's say this Waas $25,000 as a credit and to 50,000 as a debit, they would automatically give you this unbalance warning. So that's really fantastic. There doesn't let you proceed with any sort of error, so I'm gonna make it to 50,000 right here. Now that our equation is in balance, I click save, and we have our entry right here. I'm gonna delete this entry which beef has automatically done because it's empty. It has a balance of zero. So this is going to show you how to delete a transaction. We're done. So congratulations. We've just finished our first entry visas and equity entry. Let's go ahead and look at a liability entry on Jan. 15 2019. Saturn bank gives a loan off $250,000 to the company, which is a liability transaction in the accounting equation side of things, Martians Computer shop has a liability increase by 250,000 but they also have a corresponding cash increase in asset side keeping things in violence. Let's see how we would record this liability in wave. Okay, So continuing where he left off the next entry, which is a liability and freaking again be accessed by clicking the more Barton Click Arjona transaction, right or description. So we're gonna put a loan from certain bank. And we took this on the 15th off January. So we click 15th of January 2019. This loan increases our cash balance, so we're gonna put that the loan has been added directly to a Bank of America account. So it's increased our current the current balance by 250,000 end and I've gone ahead and created a Bank of America alone under the liability section. So you may remember, in the chart off accounts lecture I spoke to you about how you can create accounts. I went ahead before this lecture to save us some time, and I went ahead and created our Bank of America alone in the library section. So I'm gonna be selecting that. I'm gonna be putting in a mark of 250,000 and I'm gonna hit save. You can also hit control and s which saves the transaction so fantastic we have an equity transaction and we have a debt transaction. Now let's move on and show you how 1/3 trip transaction works, which is an asset transaction on Feb 1st 2019 Joey Poor chases $300,000 off laptops to sell . How will be record this in? We've now before we record this in wave. Let's take a look at our current ING equation. Enjoy purchases these laptops. It decreases the amount of cash the business has by $300,000 it also increases Invent tree by $300,000. So in this case bought the asset side increases as well as decreases. Keeping accounting equation in balance. Let's take a look at how to record this transaction in wave. On our way of screen, we click more again. Kick add general transactions. The right are description, which is parties off. Let's say this was HB leopards, and since this happened in February 15 bringing 19 we put our date there. What happens is we have an increasing in wintry, so I have gone ahead and created the laptops as an asset in our chart of accounts to see what sometime and the ad amount, which is $300,000 and we're gonna be this in the form of a check from our Bank of America account, which is again $300,000. So we have a debit of 300,000 and a credit of $300,000 we click safe and great. So we've just recorded three balance sheet transactions. Let's go ahead and see how some income straight print transactions were work. Let's your own pheap. 5th 2019 Martians Computer Shop makes its first sale where $10,000 worth off Laptops get sort. The buyer of thes laptops sends us cash off $10,000 with a promise delivery 30 days after we received the cash. Conceptually, when a sale happens, the increase in the income causes the equity side to go up by $10,000. And the money that has come in, which is in cash, also causes the assets I to go up by $10,000 once again keeping our accounting equation and balance. Let's see how this works on the way Now on your way of screen. This time we will not be going into our journal transactions, but it's a bit more simple. We're gonna click add income And in our description, we're gonna right sail off HB laptops. And what's happened is via gonna received beaming in our Bank of America account rather than cash on hand. So I click Bank for America and I'm gonna put the date here as Feb 5th 2019 And the sale is going to cause our balance to go up by $10,000. And I am going to choose sales right here and in the north section. You can write, for example, how many laptops use, or it could be, Let's say, five laptops. Source. If let's say later in the year, you ever want to come back and look at the century, it also be ableto see the notes I click save and I have a new entry gets recorded and green color as a sale of $10,000. Now for our final entry in this lecture, let's go ahead and take a look at an expense entry on Pheap 15 2019 Martians. Computer shop needs to pay a magazine for some, adds a trend, and it needs to pay $2500 in cash. Typically, expenses cause or decrees in the equity side. And since the expenses in cash, it also causes the cash side, which is the asset side to decrease by $2500. Keeping things in violence before we move on and see this in wave. I just want to clarify why I keep talking about the accounting equation. That's because I actually want you to truly grasps the concept. I want you to internalize it because accountings offers will keep changing. But knowing the concept really well, that's what's important. Okay, let's see how to record our $2500 marketing expense and wave okay back to the screen. And this time we select the expense. Barton and the writer description that marketing spend paid Who magazine is it? And what's gonna happen is v up being a check, which goes out from a Bank of America account and the date, which was February 15 to 2019. And it's a bedroll off $2500 and our expense family spoke about marketing expenses in our last lecture. This is print media, so I'm gonna pick advertising and promotion traditional click save, and there you go all five transactions, giving you a pretty good picture off how transactions work in Viv. So I've shown you there different categories of transactions and how to record them and wave. But the entire point of recording transactions is to see how business is doing toe, identify any bottlenecks and to make good decisions. That's where the report section off we have comes in pretty handy. Let me show you how this works now on the left hand side, Click on reports and we'll see the profit and loss or the income statement, the balance sheet and the cash flow state. We still haven't gone through the financial statements in this course yet, and you'll get a much clearer idea on how to read these reports after you finish that section. But I just want to show you how to access them. So if I want to see my profit and loss statement, I click that now for this year, I can see the summary or I can see the details. Let's click details. Here you can see the sales that we've made of $10,000. We'll also see the advertising and promotion off $2500 throwing as a net profit at this moment in time of $7500. If you want to go ahead and see how the equity transactions, the asset transactions etcetera affected our balance sheet coherently, balance sheet and again, you can see the somebody and you can see the details. You'll be able to see how much cash you have in the bank, so I click details here. Be able to see the Bank of America account and what the balances will be able to see a laptop in Men Tree, which is $300,000 we'll be able to see the loan that he took $250,000. Now remember, that balance sheet is a snapshot in time so we can change this around do Let's see January 1st Granny 19 Click Update Report, and it'll show you the first transaction that we had that Joey gave money off 200 for $3000 . Then we can see 15th Jan. 2019 where you'll see the Bank of America alone, which entries are cash, balance and border to $500,000 we will see a new library which was created US 200 for $3000 . Once again. Ah, lot more of this coming up in financial statements in the next section of this course. But you will truly be able to understand this. I just wanted to give you good overview off how accounting software works and how you can use it to improve your life. I thank you so much for joining me in this video, and I will see you in the next one. 14. A Goodbye of Sorts!: hi, everyone, and thank you so much for taking my class back yourself on the back because you learned a lot. But let's are conclude this class is yet to be good at anything in life. You have to practice, practice and practice, and bookkeeping is no different. It's time to put your newly far knowledge to one final test. Simply look at the project section of this class and complete one of the assignments that follow. You can either do the easy project or take the road less traveled by taking on the tough project. And if you're really ambitious, you can do both. If you have any questions for me, you can click the community to have an ask them. I would love to help. If you would like to see any future classes that I create, please let the follow button on your screen. And if you want to see any of my past classes, including my three part series on the accounting basics, please check out my profile page on sculpture and one final time. It was truly my pleasure to go on this journey with you. Thank you so much for joining me in this class, and I hope to see you on the next one