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Fundamentals of accounting
Fundamentals of accounting

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Week 3: Double-entry accounting

Introduction

As you learned in Week 1, accounting is a process that involves:

  1. the systematic recording of all relevant financial transactions and events
  2. classifying, interpreting, summarising and reporting such bookkeeping data
  3. the production of useful information from that data and its presentation to stakeholders of a business such as owners, lenders and the tax office.

In today’s electronically enabled business world most organisations produce their financial accounts using a computer program known as an accounting package. Such accounting software produces, at the click of a button, all the reports needed from the initial recording of transactions. Understanding and using these accounting packages properly requires a deep understanding of all the accounting knowledge studied in this course. Accountants do not just accept what the computer produces; they have to understand what these packages are telling them. Therefore, as students of accounting, you have to understand the rules of double-entry accounting that will be explained this week. Before learning these rules, you need to understand the fundamental accounting concepts that support the activity of double-entry accounting. Gaining knowledge of such fundamental concepts is the first aim of your learning this week.