LECTURE NOTES FOR CHAPTER ONE
The first rule in the study of accounting is:
Learn how to translate “accountingese’ into plain
Accountants love to use big words and fancy phrases. (Makes us look
smart and we can therefore charge more) For example, accountants don’t say
“The company has a debt”, they say “The company has a liability” Once you cut
through all the big words and fancy phrases, a liability is just a fancy name for a
The accountant’s motto is “Never use a simple term if you can use a
complicated term instead”.
Throughout the course, I will be sending out memos
in which I translate ‘accountingese’ into plain English.
You are going to be
amazed at how simple and logical accounting is once you learn how to put it into
Please cut me some slack regarding my typing and my grammar. I am not a typist so
margins and centering means nothing to me.
Also “This ain’t no English class” so when
I’m sending out these pearls of wisdom , I’m not going to spend a lot of time pondering
whether I should use a comma or a semi-colon.
HEAR YE, HEAR YE
Just because an item isn’t discussed in these lecture notes, doesn’t mean it isn’t
The only items that are discussed here are items that I think can be explained
in more “down to earth” terms than the book uses. Something might be very important
but if I don’t think I can explain it any better than the book did, then it won’t be
THIS STATEMENT APPLIES TO THE ENTIRE COURSE, NOT
JUST TO THIS CHAPTER.
ACCOUNTING TERMINOLOGY IN PLAIN ENGLISH
ASSETS- Anything that has value is an asset.
Common examples are land, building .
equipment and cash.
You might refer to your personal assets as “your
stuff”. Things like your car, clothes, CD equipment, books are referred to as
Assets are simply the company’s “stuff”
LIABILITIES- As stated previously, a liability is just a fancy name for a debt.
the time a liability will have the word “payable tacked on the end.
item might be named Accounts Payable, Notes Payable, rent payable etc.
Regardless of what word is attached, if it contains the word “payable” it
is a liability.
OWNERS EQUITY – That is the part of the business that is owned by the owner.
To illustrate, assume you want to purchase a new car for $30,000.
However, you only have $25,000, so you borrow $5,000 from the
bank and purchase the car.
You now have a $30,000 car sitting in
your garage, but how much of that car do you own?
people overlook the fact that the bank owns $5,000 of your car.