Basic Accounting




Reading Passage and Practice: Basic Accounting
Math: Working with percents
Vocabulary: Accounting terms
: Using dashes, writing a process
Project: Planning a budget
Game: Number Puzzle



Click on the words highlighted in yellow to get a definition.

Accounting is a process that tracks money that you earn (income) or spend (expense). Individuals, small businesses, and large corporations all need to know this information.  The first steps in the accounting process are done by bookkeepers.  These bookkeepers keep and organize all the financial information of a company.  Accounting records are called books.  Today, most accounting “books” are really computer files.  Each book has many accounts. Each account is the record of one individual part of a company. For example, a phone company has many accounts.  One of those accounts shows how much you owe the phone company and how much you have paid for phone service.


Bonnie Bookkeeper



Accounting books must show income – the money coming into a business.  A company receives money from selling products or from providing a service. 

            handling money

For example, a computer company sells a computer; it receives money for its computer.  A mechanic fixes a car; he receives money for the service he provides.  Both the computer company and the mechanic need to make a profit. Profit is extra money; it is money left over after the costs are paid.  Without profit, a company will break even, but it will not grow.

Accounting books must show expenses – money going out of the business.  A computer company needs to buy the materials to make its computers.  It needs to pay its employees a salary for building the computers.  It needs to pay for its building and for the utilities the building needs. A company also needs to pay taxes.  All of these costs are expenses.

After that, accounting books must show the balance – the money left over at the end of the month.  The income and expenses are usually reported once a month.  Then expenses are subtracted from income.  The money left over at the end of the month is called the balance. If the company is doing well, that balance will be a profit!


Most companies also need a report for each full year’s activities.  This report shows how well the company is doing.  Is there a good profit?  Then the company is doing well. Is there no profit?  The company is not doing well.  Is there a loss?  The company may be in trouble.When you look at a financial chart, when you see the lines going up that usually means profit. If the line goes down, the company

Most businesses fail because their owners aren't good with accounting. Be sure you know how to keep books if you own a business or if you want to spend your money well.

Profit graph

Profit graph

Brain Gym


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Leecy Wise and Vicky Lara, authors