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Documentation -> Accounting/Bookkeeping -> Prerequisite Knowledge -> Accounting/Bookkeeping Overview

 

There are certain fundamental elements of accounting that should be understood prior to beginning use of flowlog. If for no other reason, than to reduce frustration and/or mistakes. Below, we highlight these concepts for your reference.

Double Entry Bookkeeping/Accounting

From Wikipedia: "Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account. The double entry has two equal and corresponding sides known as debit and credit."..."For instance, recording a sale of $100 might require two entries: a debit of $100 to an account named "Cash" and a credit of $100 to an account named "Revenue.""

Credits and Debits

From Wikipedia: "In double entry bookkeeping, debits and credits (abbreviated Dr and Cr, respectively) are entries made in account ledgers to record changes in value resulting from business transactions." Depending on whether an account is a "debit" or "credit" account, one might debit or credit the account to increase the balance. This can be hard to visualize and remember when first starting to keep your books. flowlog drastically reduces this initial learning curve for new users by allowing them to choose "increase" or "decrease" instead of "debit" and "credit" when making entries. flowlog will still show the user whether that increase or decrease will result in a debit or credit, however.

Contra Accounts

A contra account is an account that is there to offset the balance of a corresponding account. One example would be an accumulated depreciation account that corresponds with a depreciable asset account (like Vehicles). It exists to record the lost value of the depreciable asset as it depreciates. This way, your books represent the actual value that the asset still holds. flowlog can handle acccumulated depreciation accounts for you if Book Depreciation is all you need. Please see the Automated Book Depreciation docs page for more details.

Accounting Standard

You will probably want to determine what accounting standard you will be adhering to, if any, before starting to keep your books. You can see a list of accounting standards by nation, as well as the international standard, here.

Accounting Method/Basis: Cash vs Modified Cash vs Accrual

Please see the dedicated pages in this folder for accounting methods/bases. You'll want to understand these methods and choose carefully, as what you choose will effect how you keep your books and any audits or reporting you need to do later.