Welcome back! In Module 2, we’ll unravel the magic behind recording transactions using journals and ledgers. Buckle up for an exciting ride into the heart of accounting.

Lesson 1: The Journal

1.1 What is a Journal:

Think of a journal as a diary for your business. It’s where every financial event gets recorded in chronological order. From buying a coffee maker to landing a big client, it all goes into the journal.

1.2 Basic Accounting Terms:

Assets: Things you own (like cash, inventory).

Liabilities: What you owe (like loans, bills).

Income: Money coming in (sales, services).

Expense: Money going out (rent, utilities).

Profit: When income exceeds expenses.

Loss: When expenses exceed income.

Accrual: Recording transactions when they occur, not when money changes hands.

Cash: Actual physical currency.

Bank: Money in your business account.

Lesson 2: The Ledger

2.1 Introduction to Ledger:

The ledger is like a master file. It takes all the info from the journal and organizes it by account. If the journal is your diary, think of the ledger as a detailed biography of each account.

2.2 More Accounting Terms:

Capital: Owner’s investment in the business.

Drawings: Money withdrawn by the owner.

Sub Ledger: A ledger for specific accounts (like a customer ledger).

Group: Collections of similar accounts (assets, liabilities).

Cost Category: Classifying expenses (administrative, selling).

Cost Centre: A unit in an organization incurring costs.

GST, Income Tax, TDS: Tax-related terms.

Direct/Indirect Expenses: Costs directly/indirectly tied to production.

Direct/Indirect Income: Revenue directly/indirectly tied to operations.

Conclusion:

Congratulations! You’ve navigated the essential terms of accounting. In Module 3, we’ll put this knowledge into action with double-entry accounting and financial statements.