Accounting Guide for Kids, Teens & Young Adults

Overview

When we hear the word “accounting,” we think of numbers, receipts, and taxes. While accounting can seem like a daunting task or career to think about, it is actually an extremely helpful skill to have. One of the most important things we can learn as children is how to handle money effectively. This skill is needed all through life and helps children to become adults who will be responsible about money and understand its value.

History of Accounting

Accounting has been around for thousands of years and is essential to all things relating to business, record keeping, and life. Fremont College talks about the extensive history of accounting. It states that the first recordable uses of accounting took place 7,000 years ago in Mesopotamia. The ancient people did not use accounting in terms of money, but for keeping records of crops and herds.

Accounting grew even more complex during the time of the Roman Empire. Not only was it used for crops and herds, but it was also used to track the distribution of grants of land, religious offerings, and money spent on theaters and gladiator shows. With the use of this information, the Emperor could make financial decisions related to his empire.

In 1494, Luca Pacioli wrote a 27-page book about accounting, and this is where the symbols plus and minus first appeared. His book was used for hundreds of years to teach the art of accounting. Then, during the Middle Ages, double-entry bookkeeping began. Debits and credits were now being entered for each exchange that merchants made. This type of accounting became the form we use today in our lives and businesses.

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Basics of Accounting

To get started in accounting, it is important to learn a few basics and become familiar with them. Accounting is the language of business, and with all languages, it has its special terms and lingo. It is extremely useful to learn the basic vocabulary used in any field that you will encounter. Rasmussen College has a list of 20 basic accounting terms to become familiar with. They include accounts payable, capital, cash flow and more. No matter what business you work for as an accountant, these terms will be indispensable.

It is also important to learn about the types of elements in accounting such as assets, liabilities, and equity; and how these and other elements appear on a balance sheet. Next, you will need to learn about double-entry booking as well as how and in what situations it is utilized.

Eventually, you will learn the entire accounting process. This begins with the transaction and ends with closing the books. At Saylor Academy, we can see the accounting process outlined in several steps:

  1. Identifying the transaction.
  2. Gathering the source documents such as receipts
  3. Analyzing and classifying the transaction.
  4. Recording the transaction into the correct journal.
  5. Posting details in the journal onto a general ledger.
  6. Preparing a trial balance.
  7. Calculating and making adjusts to the journal entries.
  8. Preparing an adjusted trial balance.
  9. Preparing financial statements.
  10. Closing temporary accounts.
  11. Preparing the after-closing trial balance.

 

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Record-keeping

Record keeping, or bookkeeping, is keeping track of all financial transactions. Whether the business is family-owned or a large corporation, record-keeping is extremely important. Score emphasizes the importance of learning the types of bookkeeping basics that are absolutely essential in terms of business. Knowing how to record your business finances can be a determining factor in how well or how poorly your business will do. These records allow you to see the successes and failures of your business and assists you in making important financial decisions for the future.

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Budgeting

A budget is an assessment of your money that can be spent in the future. Whether it is for yourself or a large company, budgeting is another essential part of accounting. PBS has a worksheet to use for creating your own budget. A budget is based on three things: knowing how much money you spend, your savings goal, and managing your money. By creating a budget, you can spend money more wisely.

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Debits and Credits

Debit and credit are part of the framework of the accounting process. They are the terms used for the giving and receiving of money through a transaction. According to an article at the Austin Community College website, while the terms “debit” and “credit” have different meanings in the banking world, in accounting it refers to the left side of an account (debit) and the right side (credit). For each transaction you log, debits and credits will always be equal after totaling the ledger. There are two acronyms to use to remember what debits and credits affect:

  • DEAD stands for “Debits increase Expenses, Assets, and Dividends.”
  • CRIL stands for “Credit increases Revenues, Investments, and Liabilities.”

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Careers in Accounting

Once you have mastered the ins and outs of accounting, it would be a good time to explore a career in the field. Almost all businesses need accountants for their financial dealings. Not only are you keeping track of all their transactions, but you are also assisting them with taxes, fraud auditing, and payroll reporting. You can start with the bare bones as a bookkeeper and eventually work your way to the highest paid position as an accounting professor, which includes a salary of approximately $127,000 a year.

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Accounting Activities and Games

Games are a great way to learn accounting. Take time to try some of these activities to increase your skill and understanding of accounting.

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Additional Links

If you would like to continue delving into the world of accounting, please use the links below to learn a bit more.

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