Accounting Basics

Accounting Basics at Free Geek
Each organization has its own spin on keeping track of its money. This page shows how we do it at Free Geek.

Keep in mind that we're not professional beancounters. This means that you should take what we say with a grain of salt. Hopefully, it also means we can explain things, more or less correctly, to the neophytes who want to see how we do this here.

Double entry bookkeeping
Double entry bookkeeping is an established and flexible way to keep track of our cash. It requires that every time we enter a number, we record where it came from and where it's going to. That is we're entering the numbers twice (therefor "double entry"). This is one of those things that seems overly complicated to folks who are new to accounting, but seems essential to those who have used the system. It will make more sense when you see the examples below.

Accrual vs. cash accounting
Most people are familiar with cash accounting. In that style of accounting you keep track of the money when you get or spend it. You don't count money that you owe or is owed to you until someone pays something.

At Free Geek we use accrual accounting, where we keep track of money owed us and money we owe. This method also allows us to note when the money is earned or when we begin to owe money to us, regardless if the cash has come in or gone out.

The five types of accounts
There are five types of accounts needed double entry accrual accounting, and they are income, expense, asset, liability, and equity. Every type of account has to fall in one of those five categories. Here are their definitions with examples:


 * Income


 * Expense


 * Asset


 * Liability


 * Equity