TBA Foundation · Lesson 4 of 9 · about 2 hours
After this lesson you can #
- Say in one sentence what accounts receivable and payable are.
- Explain debits and credits well enough to read a ledger.
- Tell accrual from cash, and know why the same month can differ.
- Explain why sales tax is not your revenue.
Why it matters #
TBA does the bookkeeping for you, but you will be asked “why does this show up there?” more often than you expect. Four ideas answer most of it.
Read #
- Accounting Overview
- Accounting articles (skim the titles)
The big picture #
Receivable is what customers owe you; payable is what you owe vendors. Double entry records every transaction twice, so total debits always equal total credits; that is how a ledger proves it balances. Accrual reporting counts a sale when you invoice it and a cost when you are billed; cash reporting counts them when money moves. Sales tax you collect is held for the government, so it is a liability until you pay it, not income. Finally, the balance sheet shows what you own and owe on one date, and the profit and loss shows income and costs over a period. In TBA, customers are called clients, and stock you have bought but not sold is an asset.
Try it #
- Open a demo invoice and find where it appears in the general ledger: which account is debited, which credited?
- Run the profit and loss on the accrual basis, then the cash basis, for the same month. Explain the difference.
Check yourself #
Can you say why sales tax is a liability and not income? A practice quiz and certification exams are planned for a later release.
