ACCOUNTING
EXPLAINED
TO KIDS
SWIPE
SWIPE
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INDEX
1
WHAT IS ACCOUNTING?
2
ACCRUAL ACCOUNTING
3
CASH BASIS ACCOUNTING
4
INCOME
5
EXPENSES
6
PROFIT
7
LOSS
8
ASSETS
9
LIABILITIES
10
EQUITY
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INDEX
11
REVENUE
12
ACCOUNTS PAYABLE
13
ACCOUNTS RECEIVABLE
14
DEBITS AND CREDITS
15
INCOME STATEMENT
16
STATEMENT OF CASH FLOWS
17
GENERAL LEDGER
18
BALANCE SHEET
19
CHART OF ACCOUNTS
20
COSTS OF GOODS SOLD
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INDEX
INDEX
21
OPERATING EXPENSES
22
GROSS PROFIT
23
NET INCOME
24
DEPRECIATION
25
TAX
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ACCOUNTING EXPLAINED TO KIDS 2
WHY DO WE
NEED IT?
The company has to
make sure it has
enough money .
To pay for things it
needs like rent and
payroll for it's
employees.
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ACCOUNTING EXPLAINED TO KIDS 1
WHAT IS
ACCOUNTING?
When a company makes
money, it has to keep track
of where that money came
from and where it goes.
This is called Accounting.
1
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ACCOUNTING EXPLAINED TO KIDS 2
ACCRUAL
ACCOUNTING
A method of
accounting that
records transactions
when they happen,
not when the money
is received or paid.
2
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 3
CASH BASIS
ACCOUNTING
A method of
accounting that
records transactions
when the money is
received or paid, not
when they happen.
3
BY NICOLAS BOUCHER
CASH-IN
ACCOUNTING EXPLAINED TO KIDS 4
INCOME
Money you earn
from doing work or
selling something.
Example: You sell
cookies and make
$20.
4
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 5
EXPENSES
Money you spend on
things you need to run
your business.
Example: You buy
ingredients to make
cookies and it costs $10.
5
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ACCOUNTING EXPLAINED TO KIDS 6
PROFIT
The money you
have left over after
you subtract your
expenses from
your income.
Example: You sell
cookies for $20 and
spend $10 on
ingredients, so you
have a profit of $10.
INCOME
6
=
EXPENSES
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PROFIT!
ACCOUNTING EXPLAINED TO KIDS 7
LOSS
When your
expenses are
more than your
income.
Example: You sell
cookies for $10 and
spend $15 on
ingredients, so you
have a loss of $5.
PRICE
7
=
EXPENSES
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LOSS
ACCOUNTING EXPLAINED TO KIDS 8
ASSETS
Things you own that
have value.
Example: You own a
cookie jar that you
use to sell cookies
from.
8
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 9
LIABILITIES
Money you owe to
others.
Example: You
borrowed $50 from a
friend to buy
ingredients to make
cookies.
9
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ACCOUNTING EXPLAINED TO KIDS 10
EQUITY
The difference
between your assets
and liabilities.
Example: You own a
cookie jar worth $70
and owe $50, so your
equity is -$20.
10
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 11
REVENUE
The total amount of
money coming into
your business.
Example: You sell
cookies for $20 and
cupcakes for $15, so
your revenue is $35.
11
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 12
ACCOUNTS
PAYABLE
Money you owe to
others for goods or
services you've
received but
haven't paid for yet.
12
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 13
ACCOUNTS
RECEIVABLE
Money others owe you
for goods or services
you've provided but
haven't been paid for
yet.
13
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ACCOUNTING EXPLAINED TO KIDS 14
DEBITS AND
CREDITS
These marks are
called debits and
credits, and they
help the company
make sure it has
the right amount of
money and things.
14
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 16
15
INCOME
STATEMENT
It shows how much
money the company
made and how much it
spent.
If it made more than it
spent, it has some extra
money called profit.
15
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 16
STATEMENT OF
CASH FLOWS
The statement of
cash flows shows
where the company's
money came from
and where it went.
16
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ACCOUNTING EXPLAINED TO KIDS 17
GENERAL
LEDGER
When the company
buys or sells
something, or pays
or gets paid, it has
to make two marks
in its special book
called the general
ledger.
17
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 18
BALANCE
SHEET
It shows how much a
company has, how much it
owes and how much is left for
the owner of the company.
18
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ACCOUNTING EXPLAINED TO KIDS 19
CHART OF
ACCOUNTS
The company also has a
list of all the things it
can put in its special
book, and each thing
has its own special
number.
This is called the chart of
accounts.
19
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ACCOUNTING EXPLAINED TO KIDS 20
COST OF
GOODS SOLD
The cost of the
materials used to make
what you're selling.
Example: You spend
$10 on ingredients to
make cookies and $5 on
ingredients to make
cupcakes, so your cost
of goods sold is $15.
20
BY NICOLAS BOUCHER
ACCOUNTING EXPLAINED TO KIDS 21
OPERATING
EXPENSES
The costs of running
your business, not
including cost of
goods sold.
Example: You pay $5
for rent and $3 for
electricity, so your
operating expenses
are $8.
21
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ACCOUNTING EXPLAINED TO KIDS 22
GROSS
PROFIT
The amount of money
you have left over after
subtracting cost of
goods sold from
revenue.
Example: You have
revenue of $35 and cost
of goods sold of $15, so
your gross profit is $20.
22
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ACCOUNTING EXPLAINED TO KIDS 23
NET
INCOME
The amount of money you
have left over after
subtracting operating
expenses from gross
profit.
Example: You have gross
profit of $20 and operating
expenses of $8, so your net
income is $12.
23
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ACCOUNTING EXPLAINED TO KIDS 24
DEPRECIATION
The decrease in value of an
asset over time.
Example: You buy a new car for
$20,000. Over time it decreases
in value and after one year it's
only worth $15,000.
24
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ACCOUNTING EXPLAINED TO KIDS 25
TAX
Tax is money you pay to help the
government do things like build
roads, schools, and keep people
safe.
Example: Imagine you sell cookies
and make $100, you have to pay a
part of that money as taxes, for
example, 10%, that’s $10 in taxes,
you keep $90 for yourself.
25
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