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Bookkeeping For Dummies, Australian and New Zealand Edition by Lynley Averis, Veechi Curtis

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Chapter 3

Going for the Big Equation

In This Chapter

Revealing the inner life of Pacioli (makes Isaac Newton seem tame)

Putting a little loving back in the air — pairing up those debits and credits

Taking a peek into the inner workings of accounting software

Choosing between hand-to-mouth cash and high-tech accrual

If you want to be a racing driver, it pays to understand something about the mechanics of a car. If all you want to do is drive from A to B, then you can rely on others to bail you out, and go from one year to the next without looking under the bonnet.

The same goes for bookkeeping. If you’re a business owner and you want to do your books in a simple fashion, giving them to your accountant for the finishing touches, then you can get by without ever worrying about double-entry bookkeeping. (Yep, you’re off the hook — you can skip reading this chapter and proceed to the more interesting stuff.)

However, if you’re serious about bookkeeping, the theory of how bookkeeping works and what goes on behind the scenes is vital. An understanding of debits and credits — which form the bones of double-entry bookkeeping — is essential for many of the more skilled activities a bookkeeper undertakes, such as adjusting accounts via journal entries, making sense of a Balance Sheet or troubleshooting account balances.

In this chapter, I explore all the ins and outs of double-entry bookkeeping, and how to figure out debits and credits for most everyday transactions. I also talk about the ...

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