Is bookkeeping taught in financial accounting courses?

Sort of but not really. That’s probably not a very satisfying answer so let me explain.

Financial accounting courses are not bookkeeping training per se. They are preparation for more advanced courses such as Intermediate Accounting. On the other hand, in my experience solid bookkeeping training (or experience) is excellent preparation for an introductory financial accounting course. This is because the student will understand the elementary concepts already.

Here are some of the most significant differences between old-school bookkeeping training and financial accounting courses.

Old-school bookkeeping training

Good bookkeepers understand concepts such as:

  • T-accounts
  • journal entries
  • debits and credits
  • the chart of accounts
  • debit accounts and credit accounts
  • the accounting equation
  • balance sheet
  • income statement
  • etc.

There is an old-school method for teaching these concepts that colleges and universities do not use, to my knowledge. In the old-school method, students pretend to be bookkeepers for small, private businesses. They take a month’s worth of mock transactions, enter them by hand into paper journals/ledgers, and prepare financial statements by hand from all that. I personally think this is the best way to learn those concepts. It helps to make the process and outcome (financial statements) intuitive.

Previously, I compared bookkeeping to weaving on a loom (here). Let me explain that a bit more. Let’s say we need to record a transaction for office supplies in the amount of $37.98. We “attach” the amount (and other information) into a journal by writing the information there. This “attachment” happens for all different kinds of transactions that a small private business undergoes in a typical month. This includes the following kinds of entries:

  • purchase entries
  • disbursement entries
  • accounts payable entries
  • accounts receivable entries
  • adjusting entries
  • etc.

Then, we “pull” these entries through the respective journals and then the general ledger and then the trial balances to be part of the ending balances of their respective accounts on the financial statements.

The weaving analogy isn’t a perfect analogy, but I hope it gives an intuitive sense of what happens in bookkeeping. This same thing happens in electronic bookkeeping too, whether it is automated or done by a person, although QuickBooks changed the journal and general ledger part.

Financial accounting courses: more abstract, no software training, includes public accounting topics

Introductory financial accounting courses teach those concepts. However, they are presented in a relatively more abstract manner. There won’t be a lot of manual practice with a complete set of books and financial statements. Students won’t spend a lot of time “pulling” many different kinds of initial entries through all of the layers to a set of hand-prepared financial statements that are representative of a small private firm. Having said that, I don’t want to give a wrong impression. The concepts are definitely taught, and students must learn them. They are just presented in a more theoretical manner. Also, financial accounting courses will not teach students how to use accounting software.

Finally, an financial accounting course will have some topics that are unique to public accounting. A few examples:

  • Bond entries
  • Treasury stock
  • Preferred stock
  • Earnings per share
  • Non-cash dividends

A bookkeeper for a small, privately-held business will never use that information.

I made a Venn diagram to help explain some of what I am saying here.financial accounting concepts in bookkeeping

I answered a similar question on Quora last year (here).

 

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