T-Accounts Explained: The Visual Grammar of Debits and Credits Behind Every Journal Entry
A T-account puts debits on the left and credits on the right of one ledger account — sketch one to check any journal entry before you post it.
#accounting-basics
Accounting Basics
Foundational accounting concepts, terminology, and principles for small business owners
Underapplied and Overapplied Overhead, Explained: Close the Variance to COGS or Prorate It Across Inventory
Underapplied overhead means actual spending beat applied overhead — close a small variance to COGS, prorate a material one across WIP, finished goods, and COGS.
CapEx vs. OpEx: How Capital and Operating Expenses Differ on Your Books, Your Tax Return, and Your Cash Flow Statement
CapEx buys assets you depreciate over years; OpEx covers costs you deduct now — and Section 179 plus the $2,500 safe harbor blur the tax line.
FOB Shipping Point vs. Destination: Who Owns Goods in Transit, Who Pays Freight, and How the Answer Lands Year-End Sales in the Right Year
FOB shipping point transfers ownership at the seller's dock; FOB destination, at the buyer's — and the term decides revenue timing, freight, and cutoff.
Normal Balances, Explained: Which Accounts Carry Debits, Which Carry Credits, and Why Every Journal Entry Has to Balance
Assets and expenses increase with debits; liabilities, equity, and revenue increase with credits — the accounting equation sets every account's normal side.
Period Costs vs. Product Costs: What Goes Into Inventory and What Hits Your Profit and Loss Right Away
Product costs ride with inventory onto COGS at sale; period costs hit profit now — misclassifying either shifts profit between months.
Single-Entry vs. Double-Entry: What Changes When Your Business Outgrows a Checkbook Ledger
Single-entry tracks cash; double-entry tracks your whole business. Each transaction hits two accounts, keeping Assets = Liabilities + Equity balanced.
Chart of Accounts Numbering That Scales: Building a 1000–9000 System Your Business Never Outgrows
Number accounts by tens inside 1000–9000 blocks and map each P&L line to Schedule C — a COA that scales without renumbering.
Cost of Goods Sold Explained: What Belongs in COGS, How Inventory Decides Your Gross Profit, and Why Misclassified Labor Lies About Your Margin
COGS is beginning inventory plus purchases and direct labor minus ending inventory — under IRS rules a $5,000 miscount moves gross profit $5,000.
FIFO vs. LIFO: How Your Inventory Method Changes Your Tax Bill When Prices Rise
LIFO matches newest costs against sales, cutting taxable income while prices rise — but the IRS locks in the election and taxes the reserve when you leave.
Net Profit Margin vs. Gross Margin vs. Operating Margin: The Three Profitability Ratios Every Small Business Owner Should Track
Gross margin tests your pricing, operating margin tests your overhead, net margin tests the bottom line — track all three monthly to find the leak.
Negative Retained Earnings, Explained: What an Accumulated Deficit Really Means and How to Fix It
Negative retained earnings — an accumulated deficit — means lifetime losses and payouts exceed profits; only future earnings reverse it.