“Providing for honest things, not only in the sight of the Lord, but also in the sight of men.” — 2 Corinthians 8:21
Lesson
What You Will Learn
- Identify the five types of accounts
- Set up a simple chart of accounts for a small business
- Sort transactions into the correct income and expense categories
- Keep receipts and documentation organized
Lesson Notes
The Five Types of Accounts
Every business transaction touches at least one of five account types:
- Assets: what the business owns (cash, money customers owe you, equipment).
- Liabilities: what the business owes (unpaid bills, loans).
- Equity: the owner's share (contributions, profits kept, minus draws).
- Income (revenue): money earned from selling products or services.
- Expenses: costs of running the business.
The Chart of Accounts
A chart of accounts is the list of categories you use to sort every transaction. Numbering keeps it orderly. A starter chart for Joy's baking business:
- 1000 Cash (business account) · 1100 Accounts Receivable · 1200 Equipment
- 2000 Accounts Payable · 2100 Loans Payable
- 3000 Owner Contributions · 3100 Owner Draws · 3200 Retained Profit
- 4000 Sales · 4100 Other Income
- 5000 Ingredients · 5100 Packaging (cost of goods sold)
- 6000 Booth & Market Fees · 6100 Advertising · 6200 Phone · 6300 Vehicle & Fuel · 6400 Bank Fees · 6500 Insurance & Licenses
Keep the list short at first. Add a category only when you need it.
Receipts and Documentation
Every entry in your books should be backed by proof: a receipt, an invoice, a bank statement line, or a written note for small cash sales. On each receipt, write what it was for and the category number.
File receipts by month in an envelope or folder labeled Business Receipts: March. If you photograph receipts, keep the paper copies too until a tax professional tells you how long to keep them. Records protect you if questions ever come up.
Cost of Goods Sold
Some expenses go directly into the product: Joy's flour, butter, and cake boxes. These are cost of goods sold (COGS). Other expenses, like booth fees and advertising, are operating expenses. Separating them shows how much each sale really earns before overhead.
Key Terms
| Item | Details |
|---|---|
| Chart of accounts | The numbered list of categories used to sort transactions |
| Asset / Liability | What the business owns / what it owes |
| Equity | The owner's share of the business |
| COGS | Cost of goods sold: the direct cost of products sold |
In-Class Activities
Sort the Transactions
Using Joy's chart of accounts, write the account number for each: 1) sold a birthday cake; 2) bought butter and eggs; 3) paid the monthly market booth fee; 4) bought cupcake boxes; 5) paid for flyers; 6) Joy took $150 for her rent; 7) the bank charged a monthly fee; 8) bought a stand mixer for the business; 9) Joy added $300 of her savings to the business; 10) paid the business share of the phone bill.
Receipt Detective
Look at the five sample receipts. For each, write the date, vendor, amount, what it was for, and the account number. Circle any receipt that is missing information you would need, and explain what is missing.
Assignment: My Chart of Accounts
Build a chart of accounts for your own business idea (or a sample business).
- Include at least two asset, one liability, two equity, two income, and five expense accounts, with numbers.
- Mark which expenses are cost of goods sold.
- Describe your receipt system in three to four sentences: where receipts go, how they are labeled, and how often you file them.
Graded with the Module Assignment Rubric.
Reflection Journal
Second Corinthians 8:21 says Paul provided for honest things in the sight of the Lord and of men. Records let others see that we are honest. How does keeping clear records protect your integrity and your witness?
Prayer focus: Ask God to make you honest in what others see and in what only He sees.
Weekly Reading & Devotions
Honest in Every Sight
When Paul collected money for the poor in Jerusalem, he made sure others could see it was handled honestly. He wrote that he provided for honest things, not only in the sight of the Lord, but also in the sight of men. He did not ask people to simply trust him. He made his honesty visible.
A chart of accounts and a receipt file do the same for a business. Every dollar has a category, and every entry has proof. Anyone who looks, whether a tax professional, a lender, or a partner, can see where the money went.
This week you learned the five kinds of accounts: assets, liabilities, equity, income, and expenses. You learned that an owner draw is not an expense and an owner contribution is not income. These small distinctions keep your reports truthful.
Start simple. A short list of categories that you actually use is better than a long list you ignore. Label each receipt the day you get it, and file it by month. Faithfulness in these little things builds a business others can trust.
Think About It
- Why does visible honesty matter in business? ______________________
- Which categories will your business need most? ______________________
- Where will you keep your receipts, and how will you label them? ______________________
Daily Devotions for Week 2
In the Sight of All
Providing for honest things, not only in the sight of the Lord, but also in the sight of men.— 2 Corinthians 8:21 (KJV)
Integrity is both private and public. Clear records let others see what God already sees.
Reflect: Where can you make your honesty more visible?
Pray: Lord, make me honest in every sight.
Do: Write the purpose on the back of one receipt.
Faithful in Least
He that is faithful in that which is least is faithful also in much: and he that is unjust in the least is unjust also in much.— Luke 16:10 (KJV)
A two-dollar receipt matters because faithfulness is built in small things.
Reflect: What small thing have you been tempted to skip?
Pray: Lord, make me faithful in the least.
Do: Record one small purchase you might have ignored.
Walking Surely
He that walketh uprightly walketh surely: but he that perverteth his ways shall be known.— Proverbs 10:9 (KJV)
Honest people walk with confidence. They have nothing to hide.
Reflect: Where would honesty give you more peace?
Pray: Lord, help me walk uprightly.
Do: Sort five practice transactions into their categories.
One Master
No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.— Matthew 6:24 (KJV)
Money is a tool, not a master. Good records keep money in its place.
Reflect: Has money ever felt like your master?
Pray: Lord, You alone are my Master.
Do: Name one way you will keep money in its place this week.
Establish Our Work
And let the beauty of the LORD our God be upon us: and establish thou the work of our hands upon us; yea, the work of our hands establish thou it.— Psalm 90:17 (KJV)
We plan and organize, and we ask God to establish what we build.
Reflect: What work do you want God to establish?
Pray: Lord, establish the work of my hands.
Do: Draft the first ten accounts of your chart of accounts.
Module Quiz
- 1.
Money that customers owe the business is:
- 2.
Which is a cost of goods sold for a bakery?
- 3.
A chart of accounts is:
- 4.
You should keep receipts as proof for the entries in your books.
- 5.
Name the five types of accounts.