> For the complete documentation index, see [llms.txt](https://tribalfs.gitbook.io/accountant/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://tribalfs.gitbook.io/accountant/getting-started/the-basics.md).

# The basics

Three ideas that make everything in Accountant click.

Learn these three ideas once and the rest of the app will make sense. It takes about three minutes.

## 1. Your money in one equation

> **Total assets = Total liabilities + Net worth**

* **Assets** are what you own: cash, bank balances, e-wallets, money others owe you, personal property (such as vehicles), and real property (such as land and homes).
* **Liabilities** are what you owe: credit cards, loans and unpaid bills.
* **Net worth** is what's left when you subtract what you owe from what you own.

**Example:** you have 10,000 in cash and in the bank, and you owe 3,000 on a credit card. Your net worth is 7,000.

Only two things change your net worth: **income** raises it and **expenses** lower it. Moving money between your accounts, borrowing, or paying off a debt doesn't change it. Your money just changes places.

Accountant keeps this equation balanced with every transaction you record. You can see it any time in **Reports › Net worth**.

[Learn more about the accounting equation](/accountant/fundamentals/understanding-the-basic-accounting-equation.md)

## 2. The account structure

Think of a filing cabinet with three levels:

1. **Account type**, the drawer. There are only four:
   * **Asset**: what you own
   * **Liability**: what you owe
   * **Income**: what you earn
   * **Expense**: what you spend on
2. **Account category**, a folder in the drawer. It groups similar accounts together.
3. **Account**, the record inside the folder. This is where your amounts go, and each account has its own balance.

```
Asset › Cash in bank › Everyday checking, Emergency savings
Expense › Household › Groceries, Apartment rent
```

{% hint style="info" %}
**A category is not an account.** Many money apps call *Groceries* a "category". In Accountant, *Groceries* is an **expense account**, where your grocery spending is recorded. *Household* is the category that groups it with similar accounts. Categories aren't only for expenses either: *Cash in bank* groups your bank accounts, and *Credit card* groups your cards.
{% endhint %}

Accountants call the full list of your accounts your *chart of accounts*. In the app, it's the **Accounts** screen.

[Learn more about setting up accounts](/accountant/accounts/setting-up-accounts.md#how-your-accounts-are-organized) · [Account categories](/accountant/accounts/categories.md)

## 3. Six kinds of transactions

You don't need to know bookkeeping rules. Pick what happened, and Accountant records both sides of the transaction for you.

| Shortcut              | Use it when…                                                    |
| --------------------- | --------------------------------------------------------------- |
| **Pay money**         | money leaves your cash, bank or e-wallet                        |
| **Receive money**     | money arrives in your cash, bank or e-wallet                    |
| **Buy on credit**     | you buy something now and pay later, for example by credit card |
| **Record income due** | you've earned income but haven't been paid yet                  |
| **Transfer money**    | you move money between your own accounts                        |
| **Add adjustment**    | nothing moved in cash, but something needs correcting           |

Remember: **not every payment is an expense, and not all money received is income.** Paying your credit card bill or moving money to savings doesn't make you poorer. See [Money spent isn't always an expense](/accountant/fundamentals/money-spent-is-not-always-an-expense.md).

[Learn more about the six transaction types](/accountant/transactions/transaction-types.md)

## Next

You're ready to set up the app: [First setup](/accountant/getting-started/first-setup.md).


---

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