 Unit 2 of sailor.org's Introduction to Financial Accounting. This unit is divided into four subunits and will take almost four hours to complete in total. Now I know we said most units will probably take between two and three hours, but this unit is probably the most important one on the course, so it needs to take a little longer. Before we start this unit, review your notes from Unit 1. We'll be building on what you learned in Unit 1 in this unit. Have you ever wondered exactly how a business records its transactions? This unit will give you a behind-the-scenes look at that process. We'll learn about what's called double-entry method of accounting using the accounting equation. The accounting equation basically states that all credits must equal all debits. In other words, imagine that you bought an iPad. This would be the credit. In order to buy the iPad, you spend $400 of your savings and then borrow $200 from your dad. These two amounts, the $400 and $200 sums, would represent the debits. The credit and the sum of the two debits equal each other. Of course this becomes a lot more complicated once we learn all the different forms that debits and credits can take in a business situation, but that's the basic principle. You can think of the accounting equation as a built-in check and balance to make sure that all transactions are recorded correctly. While you read the assigned content and watch the video lectures, don't forget to add to your notes. This unit's information will be incorporated in some form or another throughout the remainder of this course. See you in Unit 3!