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Introduction to Accounting Book keeping AccountingThis is a process of
detailed recording of all the financial transaction of a business.
Each financial event or business activity is called a transaction
This uses the bookkeeping records to prepare the financial statements at the regular intervals.
Learning objective Accounting literacy
Financial literacy
Business literacy
The three aspect of Accounting
STRUCTURE
LANGUAGE
MOVEMENT
Terminology ie assets , liability,
income
Increase or decrease and debit & credit
Ledgers, Income
statement and balance sheet
The five absolute elements in accountsAssetsLiabilitiesExpenses Owner/capitalIncome
Definition of termsAssets: are resources
that are owned by a business and uses them to run the business to produce, sell goods and services eg Machinery Motor vehicles , cash etc
Expenses: These are day to day running costs incurred by a business in the process of earning revenue eg rent, wages, salaries, interest, costs of heat etc
Liabilities : these are amounts that the business owes to other people eg amount owed to suppliers, loan , bank overdraft etc
Capital : This represent resources invested in the business by the owner or money used to start up the business by the owner.
Income / Revenue: These are the amounts the business earns by selling its products or providing services to customers. eg sales, fees, commission, interest, rent received, etc.
The Butterfly conceptGreen YellowThe earth consumption
of energyThe sun, the source of
energy
The accounting duality/butterfly.Green yellowUse of funding Source of funding
3.Assets
5.Expenses
2.Liabilities
1.Owner/equity/capital
4.Income
Accounting duality continues Green YellowUse of funds Room 3. Assets Premises Machinery Motor vehicle Equipment Stock Fixtures and fittings Room 5. Expenses Wages and salaries Insurances Rent electricity
Source of fundsRoom 2. LiabilitiesCreditorsLoanRoom 1. Capital /Equity
Room 4. Income SalesRent receivedCommission received
Conclusions It is a Trial balance Green debit, yellow creditRoom 1,2,3 is the accounting equation which
states that: ASSETS= CAPITAL + LIABILITY Therefore room 1,2,3 is a balance sheet Room 4,5 is an income statement.Rooms 1,2 and 4 credit increase and debit
decreaseRooms 3,5 credit decrease and debit increase
Terminology: Debits & CreditsGreen use of funds
Yellow: Source of funds
Debit
Debit the account increases
Credit the account decrease
Credit
Credit the account increase
Debit the account decrease
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