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