Transcript Double-Entry Accounting System

Chapter One:
Introduction
Objectives
At the end of the lesson, students should be able to :
• explain the concepts of Accounting Entity,
Accounting Period, Monetary Convention,
Going Concern and Historical Cost.
• know the Accounting Cycle.
Basic Book-keeping concepts
The Accounting Entity
or Business Entity
Accounting Period
Monetary Convention
The Going Concern
The Historical Cost
The Accounting Entity
Or Business Entity
concept
The business exists as a unit by itself.
It is separated from its owner.
Only transactions and events related
to the business are recorded in the
business books.
Accounting Period
The life of a business is divided into
many equal and fixed periods of
time. Eg one year
Similar to your parents’ monthly
salary income & expenses…
?
1 February 1998
28 February 1998
One month
?
1 March 1998
March
31 May 1998
April
three months
May
?
1 January 1998
Jan.
Feb.
30 June 1998
Mar.
Apr.
six months
May
Jun.
?
1 September 1998
9 10 11 12 1
2
31 August 1999
3
4
One year
5
6
7 8
Monetary Convention
Click
me!
Can you tell me…
• How much is your health worth?
• If I want to buy your attitude, how much
should I pay you?
• Can I buy laziness from you?
How much are you willing to sell?
Do you think everything in the
world can be measured in terms of
dollars and cents?
Therefore, ONLY MONEY is used as
the basic measuring unit for
financial reporting
Going Concern
Imagine you just set up a new company.
Do you think you want to sell off your
business next year? Why not?
Assumption: The business entity will
continue to operate and it will not close
down.
All assets owned by the business are
assumed to be used into the
unknown future.
Hence, we value the assets at
historical costs.
Historical Cost
AFTER 11/9
BEFORE 11/9
Market price changes all the
time!
Therefore…
All transactions/assets of a
business entity are recorded at
the original cost price.
Can you still remember
the 5 concepts ?
One day, you bought a new handphone Nokia 8310…
You also received an invoice from M1…
You decided to write down what you have spent on
a notebook so that you will not forget…
To record every different expenses on your
notebook seem very messy to you, so you decided
to keep a notebook for hobbies, books &
stationery, food & transport etc…
You want to see if your records are correct at the end of
the month… Did you forget to record anything?…
Income
$
Pocket money received
Expense
$
140
Hobbies
20
Food & Transport
70
Books & Stationery
10
Sports & Recreation
15
Handphone bill
20
Left*
5
140
140
At the end of the month, you added up all your
pocket money received and the total amount of money
spent. Did you overspent on your hobbies? Do you
have some money to save for the month? How much
money do you have left at the end? Should you cut
down on your expenses next month? …
Source
Documents
Can you link??
(originals)
Books of Prime
Entry
(Journal Entries)
Ledgers
Trial Balance
Adjustments
Reports
SUMMARY
 What have you learn today?
 Any questions?
 Do you find POA more interesting
now?
 Class worksheet to test your
understanding.