Introduction to Accounting
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Transcript Introduction to Accounting
Introduction to Accounting
Book keeping
Accounting
This is a process of detailed
This uses the bookkeeping
recording of all the financial
transaction of a business.
Each financial event or
business activity is called a
transaction
records to prepare the
financial statements at the
regular intervals.
Learning objective
Accounting literacy
Financial literacy
Business literacy
The three aspect of Accounting
MOVEMENT
STRUCTURE
LANGUAGE
Ledgers, Income
statement and
balance sheet
Terminology ie
assets , liability,
income
Increase or
decrease and
debit &
credit
The five absolute elements in
accounts
Assets
Liabilities
Expenses
Owner/capital
Income
Definition of terms
Assets: 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 concept
Green
Yellow
The earth consumption of
The sun, the source of energy
energy
The accounting duality/butterfly.
Green
yellow
Use of funding
Source of funding
3.Assets
2.Liabilities
5.Expenses
1.Owner/equity/capital
4.Income
Accounting duality continues
Green
Use of funds
Room 3. Assets
Premises
Machinery
Motor vehicle
Equipment
Stock
Fixtures and fittings
Room 5. Expenses
Wages and salaries
Insurances
Rent
electricity
Yellow
Source of funds
Room 2. Liabilities
Creditors
Loan
Room 1. Capital /Equity
Room 4. Income
Sales
Rent received
Commission received
Conclusions
It is a Trial balance
Green debit, yellow credit
Room 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 decrease
Rooms 3,5 credit decrease and debit increase
Terminology: Debits & Credits
Green use of funds
Yellow: Source of funds
Debit
Credit
Debit the account increases
Credit the account decrease
Credit the account increase
Debit the account decrease