Introduction to Accounting
The two professional ethics of accountants.
Integrity and objectivity
The type of business transactions that payment is delayed.
Credit transactions
The basic accounting equation.
Assets = Liabilities + Equity
The double entry, "Owner withdrew $1,000 cash into the business bank account".
Dr Drawings $1,000
Cr Cash at bank $1,000
The 2 purposes of a trial balance.
1. Ensure arithmetic accuracy in recording
2. Facilitate the preperation of the financial statements
The accounting theory that states, "the activities of the business is separate from the actions of the owner and all transactions are recorded in the business point of view".
Accounting entity theory
The accounting theory that states, "source documents served as an evidence that a transaction had taken place".
Objectivity theory
The expanded accounting equation.
Assets = Liabilities + Capital + Income - Expenses - Drawings
The double entry, "Business repaid a loan of $20,000 from LaLa Bank".
Dr Loan from LaLa Bank $20,000
Cr Cash at bank $20,000
The two portions of the statement of financial performance for a trading business.
"Trading" portion and "Profit and loss" portion
The accounting theory that states, "business is assumed to have an indefinite economic life".
Going concern theory
The source document used to reduce the amount owed by credit customer.
Credit note
<Motor vehicle $45,000> <Trade payables $8,000> <Trade receivables $15,000> <Bank overdraft $3,000> <Premises $50,000>
The equity of the business.
$99,000
The double entry, "A furniture seller bought $15,000 of teak chairs from Sandteak on credit".
Dr Inventory $15,000
Cr Trade payable - Sandteak $15,000
The 5 sub-headers in the statement of financial position (list in order).
1. Non-current assets
2. Current assets
3. Owner's equity
4. Non-current liabilities
5. Current liabilities
The system set up and managed by accountants to provide stakeholders with accounting information.
Accounting information system
The 4 stages of the accounting cycle.
Stage 1 - Identify and record
Stage 2 - Adjust
Stage 3 - Report
Stage 4 - Close
The element/s affected, "Owner withdrew $10,000 from the business bank account".
Asset -$10,000
Equity -$10,000
The double entry, "Business sold $1,500 of goods to BrownPink on credit and the cost of these goods sold was $300".
Dr Trade Receivables - BrownPink $1,500
Cr Sales Revenue $1,500
Dr Costs of sales $300
Cr Inventory $300
<Sales revenue $82,000> <Cost of sales $18,000> <Discount allowed $1,000> <Discount received $2,000> <Sales returns $4,000> <Bank loan interest $3,000> <Salaries $20,000>
The profit/loss for the year.
Profit $38,000
The one INTERNAL stakeholder and the two EXTERNAL stakeholders are interested in the amount of LIABILITIES of the business.
Internal - Managers
External - Lenders, Suppliers
The flow of transaction in the accounting information system (name the 6 stages)
1. Source document, 2. Journal, 3. Ledger, 4. Trial balance, 5. Financial statements, 6. Closing entries
The element/s affected, "Business paid cash $450 to settle a debt $500 owed to a credit supplier".
Asset -$450
Liabilities -$500
Equity +$50
The double entry, "Business received a cheque $850 from BlackDot for goods previously sold on credit $1,000".
Dr Cash at bank $850
Dr Discount allowed $150
Cr Trade receivable - BlackDot $1,000
<Capital on 1 Jan 2022 $88,000> <Loss for the year $13,000> <Drawings $16,000> <Additional capital $10,000>
The Capital on 31 Jan 2022.
Capital on 31 Jan 2022 $69,000