1. Accounting Notes
The following topics will be explained in details:
Accrual accounting
Balance sheet.
Income statement .
Reporting period & Reporting date.
Related fields of study.
2. Accounting definition
Accounting :is the skills or activity of keeping records of
the money a person or organization earns and spend.
Accounting: is the practice and knowledge of
systematically identifying, measuring, recording and
reporting of qualitave and quantitative information in
respect of the economic activities of the business.
3. Accrual accounting
In accordance with accrual accounting, the effects of
transaction that are incurred on credit, are recorded in the
accounting records when the transaction is incurred, not
only at the point of time when payment take place.
e.g. when a customer purchase trading stock on credit. The
business record this transaction by debiting trade receivable
and credit trading stock. when the payment takes place the
business debit bank and credit trade receivable.
4. Balance sheet
1. The simple way to explain a balance sheet one can
say its “ Assets=Equity + Liabilities”.
2. Where by under Assets we have “non current
assets and current assets”.
3. Under equity we have “capital and retained
earnings”.
4. Under liabilities we have “non current liabilities and
current liabilities”.
5. The structure of balance sheet.
Assets Equity and liabilities
Non-current assets (A) Equity
Tangible assets •capital
•Long term investment •Retained earnings
Current assets (B) liabilities
•Inventory Non current liabilities
•Cash and cash equivalents •Long term loan
•Receivables Current liabilities
•Current portion of long term loan
Total assets(A+B)
6. Income statement
Income statement is the statement of profit and loss.
This statements provide information about the financial
performance of the company for the reporting period,
however this statement is managed monthly.
Financial performance is the relationship between the
income and the expenses of the company for a reporting
period.
This statement reflect the profit that the company made for
a certain month.
7. The structure of the income
Statement of profit & loss
statement
Sales 1867
Less : cost of sales (1200)
= gross income 667
Plus: other income 12548
=profit before expenses 13215
Less: other expenses (2465)
=profit before tax 10750
Less: income tax (2451)
=profit for the month 8299
8. Reporting period and reporting date
Reporting period : the useful life of an entity is
divided into twelve months. January till December.
Reporting date : the last day of a reporting period is
known as the reporting date. "namely 31 December”
9. Related fields
When your studying accounting, this are the fields
that you can work to :
1. Management accounting
2. Financial management
3. Auditing
4. Internal control
5. Taxation
10. Important tools
The most important thing that you should know in
T
accounting is the “ ” accounts.
Incomes on the “T” accounts increase on debit side
and decrease on credit side.
Expenses on the “T” account increase on credit side
and decrease on debit side.
“T” account is the ledger account
11. Accounting is fun
Loan
repayment Income
expense
s
s
Tax
paymen Profit or
t loss
Don’t wait for the last day to record income and expenses, like this man
record them every day when it arise, to avoid heavy load of work.
Manage your work
12. Expenses
Profit
Incomes
Accounting
Debit
loss
Credit
