Accounting notes
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1. The document discusses key accounting topics including accrual accounting, balance sheets, income statements, reporting periods, and related fields of study. 2. Accrual accounting records transactions when incurred rather than when payment occurs. A balance sheet shows assets, liabilities, and equity with assets on the left and liabilities and equity on the right. 3. An income statement provides financial performance for a reporting period by showing revenues, expenses, and profit or loss, with the reporting period being a month or year.
Accounting notes
- 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