financial acounting

types of buissneses

NOT SEPERATED: meaning if the company has debts its payed out of pocket.

accounting equation

assets = capital + liabilities

CAPITAL = AMOUNT INVESTED MY OWNERS

NCA VS CA

NCA: an asset held for more than 12 months not ment to be sold

CA: an asset held for less than 12 months that will be converted to cash

NCL VS CL

NCL: liability due after more than 12 months

CL: liability due before 12 months

HOW TO MAKE BALANCE SHEET

BRACKETS MEAN MINUS

1)START WITH PROFIT/LOSS

2)start with incomes

sales

(returns) = income

3)cost of sales

opening inventory

purchases

(purchase returns) (you gain money from these)

carriage inwards

(closing inventory)(gain money since asset)

all equals === cost

4) find gross profit

gross profit = income - costs (should be positive)

5) sundary income if any

rent recived ( add this to final profit)

6) expenses

carrige out

salaries

rent paid

motor expenses

sundary expenses

all equals to expenses

7)find net profit

net profit = gross profit - expenses + sundary income

8) START BALANCE SHEET

9)start with assets non current then current

NCA

motor vehicles

future fitting

CA

closing inv

recivables

cash in bank

cash in hand

10) NCA + CA = ASSETS

11) capital

opening capital

net profit (FROM SOPL)

drawings

12)NCL AND CL

CL

payables

13) does assets = capital + liabilities

how sopl, how to know where each one goes

1. Revenue (Sales)

This is the money earned/lost from selling/returning goods or services.

2. Cost of Sales

These are the costs directly associated with buying or producing the goods sold.

3. sundry Income

These are earnings other than the main sales revenue.

4. Expenses

These are the costs of running the business that are not included in cost of sales.

how to know where each thing goes in sofp

1. Non-current assets

These are assets the business expects to keep and use for more than one year.

2. Current assets

These are assets expected to be sold, used or converted into cash within the normal operating cycle or generally within 12 months.

3.Capital

The amount of money or resources invested in a business by its owner

4. Current liabilities

These are amounts the business owes that are generally due within 12 months.

5. Non-current liabilities

These are amounts owed that are generally due more than 12 months in the future.

capital vs revenue expenditure

capital: purchase of a NCA

revenue: costs related to a transaction, eg repairs/ maintenance

whats a nominal ledger and how to use it

when you put the 2 effects on debit and credit side of a transaction

DEBIT : expenses, assets, drawings

CREDIT: liabilities, income, capital

WHEN INCREASING DR left AND CR right

total DR should be equal to total CR

make a nominal ledger for the first 6

whats a t acount and how to make one (cash acount where trader makes 10000 in sales but looses 6000 in purchases)

t acount is too see what goes into an aocunt and what comes out

FOR CASH ACOUNT, if cash increases credit, decreases debit

for the question above

sales is on left, even tho its income,since its a cash acount and cash(assets) aer increasing, while purchases is right since cash is decresing hence credit

how to do brought forward carry forwards for this

1) choose the bigger value and thats the total for both sides

2)find differance 10000- 6000 = 4000 thats balance C/F and u put on lower side

3)for balance B/F, you put it on the opposite side of C/F and its same value as C/F