Principles of accounts

Accounting Cycle

Accounting Cycle

1. Source documents

2. Journals

3. Double Entry

4. Trial Balance

5. Income Statement

6. Balance Sheet

What is another name for Journals?

Books of original entry

What is another name for double entry?

Ledger

What is another name for Income statement?

Trading profit & loss account

What is another name for Balance sheet?

Statement of financial position

Source documents - #1

Sales and purchases Invoice

Source documents - #2

Debit and credit notes

Source documents - #3

Petty Cash vouchers

Source documents - #4

Bank paying in slips, cheques and cheque counterfoils

Source documents - #5

Receipts and Bankers’ Automated Clearing Services (BACS) receipts

Source documents #6

Correspondence

What is Petty Cash?

Petty cash is a small amount of money that businesses keep/do not deposit so that they don’t have to keep going to the bank to draw money every time they are in need of it

Books of Original entry - #1

Sales and Purchases Journals and general journals

Books of Original entry - #2

Returns Inwards and Outwards

Books of Original entry - #3

Cash book and Petty Cash book

Another name for purchases journals and sales journals?

1. Sales day book

2. Purchases day book

When assets increase you _____ and when assets decrease you ______

1. Debit

2. Credit

When liabilities increase you ______ and when liabilities decrease you _____

1. credit

2. debit

When expenses increase you _____ and when expense decrease you ______

1. Debit

2. Credit

When capital increase you ______ and when capital decrease you _____

1. Credit

2. Debit

When revenue increase you ______ and when revenue decrease you _____

1. Credit

2. Debit

Sales accounts are always

Credited

Purchases accounts are always

Debited

What is book keeping?

Bookkeeping is the systematic recording of the daily transactions of a business in terms of money. It is the first stage in the accounting cycle.

What does bookkeeping involve?

Bookkeeping involves record keeping – i.e. records are kept for sales, purchases, revenue expenses and all others business transactions.

What us accounting?

Accounting is the process by which certain methods and procedures are used to prepare, classify, analyse and summarize the financial records of a business.

What does accounting involve?

Accounting involes using information compiled in the bookkeeping process so that financial statements can be prepared, analysed and interpreted.

What are financial statements?

Financial statements are formal records of the financial activities and position of a business. Relevant financial information is presented in a structured manner and in a form which is easy to understand.

Types of financial statements- #1

Income statement – The purpose of an income statement is to show a company's financial performance over a period. It tells the financial story of a business's activities. Within an income statement, you'll find all revenue and expense accounts for a set period.

Types of financial statements - #2

► Statement of financial position - The statement lists the assets, liabilities, and equity of an organization as of the report date. It shows what the business owes and owns.

Internal users

1. Owners

2. Managers

3. Employees

External users

1. Potential Investors

2. Government/Tax authorities

3. Banks and other financial institutions

4. Customers (debtors)

5. Suppliers (creditors)

What is capital?

Capital is the total amount of resources supplied (or invested in) a business by its owners.

Who is a debtor

(also known as accounts receivable) a person who owes money to the business for goods previously sold to them on credit

Who is a creditor