Accounting

Book-keeping
is the detailed recording of all the financial transactions of the business.

If records are not maintained, information may be overlooked or left for corruption.
double entry book-keeping (T-accounts)
Is used to record transactions

Accounting
Is using book-keeping records to prepare financial statements at regular intervals and to assist in decision-making.

Income statement: calculation of the profit or loss earned by the business.

Statement of financial position
shows the assets and liabilities of a business on a certain date.

Progression of the business can be measured by the financial statements from the previous years.

Capital
Is the total resources provided by the owner.

Asset
Represents anything the business owns.

Liability
Represents anything the business owes.

Accounting Equation

Assets = capital/owners’ equity + liabilities

Trade payable
represents the amount the business owes to the credit suppliers of goods (trade creditors).

Trade receivable
Represents the amount owed to the business by its credit customers (trade debtors).

Double entry book-keeping
is the process of making debit entry and credit entry for each transaction.
Used for day-to-day transactions.

Return outwards
Goods which have been purchased (from the business) but returned to the supplier. Due to the product being faulty, damaged, or not what was ordered.

Return inwards
A customer may return good to the business.

Trial balance
is a list of balances on the accounts in the ledger at a certain date.

·Check the arithmetical accuracy of the double entry book-keeping.

·Shows if the total debit balance is equal to the total credit balance.

Purpose

·Help in locating arithmetical errors

· Used to prepare financial statements

Invoice
document issued by the supplier of goods on credit showing details, quantities and price of goods supplied.

contains:

·Name and address of the supplier

·   Name and address of the customer

·   Date

·   Details, quantities, and price

TradeDiscount
Is a deduction in the price of goods; rate is dependent on the quantity purchased.

·   Encourages the customer to purchase in bulk

·   Shown as a deduction on the invoice

CASHDISCOUNT
allowance given to a customer when an account is settled within a time limit set by the supplier.

·   Cash discount is not shown as a deduction from an invoice as it is only allowed if the invoice is paid within a set time limit.

DebitNote
Document issued by the purchaser of goods on credit to request a reduction on the invoice received.

Customer should check that goods received are in satisfactory conditions.
price, quantity, and quality.

Credit Note
Document issued by a seller of goods on credit to notify a reduction in an invoice previously issued.

Whengoods are returned or reported faulty.

Statement of Account
is a document issued by the seller of goods on credit to summaries the transactions for the month.

Contains:

·The balance owing at the start/end of the period.

·Invoices and credit notes issued.

·Payment received.

·Any cash discounts allowed.

Cheque
A written order to a bank to pay a stated sum of money to the person or business named on the order.

Receipt
Written acknowledgement of money received and acts as proof of payment.