SUBJECT: FINANCIAL ACCOUNTING

Presented by Sean Fuller Bsc, MBA, ACCA Level 2, CIMA (Final Stage Equivalent)

TOPIC: INTRODUCTION ACCOUNTS AND ACCOUNTANTS

Subject: Accounting Date:16/1/2012 Group: College Students Time: Afternoon/Evening

AIM
By the end of the session you will develop an understanding and appreciation of the basic principles of Double-Entry Book-Keeping

OBJECTIVES
The principles of double entry book-keeping Debits and credits in double entry book-keeping Double entry for credit sales and credit purchases General principles of debits and credits

OTHER USEFUL INFORMATION

Basic/Key Skills Outcomes Relates only to the Financial Accounting Skills curriculum Health & Safety Fire exit on through the door and left through the main doors down the stairs Please do not leave chairs in the walk way it may obstruct movement in case a fire

DIFFERENTIATED LEARNING
Identify specific needs: Point in session (e.g. for slower learners 5 in this session) Repeat more than once Extension Work: (e.g. for faster Point in session learners) 5 Give two task Materials Additional Explanation

Materials Extra Materials for read and extra reference source

CODE OF CONDUCT

During this lesson, the only rules we all need to observe are based around Respect for each other, no matter what their social background, culture, sex or difficulties are. This will manifest its-self in allowing everyone to speak and be heard, not using any stereotypical remarks about any social group etc. Think before you speak! Respect everyones point of view-except if it is liable to cause offence. Use of inappropriate language and speaking in your own language in the classroom is not acceptable. Thank you for your consideration

RULES FOR CLASS

No talking to each other without permission in the class-If you have something to say raise your hand to ask for permission to speak-Penalties for disrupting the class can be leaving the class permanently. (No Mobile Phones) No eating during class time-if you caught you will be ask to leave the class and finish on the outside Everyone should make every effort to be early for class (Lateness will not be tolerated) You are expected to do your assignments on time. You will receive a pop quiz at any time during the class session therefore you are expected to read before coming to class.

MAIN LESSON

Introduction

Questions: What is the basic principles of double entry bookkeeping

Debit

Credit

THE PRINCIPLES OF DOUBLE ENTRY BOOKKEEPING

The dual aspect of double entry involves making two entries for every transaction in the books of account of the business
Cash Decrease Bank Balance Increase

Purchases of Goods for Cash Sale of goods for cheque

Goods - Received Goods Out of Business

Payment of wages by cheque

Wages Paid

Bank Balance Decrease

LEDGER ACCOUNT
DR Wages Account CR Date Details Folio AMT Date Details Folio AMT 5 Sept Bank CB121200

NOTE THE FOLLOWING POINTS ABOUT THE

LAYOUT OF THIS ACCOUNT The name of the account The account is divided into two sides Left is Debit or Dr Right is Credit or Cr. The Date and Details of the transaction Folio is for referencing Description of each entry is the name of the other account involved.

DEBIT AND CREDIT IN DOUBLE ENTRY BOOKKEEPING Every transaction involves one debit entry and one credit entry Debit entries are on the left of the appropriate account and credit entries are on the right Correct=right (credit = right hand side) and UK drivers, drive on the left. Work out which entry is the debit and which entry is the credit. There are two approaches: Conceptual Approach and Practical Approach

DOUBLE-ENTRY BOOK-KEEPING
The Conceptual Approach to Debits and Credits Debit Entry: the account which gains values or derives a benefit Credit Entry: the account which gives value or records some obligation Practical Approach 1 Sep 20-1 Sale of goods for 120 cheque received 5 Sep 20-1 Payment of wages of 1200 by cheque 6 Sep 20-1 Purchase of Goods for 3000, paid chq. 7 Sept20-1 Received loan of 5000 from Ian Wat. Paid chq. 9 Sept 20-1 Purchase of Computer costing 4000, paid chq

DOUBLE-ENTRY BOOK-KEEPING (CONTINUE)

Money received is recorded on the left hand side, and money paid out is recorded on the right hand side. Identify on which side of the bank account, debit (money in) or credit (money out) Record the other entry item on the other side of the appropriate account

DOUBLE ENTRY FOR CREDIT SALES AND

CREDIT PURCHASES Note: Purchases and Sales on credit are the most common. Credit Sale: Debit Debtors account, Credit sales account Credit Purchases: Credit creditors ( Suppliers) account, Debit purchases account Sales Account 20-1 10 Sep Arco E. 5000

Arco Engineering 5000

20-1 10 Sep Sales

DOUBLE ENTRY FOR CREDIT SALES AND CREDIT PURCHASES (CONT)

Dr. Bank Account 20-1 10 Oct Arco E. 5000

Cr.

Dr. Arco Engineering 20-1 20-1 10 Sep Sales 5000 10 Oct Bank

Cr.
5000

Sidbury Traders 2500 from NewLands Debit Purchases Account Credit Newland Supplies account

DOUBLE ENTRY FOR CREDIT SALES AND CREDIT PURCHASES (CONT)

Dr. Purchases Account 20-1 12 Sep Newland S. 2,500

Cr.

Dr. Newland Supplies Cr. 20-1 20-1 12 Oct Bank 2,500 12 Sep Purchases 2,500
Dr. 20-1

Bank Account Cr. 20-1 12 Oct Newland S. 2,500

DOUBLE ENTRY BOOK-KEEPING (CONTIN)

Balancing Off Accounts Balancing of each account allows for total debtors and creditors to be known Returns In and Returns Out Returns In-unwanted or faulty goods returned to the business Debit Note used by sender and Credit note receiver Debit returns in account Credit the debtors account Returns Out: are goods returned by the business, normally with a debit note. Debit creditors Credit returns out account

GENERAL PRINCIPLES OF DEBITS AND CREDITS

Debits Include: Purchase of goods for trading purposes Expense incurred by the business Purchases of Assets for retention in the bus. Money received Drawings made by the owner of the business Credits Includes: Sales made by the business Income received by the business Incurring a liability Money paid out business bank account

WHEN DO WE DEBIT OR CREDIT?

Debits Money received (cash and bank) Purchases Fixed Assets Acquired Expenses Drawings Credit Money paid out (Cash and Bank) Sales Liabilities incurred Income Capital

NOTE EXAMPLES

CONCLUSION
The principles of double entry book-keeping Debits and credits in double entry book-keeping Double entry for credit sales and credit purchases General principles of debits and credits