Topics Summary Methodology Time

What is accounting?
People and businesses
The accounting Classifying and summarizing
equations and Communicating information
Lecture 3
balance sheets What is book keeping?
Accounting is concerned with
Users of accounting information
The accounting equation
Introduction to balance sheet
The balance sheet and effects of business
transactions
The accounting Equality of the accounting equations
equations and Detailed presentation of balance sheet
Lecture 3
balance sheets Assets
Capital
Liabilities,
Debtors
Creditors

Nature of transaction
The double entry system
The double entry
Double entry bookkeeping
system for assets
The accounts for double entry
liabilities and Lecture 3
Debit and credit
capital
T-accounts
The double entry rules
Effects and action of transactions
Entering into T-accounts
Stock movement
Increase in stock
Decrease in stock
Purchase of stock on credit
Purchase of stock for cash
Sales of stock on credit
The asset of stock Lecture 3
Sales of stock for cash
Returns inwards
Return outwards
Special meaning of ‘sales’ and ‘purchases’
Comparison of cash and credit transactions for
purchases and sales
The nature of profit or loss
The effect of profit The effect of profit and loss on capital
or loss on capital Profit or loss and sales
and the double Profit or loss and expenses
Lecture 3
entry system for Debit or credit
expenses and Double entries for expenses and revenues
revenues Drawings
 Introduction
Accounts for debtors
Balance carried down
Balancing off Balance brought down
Lecture 3
accounts Accounts for creditors
Three-column accounts
Preparation of three-column accounts

Introduction
Total debit entries
The trial balance
Total credit entries Lecture 3
Total debit balance and total credit balance
Trial balance and errors
Introduction
Purpose of trading and profit and loss accounts
Trading profit and
Gross profit
loss account an
Net profit Lecture 3
introduction
Information needed
Effect on the capital account
The balance and books

Introduction to balance sheet

Contents of the balance sheet
Drawing up a balance sheet
No double entry in balance sheet
Balance sheet Balance sheet layout
Lecture 3
Assets
Fixed assets
Current assets
Liabilities
Current liabilities
A properly drawn up balance sheet
Returns inwards and return outwards
Carriage
The second year of a business
Adjustments needed for stock
Trading and profit Other expenses in the trading account
and loss account
and balance sheet:
Lecture 3
further
considerations
 Introduction to accounting concepts
One set of final accounts for all purposes
Objectivity and subjectivity
Accounting standards and financial reporting
standards
International Accounting Standards
Accounting Standards and the legal framework
The historical cost concept
The money measurement concept
Accounting
The business entity concept
Concepts Lecture 3
The dual aspect concept
The time interval concept
Going concern concept
Consistency
Prudence
The accrual concept
Separate determination
Substance over form
Materiality

The growth of the business

Books of original entry
Types of books of original entry
Using more than one ledger
Sales ledger
Books of original
Purchase ledger Lecture 3
entry and ledgers
General ledger
Personal accounts
Impersonal accounts
Nominal and private ledgers
The accountant as a communicator

Drawing up a cash book

Cash paid into the bank
The use of folio columns
Advantages of folio columns
Cash books
Cash discounts Lecture 3
Discounts allowed and discounts received
Cash discounts
Discount column in cash books
Bank overdrafts
Bank cash books

Cash sales
Credit sales
The sales day book
Copies of sales invoices
and the sales
Making entries in the sales day book Lecture 3
ledger
Posting credit sales to the sales ledger
Example of posting credit sales
Trade discounts
Credit control
Purchases invoices
The purchase day
Making entries in the purchases day book
book and the
Posting credit purchases to the purchase ledger Lecture 3
purchase ledger
Example of posting of credit purchases
 Return inwards and credit notes
Return inwards daybook
Example of a returns inwards day book
Return outwards and debit notes
Return outwards day book
The returns day
Examples of a return outwards day book Lecture 3
books
Double entry and returns
Statements
Sales and purchase via credit cards
Internal check
Factoring
Introduction to journal
Main books of original entry
The journal
The journal: the other book of original entry Lecture 3
Typical uses of the journal
The basic accounting cycle
Division of the cash book
Analytical petty The imprest system
cash book and the Illustration of an analytical petty cash book
Lecture 3
imprest system Bank cash book
Why using bank cash book
Entering to a bank cash book
What is VAT?
Background of VAT
VAT rates
Standard-rated businesses
Exempted businesses
Zero-rated business
Value added tax
Partly exempt businesses Lecture 3
Different method of accounting for VAT
VAT in ledger accounts and financial statements
VAT and cash discounts
VAT owing
Columnar day books and VAT
Value added tax return forms
Pay
Methods of calculating gross pay
Income tax deductions
PAYE code number
Employees’ pay
National Insurance Lecture 3
Pensions contributions
Voluntary contributions
Statutory Sick Pay and Statutory Maternity Pay
Calculation of net wages/ salary payable
Introduction
Background of computers
Large versus small systems
Networks
Software
Computers and
Benefits from computers
accounting Lecture 3
Management information system
Use of spreadsheets
Use of databases
Data back ups
Passwords
Data security and the data protection act 1998
 Introduction
Back ground
Benefits of using computerized accounting system
Computerized Speed and accuracy
accounting Error detection
Lecture 3
systems Computerized accounting books
Computerized stock control and modular integration
Accounting information system
Issues to consider when introducing fully
computerized AIS
Introduction
Capital expenditure
Capital expenditure Revenue expenditure
and revenue Capital expenditure further analysis
Lecture 3
expenditure Joint expenditure
Incorrect treatment of expenditure
Treatment of loan interest
Capital and revenue receipts
Bad debts, Bad debts
provision for Provision for doubtful debts
doubtful debts and Accounting entries for provision for doubtful debts
provision for Increasing the provision Lecture 3
discounts on Reducing the provision
debtors Bad debts recovered
Provision for cash discounts on debtors
Introduction
Nature of fixed assets
Depreciation of tangible fixed assets
Depreciation is an expense
Depreciation of
Causes of depreciation
fixed assets:
Land and buildings
nature and Lecture 3
Appreciation
calculations
Provision for depreciation as an allocation of cost
Straight line method
Reducing balance method
Choice of method
Depreciation provisions and assets bought or sold

Introduction
Double entry Recording depreciation
records for The disposal of a fixed asset Lecture 3
depreciation Change of depreciation
Depreciation provisions and the replacement of
asset

Financial statement
Adjustments needed
Accrued expenses
Accruals and Prepaid expenses
prepayments Revenue owing at the end of period Lecture 3
Expenses and revenue account balances and the
balance sheet
Goods for own use
Financial statement in the service sector
Extended trial balance
 Different valuation of stocks
FIFO method
LIFO method
Average cost method
Stock valuation and calculation of profits
Reduction to net realizable value
The valuation of
Stock groups and valuation
stock Lecture 3
The category method
Periodic stock valuation
Factors affecting the stock valuation decision
Work in progress
Goods on sale or return
Stock taking and the balance sheet date
Stock levels
Completing entries in the cash book
Where closing balances differ
Bank reconciliation
The bank balance in the balance sheet
statements Lecture 3
An alternative approach to bank reconciliations
Bank overdrafts
Dishonored cheques
The benefits of accounting controls
Principle of control accounts
Information for control accounts
Control accounts Form of control accounts Lecture 3
Control account as part of double entry
Self-balancing ledgers and adjustment accounts
Reconciliation of control accounts
Types of error
Errors not affecting Correction of errors
trial balance Casting Lecture 3
agreement

Errors and the trial balance

Suspense account
Suspense account and the balance sheet
Suspense Correction of errors
accounts and Lecture 3
The effect of errors on profits
errors Suspense accounts: businesses and

The need for accounting ratios

Mark-up and margin
Calculating missing figures
Accounting ratios
The relationship between mark-up and margin Lecture 3
Manager’s commission
Gross profit as percentage of sales
Stock turn over