Principles of Accounts

Balance Sheet
A balance sheet is a financial statement that provides a
snapshot of a company's financial position at a specific
point in time, typically at the end of a quarter or fiscal
year. It shows the company's assets, liabilities, and
shareholders' equity.

 Assets: These are what the company owns or controls,

which hold economic value and can be tangible (like
cash, inventory, property, equipment) or intangible
(like patents, trademarks, goodwill).
 Liabilities: These represent the company's debts or
obligations, including loans, accounts payable,
accrued expenses, and any other amounts owed to
external parties.
 Capital: Capital often refers specifically to the amount
invested by shareholders in the company. It can be in
the form of both contributed capital (money raised
through the sale of stock) and retained earnings
(profits reinvested back into the business).

Main Parts of a Balance Sheet

Current assets
Cash, as well as other assets you expect to turn into cash
within the next 12 months.
Current assets are the things a company owns that it can
turn into cash or use up within a year. Some examples
include:

 Cash at hand in bank.

 Money Owed: Payments customers haven't made yet.
 Inventory
 Short-Term Investments: Stocks or bonds.
 Prepaid Stuff: Insurance or rent.

Fixed assets
Fixed assets are physical or tangible items that a company
owns and uses in its business operations to provide
services and goods to its customers and help drive
income. Examples include:
Buildings, computer equipment, software, furniture, land,
machinery, and vehicles.

Current liabilities
Debts and other obligations to creditors that will be due
within the next 12 months. Examples of current liabilities
include accounts payable, credit card bills, sales taxes
collected, payroll liabilities and loan payments.

Long-term liabilities
Debts and other obligations to creditors that will not be
due in the next 12 months. Examples of long-term
liabilities include long term loans, Bonds Payable, Pension
Obligations, Deferred Tax Liabilities, Lease Obligation and
mortgages.

A balance sheet is a financial statement that provides a

snapshot of a company's financial position at a specific
point in time. Its uses are diverse and crucial for various
stakeholders:

 Assessing Financial Health

 Decision Making
 Creditworthiness Evaluation
 Comparative Analysis
 Investor Relations
 Regulatory Compliance
 Benchmarking

What is Accounting?

Accounting is the keeping record of financial data

Concepts of Accounting

Business Entity Concept:

Maintaining a clear separation between the business itself

and its owner(s). This principle ensures that the business's
financial activities and transactions are distinct and
separate from the personal finances of its owner(s).

Historical Cost Concept

The historical cost principle states that a company or

business must account for and record all assets at the
original cost or purchase price on their balance sheet.

Dual Aspect Concept

The dual aspect concept forms the basis of the double-

entry accounting method. This requires that each business
transaction be recorded in two separate accounts.
According to the dual aspect concept, every transaction
impacts the business in two ways which must be equal
and opposite.

Money Measurement Concept

The money measurement concept states that a business

should only record an accounting transaction if it can be
expressed in terms of money. This means that the focus of
accounting transactions is on quantitative information,
rather than on qualitative information.

Accounting Ethics

Ethics of accounting are guidelines established by

different accounting bodies to deter accountants from
misusing financial information. They include
confidentiality, integrity, and professional competence.

The Ethical Issues in the Field of Accounting

Omission of Financial Data: Leaving out or omitting

certain financial figures from a balance sheet that may
psint the business in a bad light to the public investors
Confidentiality

Professional Competence

Fraud

Source Documents

Cash Receipt: Confirming the receipt of cash e.g rent paid

by cash $5000
Credit Note: issued by a seller to a buyer to tell the buyer
the amount they owe. It's used to officially reduce the
amount owed by the buyer to the seller. This usually
occurs when there's an error in the original invoice, a
return of goods, or a discount given after the sale e.g
received a credit loan from supplier $670

Credit sales receipt: is issued when a sale is made on

credit, meaning the buyer doesn't pay immediately but
agrees to pay at a later date, often within an agreed-upon
timeframe. E.g goods was bought on credit from L. Davis
$1000

Petty cash voucher: A petty cash voucher is a document

used to record small, miscellaneous expenses paid for out
of a petty cash fund. When an employee spends money
from the petty cash fund, they fill out a petty cash voucher
to document the expenditure. E.g cash was received from
the cash register to make small purchases of dish soap for
the office $300

Debit note: used in business to inform a buyer that a debit

has been made to their account. It's typically issued by a
seller to notify the buyer about additional charges,
adjustments, or corrections that increase the amount owed
by the buyer to the seller.