Recap of Last Class

Elements of Accounting / Financial Statements

Accounting Concepts [Business / Separate Entity, Money Measurement,

Going Concern, Accrual / Cash, Prudence, Substance Over Form, Completeness]

Accounting Conventions Concepts [Historical Cost,

Accounting Periods]

Characteristics of Financial Statements [Relevance,

Faithful Representation, Completeness, Verifiability, Timeliness, Understandibility ]
 Learning Objectives – 17 October
Recapitulate of last class

Explain what is meant by ‘double entry’

Explain how the double entry system follows the rules
of the accounting equation
Explain why each transaction is recorded into
individual accounts
Describe the layout of a ‘T-account’
Learning Objectives
 Explain what is meant by the terms debit and credit

 Explain the phrase ‘debit the receiver and credit the giver’

 Prepare a table showing how to record increases and decreases of

assets, liabilities and capital in the accounts

 Entera series of transactions into

T-accounts
The Double Entry System
Every transaction affects two items.

These effects need to be shown in the

accounting books.

This is double entry bookkeeping.

 Concept of Journal
 Journal is a record of financial transactions in
order by date. A journal is often defined as
the book of original entry.

Journal entry is an entry to the journal.

All accounting transactions are recorded

through journal entries that show account
names, amounts, and whether those accounts are
recorded in debit or credit side of accounts.
Account
The accounts that are used to sort and
store transactions.

Ledger
Collection of accounts.
Also called book of final entry.
The Double Entry Account
The right side is called Debit

The left side is called Credit

How recording in an account
affects items
Or, to see this in the accounts
Activity
The owner starts the business with
£10,000 in cash on 1 August 2012.
Activity
A van is bought for £4,500 in cash on 2
August 2012.
Fixtures (e.g. shelves) are bought on
credit from Shop Fitters for £1,250 on 3
August 2012
Activity (Continued)
Combining all four of these transactions, the accounts now
contain:

2-13
Activity

2-14
Activity (Continued)

2-15