ems.

• bookkeeping - the recording of financial transactions and the preparation of financial statements.
• 1494 - Lucas Pacioli described the double entry system.
• ‘for every debit, there’s a credit’
• income - expenses =profit or loss.
• creditors - much money the business owes to other businesses or suppliers
• debtors - those who owe money to the business.
• assets - the value of all his possessions.
• the amount and type of all expenses he has incurred.
• the amount and type of all income earned.
• the end result = either a profit or a loss
• capital or interest - the amount of money that a business has invested in the business (owner‘s equity)
• the overall financial position of his business.
• owner/entrepreneur - to start up the bussiness they can either use their own money or they can borrow money from the bank (loan)
• accountant/bookkeeper - manages all the money that is both being received and paid by the business.

  they also determine whether the business has made a profit or a loss.
• employees/workers - these are people that work for the business.
• bank - when money is received it is deposited and when money is being drawn out of the bank we call the withdrawal. banks also loan money to the business as start-up capital.
• debtors - are people or other businesses that owe the business money.
• creditors - are people or businesses we owe money too.
• always look at it from the business‘ perspective.
• service business - provides a service

  e.g sorbet.

  when we receive money for this type of business we call it current income / fee income.
• trading business - buying goods and then selling them at a higher price than it was bought.

  e.g. cotton on.

  when money is received we call it sales.
• transactions - an exchange of money between two parties in return for a service or products.
• step 1:

  transactions take place.
• step 2:

  a source document is recorded.
• step 3:

  info from the source document is entered into the cash journals.
• step 4:

  info from the journals is posted to the general ledger.
• step 5:

  info from the general ledger is used to draw up the trial balance.
• step 6:

  the financial statements are drawn up.
• debit side- left side
• credit side- right side.
• +A

  +E

  O+

  I+

  L+
• A-assets.

  E-expenses.

  O-owner‘s equity.

  I-income.

  L-liability.
• assets:

  BEV, trading stock, debtors control, bank, cash float, petty cash.
• expenses: insurance, wages, salaries, telephone, water and electricity, stationery, rent expense, consumable goods, cost of sales.
• drawings decrease owner’s equity.
• capital increases owner‘s equity.
• income: sales, current income, rent income, commission income.
• liability: creditors control, loans, bank overdraft.