Accounting-Term 1 '24

• Business Entity - A business, an entity is something that can exist independently. Businesses are business entities.
• Accounting Equation - Assets = Liabilities + Owner's equity
• Business Entity Rule - The personal money matters of the owner must be kept separate from the money matters of the business
• Assets - The resources owned by a business that it can use to generate income.
• Fixed Assets - Assets that are not expected to be used up or consumed in the normal course of business.
• Financial Assets / Investments - These are assets that are expected to generate cash flows in the future.
• Current Assets - Assets that are expected to be converted into cash within one year.
• Liabilities - The amount of money that a business owes to other people or organisations. It excludes money owed to the owner.
• Long Term Liability - A liability that will become payable, only after a period of one year.
• Current Liability - Liability that is payable within one year. (short-term liability)
• Capital - The money that is invested in a business, which is used to buy assets.
• Drawings - When the owner takes money or anything else from the business for personal use.
• Income - the money received by an individual or business from their work or investments.
• Expense - A cost of goods and/or services.
• Transaction - Money value must be recorded into the books of the enterprise at a specific point in time.
• Cash Receipt - A document that records the receipt of cash from a customer.
• Payment - Represented by a transaction where money is paid out by the enterprise. Normally by EFT as an internet payment.
• Profit and Loss - The difference between the total revenue and total costs of a business.
• Owners Equity - The amount of money that the owner has invested in the business.
• OWNERS EQUITY = CAPITAL + NETT PROFIT - DRAWINGS
• Source document - document that is used to verify the authenticity of the document being used.
• Bank - It is the current account in the books of the enterprise.
• Cash Float - The amount of cash that is available for immediate use.
• Petty Cash - A small amount of money that is kept in a safe place for small purchases.
• Double Entry Principle - For every credit there is a debit.
• Journal - A book or collection of books in which the entries are arranged in chronological order.
• Ledger - A book in which the accounts of a business are recorded and from which the accounts of the business are prepared.
• Income Statement - A statement that shows the financial position of a business at a particular point in time.
• Balance Sheet - A statement of the financial position of a business at a particular point in time.
• Trading Stock - A stock of goods held by a business for sale to customers.
• Cost Price - The price at which the goods are sold to the customer.
• Selling Price - The price at which the seller agrees to sell the goods to the buyer.
• Profit Mark-up - The amount of profit that a business makes on its sales.
• Cost of Sales - The cost of goods sold, including direct labor and manufacturing overhead, but excluding direct materials and direct labor
• Gross Profit = Selling Price - Cost of Sales
• Nett Income (Profit)- Sales-Cost of Sales= Gross Profit + Other Income-Other Expenses= Nett Income
• Cost Price + Gross Profit = Selling Price
• Selling Price - Cost Price = Gross Profit
• Selling Price - Gross Profit = Cost Price
• 1. Capital
  2. Drawings
  3. Land and Buildings
  4. Equipment
  5. Vehicles
  6. Trading stock
  7. Bank
  8. Cash float
  9. Sales
  10. Cost of sales
  11. Rent income
  12. Commission income
  13. Interest on current account
  14. Wages
  15. Stationery
  16. Packing material
  17. Water and electricity
  18. Bank Charges
  19. Sundry expenses
  20. Salaries