accounts

• Reasons why Accounting is Important


  • To keep record of the transactions.
• Reasons for Maintaining Accounting Records

  • These records help to see how the business is doing.
• Money Measurement Concept


  Accounting is only concerned with items that have a money value
• Personal Budget


  A plan of income and expenses for the future in one's personal life
• Financial Accounting


  A specific branch of accounting involving a process of recording transactions.
• Cost snd Management Accounting

  Cost - calculation of Costs of companys products. Management - a method that creates statements reposts and documents.
• Double Entry Bookkeeping


  Every transaction is recorded twice: once on the Debit side and once on the Credit Side
• Business transaction vs private transaction

  Private transactions are done by the owner and relate only to his personal life. Business transactions relate to the business and should be recorded.
• Money Measurement Concept

  Items that have a money
• Historical Cost Concept

  Assets should be shown at Cost Price
• Similarities between historical cost concept and money measurement concept

  They're both applied when valuing assets.
• Daybooks


  • Sales Day Book
  • Purchases Day Book
  • Sales Returns Day Book
  • Purchases Returns Day Book
  • The General Journal
• UnderstandabilityAccounting Information should be presented in such a way that it is easily understood by everyone
• Verifiable


  • All information provided in our accounting system should be backed up by business documents, such as receipts and invoices
• Comparability


  • It should be possible to compare accounting statements with other businesses.
• Consistent

  • Accounting information should be prepared in the same manner each year.
• Timely


  • Accounting Information should be kept up to date
• Assets


  items that the business owns, ex: buildings, vehicles, furniture
• Liabilities


  amounts that the business owes to others ex: loan and trade paybles
• Capital


  what owner invested into the business
• What is the accounting equation?

  Assets= Capital+Liabilities
• Drawings


  when the owner takes money from the business.
• The difference between trade receivables and trade payables.

  Trade Receivables are ppl who owe money to the business. Trade Payables are ppl to whom the business owes money
• The equation of net profit.

  Net Profit= Gross Profit − Expenses
• The difference between current and non-current assets.

  Current Assets are bought to be used in the business for a long time, and they have a high value, ex: premises, machinery, motor van and furniture. Non-Current Assets are when the value keeps changing during the business year, ex: stock, trade receivables, bank and cash.
• The difference between non-current liabilities and current liabilities.

  Non current liabilities are amount owed that will be paid over a long period of time, ex: loan from the bank Current liabilities are amounts that the business owes that need to be settled within a year or less, ex: trade payables
• Equation to find Net Wage (from topic: Payroll)

  Gross Wage- Income Tax & N.I = Net Wage