ACCOUNTING AND FINANCE
A Lot to Learn
UNIT
1A
TRANSACTIONS
FIXED ASSETS
REVISION
NOTES
ASSETS
CURRENT ASSETS
DEBTORS
LIABILITIES
CURRENT LIABILITIES
CREDITORS
BALANCE SHEET
NET WORTH
Records must be kept of all financial events eg when something is bought or
sold or when payment is made for something. These financial events are called
TRANSACTIONS.
Accounting and Finance is all about preparing and interpreting these financial
records.
ASSETS – things of value owned by a person or business. These can be
FIXED if they are likely to remain the same for a long period (eg property,
equipment) and CURRENT when they are liable to change regularly (eg Bank,
Cash)
DEBTORS – people and firms who owe us money
CREDITORS – people and firms to whom we owe money
LIABILITIES – debts owed to other people or firms. Can be long-term eg
mortgage on a house repaid over 20 years or CURRENT when they must be
paid back within a few months.
BALANCE SHEET – a statement that shows the financial standing of a person
or firm at a point in time.
NET WORTH – the financial value of a person or business.
NET WORTH = ASSETS – LIABILITIES
ACCOUNTING AND FINANCE
A Lot to Learn
CASH BUDGET
UNIT
1B
REVISION
NOTES
OPENING BALANCE
CLOSING BALANCE
A CASH BUDGET is a statement prepared to forecast how much cash will be
left at the end of the coming week, month or year.
It shows the OPENING BALANCE (the amount at the beginning of the period)
plus all cash coming in less all cash going out to calculate the CLOSING
BALANCE.
Reasons for preparing a Cash Budget:

to calculate how much cash is likely to come in during the coming week,
month or year

to calculate how much cash is likely to be spent during the coming week,
month or year

to show how much cash is likely to be left at the end of the coming week,
month or year

to plan future spending

to predict the likelihood of running short of cash

to tell how long it will take to reach a certain target of savings

to help judge if items of spending or borrowing can be afforded.
ACCOUNTING AND FINANCE
A Lot to Learn
UNIT
1C
REVISION
NOTES
CHANGES TO THE BALANCE SHEET
Every transaction affects at least 2 items in the balance sheet. When these items
are affected, the balance sheet still balances. The following are changes that still
allow the balance sheet to balance.
ASSETS
Increase
Decrease
Increase
Decrease
Increase
Decrease
Increase
Decrease
less
LIABILITIES
equals
NET WORTH
Increase
Decrease
ACCOUNTING AND FINANCE
A Lot to Learn
UNIT
1D
REVISION
NOTES
NOT-FOR-PROFIT ORGANISATIONS ie CLUBS AND SOCIETIES
COMMITTEE
CHAIRPERSON
TREASURER
SECRETARY
HONORARIUM
SUBSCRIPTIONS
AGM
RECEIPTS AND PAYMENTS ACCOUNT
This type of organisation is set up to provide a service and facilities for its
members rather than to go out intentionally to make a profit. The members own
the organisation and elect a COMMITTEE (a group of people) to run the club
on their behalf.
The CHAIRPERSON heads the committee, the TREASURER takes control of
all the club’s financial matters and the SECRETARY assists the chairperson in
organising meetings (like the ANNUAL GENERAL MEETING to which all
the members are invited) and dealing with correspondence.
The club usually gets the bulk of its income from the annual fee paid by
members called SUBSCRIPTIONS. To supplement this, the club will run
fund-raising events and activities to help cover their costs and purchase
equipment.
None of the committee members are full time employees of the club so an
HONORARIUM is usually paid to each of them as a fee for the work they do
voluntarily for the club.
The club will normally have an account at the bank and the RECEIPTS AND
PAYMENT ACCOUNT is the club’s version of it. It resembles a cash budget
in layout but is normally done at the end of the year. The Opening Balance
(cash at the beginning) is added to all the receipts of cash for the period less all
the payments of cash for the period, revealing the closing balance for the period.
The closing balance represents the money the club should have in the bank.