Accounting: Introduction
Mr. Barry
A-level Accounting Year 12
Mr. Barry
A-level Accounting Year 12
A change to the school day
Mr. Barry
A-level Accounting Year 12
Starter Activity 1
• On the postit given, can you answer the
following questions (use both sides)
– Why did you choose accounting?
– What are you most looking forward to studying
in this year in the accounting course?
End
Mr. Barry
A-level Accounting Year 12
Format of this Year
Unit 1: Financial Accounting
Unit 2: Financial and Management
Accounting
11 Lessons every two weeks
Ensure you are aware of the times and places of each
lesson (Week A & Week B)
Mr. Barry
A-level Accounting Year 12
Topics
Week
Purpose of Accounts
2
Double Entry
2-4
Trial Balance
5
Simple final accounts for sole traders
6-7
Assessment
8
Adjustments for final accounts
9-12
Daybooks
13-14
Assessment
15
Correcting errors and suspense account
2
Bank reconciliation
3
Control accounts
4
Accounting Concepts/ ACCN 2 Theory
5-6
Limited company accounts
7-8
More advanced Matters/ Budgetary and Budgetary control
9-10
Mr. Barry
A-level Accounting Year 12
Icebreaker Time
Mr. Barry
A-level Accounting Year 12
Form
into
Pairs
now
Mr. Barry
A-level Accounting Year 12
Activity
• On the postit given, can you answer the
following questions (use both sides)
Find your partners
– Favourite colour
– Favourite pastime
– Best moment from the summer holidays
End
Mr. Barry
A-level Accounting Year 12
Time to Stand Up
Mr. Barry
A-level Accounting Year 12
Topic 1- Purposes of accounting
Mr. Barry
A-level Accounting Year 12
Business Transactions
• What does it involve?
 Purchasing resources e.g. raw materials, labour,
capital equipment, land (can be called factors of
production).
 Selling goods and services that have been
produced or purchased from a supplier
 The business needs to keep a record of ALL
transactions. The use of till rolls record sales,
invoices record purchases which are entered into
a Purchases Book.
Mr. Barry
A-level Accounting Year 12
Mr. Barry
A-level Accounting Year 12
Purposes of keeping Accounting
records
• To assess profitability and solvency by assessing what has
happened in the past.
• An aid to decision-making to enable the production of cash
budgets , projected profit and loss accounts and balance
sheets. (Forecasting for the future)
• Monitoring and control . To monitor what has actually
happened and compare with forecasts and take any
necessary corrective action .
• To enable HM Revenue and Customs to assess the correct
amount of income taxes and value added tax . (Legal
requirement)
• Minimising the chances of fraud
• Evidence for external borrowings as when applying for a bank
loan
Mr. Barry
A-level Accounting Year 12
Recording and Reporting what has
happened in the past
• All businesses must be able to assess whether
the business is profitable
• Recording historic income and expenditure,
and producing an income statement, enables
this to be done
• Producing a statement of financial position
(balance sheet) enables a business to assess
whether they are solvent
Mr. Barry
A-level Accounting Year 12
Forecasting the future
• Based on what happened historically, owners
are able to forecast what they anticipate will
happen in the future, in the form of cash
budgets or projected income statements and
statements of financial position
Mr. Barry
A-level Accounting Year 12
The USERS of Accounting Information (STAKEHOLDERS)
STAKEHOLDERS have different reasons for accounting information. List them.
Owners
Investment
Analysts
Community
Groups
Managers
Government
The BUSINESS
Competitors
Suppliers
Employees
Customers
Lenders
e.g. Banks
Mr. Barry
A-level Accounting Year 12
Mr. Barry
A-level Accounting Year 12
Topic 2- Double-Entry
Mr. Barry
A-level Accounting Year 12
Double-Entry Book-Keeping
• Aims:
– To understand the dual aspect of book-keeping
– To be able to carry out basic double entry transactions
from given information
Double-Entry Book-Keeping
Getting started:
•For every financial transaction there is a dual aspect – so you would do two bookkeeping entries in two different ledger accounts
•Accounts are where the business will record all associated transactions e.g. wages, rent
paid, sales (but by customer names), purchases (but by supplier/creditor name)
•Lay out of an account shown on the top half of page 7 of text book – please copy this
out
•In reality wages take up pages in hand-written book-keeping systems, but we will put
several on a one page
•For our exercises we will use a simpler format
Debits & Credits
• Accounts are often called T accounts, they have two sides – debit & credit
• Principle of double entry is that for every transaction one account is debited
and the other account is credited
• Debit entries are made on left hand side of the appropriate account & credit
are made on the right hand side
• The general rules are:
– If account gains value, or is recording an asset or expense – DEBIT SIDE
– If account gives value, or is recording a liability or an income item –
CREDIT SIDE
Mr. Barry
A-level Accounting Year 12
The Layout
DEBIT (DR)
Date
The date of
the
transaction
Mr. Barry
CREDIT (CR)
Details
Total (£) Date
The amount of
the transaction
The account to
which the other
part of the
transaction is
posted
A-level Accounting Year 12
Details
Total (£)
DEAD CLIC
DEBIT (DR)
Date
Details
CREDIT (CR)
Total (£) Date
Expenditure
Assets
Drawings
Mr. Barry
Details
Liabilities
Income
Capital
A-level Accounting Year 12
Total (£)
1 Minute Test
Can you remember
The layout of a T account
The acronym for ruling Debit and Credit?
End
The Accounting Equation
Assets- Liabilities = Capital
Mr. Barry
A-level Accounting Year 12
Important definitions
Assets
Resources that a business owns and uses to
run a business and to produce and sell goods
and services
Non-Current Assets (NCA) and Current Assets
(CA)
Examples are Machinery (NCA), Buildings
(NCA) and Cash (CA)
Mr. Barry
A-level Accounting Year 12
Important definitions
Liabilities
Amounts that the business owed to third
parties
Non-Current Liabilities (NCL) and Current
Liabilities (CL)
Examples are Debentures (NCL) and bank
overdrafts (CL)
Mr. Barry
A-level Accounting Year 12
Important definitions
Capital
Investment in the business made by the
owner
Made up of initial investment plus profits
made, less profits withdrawn by the owner in
the form of drawings
Mr. Barry
A-level Accounting Year 12
Important definitions
Drawings
Funds withdrawn from the business by the
owner for personal use
Mr. Barry
A-level Accounting Year 12
Example transactions – ruling up accounts
– Overview of capital
• Started in business with capital of 5000 as a cheque paid into the account
• Ruling up appropriate accounts
– Overview of fixed assets
• Bought office equipment 2500 paying in cheque
• Ruling up appropriate accounts
– Overview of expenses
• Paid rent of office 500 by cheque
• Ruling up appropriate accounts
– Overview of income
• Received commission of 100 by cheque
• Ruling up appropriate accounts
– Overview of Owner’s drawings
• Withdrew 250 from the bank for own use
• Ruling up appropriate accounts
– Overview of Loans
• Received a loan of 1000 from James Henderson
• Ruling up appropriate accounts