Accounting: An introduction

Accounting: IntroductionMr. Barry

A-level Accounting Year 12Mr. BarryA-level Accounting Year 12

A change to the school dayMr. BarryA-level Accounting Year 12

Starter Activity 1On 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?

EndA-level Accounting Year 12Mr. BarryThis bar timer, will start when anywhere on the slide is clicked. The bar will move from left to right and the word End will appear at the end, accompanied by a Deep Gong sound. It is possible to change the duration of this timer to any time, by entering the animation settings, and changing the timing for rectangle 3. Note the time has to be entered as a number of seconds so if you want 2mins & 30secs this is entered as 150 (60X2 + 30 = 150).

4Format of this YearUnit 1: Financial AccountingUnit 2: Financial and Management AccountingMr. BarryA-level Accounting Year 1211 Lessons every two weeksEnsure you are aware of the times and places of each lesson (Week A & Week B)Topics WeekPurpose of Accounts2Double Entry2-4Trial Balance5Simple final accounts for sole traders6-7Assessment8Adjustments for final accounts9-12Daybooks13-14Assessment15Correcting errors and suspense account2Bank reconciliation 3Control accounts4Accounting Concepts/ ACCN 2 Theory5-6Limited company accounts7-8More advanced Matters/ Budgetary and Budgetary control9-10Mr. BarryA-level Accounting Year 12Icebreaker TimeMr. BarryA-level Accounting Year 12

Mr. BarryA-level Accounting Year 12

Form into Pairs now

ActivityOn the postit given, can you answer the following questions (use both sides) Find your partners Favourite colourFavourite pastime Best moment from the summer holidays

EndMr. BarryA-level Accounting Year 12This bar timer, will start when anywhere on the slide is clicked. The bar will move from left to right and the word End will appear at the end, accompanied by a Deep Gong sound. It is possible to change the duration of this timer to any time, by entering the animation settings, and changing the timing for rectangle 3. Note the time has to be entered as a number of seconds so if you want 2mins & 30secs this is entered as 150 (60X2 + 30 = 150).

9Time to Stand UpMr. BarryA-level Accounting Year 12

Topic 1- Purposes of accountingMr. BarryA-level Accounting Year 12Business TransactionsWhat 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 supplierThe 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. BarryA-level Accounting Year 12Mr. BarryA-level Accounting Year 12

Purposes of keeping Accounting recordsTo 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. BarryA-level Accounting Year 12Recording and Reporting what has happened in the pastAll businesses must be able to assess whether the business is profitableRecording historic income and expenditure, and producing an income statement, enables this to be doneProducing a statement of financial position (balance sheet) enables a business to assess whether they are solvent

Mr. BarryA-level Accounting Year 12Forecasting the futureBased 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 positionMr. BarryA-level Accounting Year 12The USERS of Accounting Information (STAKEHOLDERS) OwnersInvestmentManagers AnalystsCommunity Government Groups

Competitors Suppliers Employees Customers Lenderse.g. Banks

The BUSINESSSTAKEHOLDERS have different reasons for accounting information. List them.Mr. BarryA-level Accounting Year 12Mr. BarryA-level Accounting Year 12

Topic 2- Double-EntryMr. BarryA-level Accounting Year 12Double-Entry Book-Keeping

Aims:

To understand the dual aspect of book-keeping

To be able to carry out basic double entry transactions from given informationGetting started:For every financial transaction there is a dual aspect so you would do two book-keeping 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

Double-Entry Book-Keeping

Debits & CreditsAccounts 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 SIDEIf account gives value, or is recording a liability or an income item CREDIT SIDE

Mr. BarryA-level Accounting Year 12

The LayoutMr. BarryA-level Accounting Year 12DEBIT (DR)CREDIT (CR)Date Details Total () Date Details Total ()The date of the transactionThe account to which the other part of the transaction is posted The amount of the transactionDEAD CLICMr. BarryA-level Accounting Year 12DEBIT (DR)CREDIT (CR)Date Details Total () Date Details Total ()Expenditure AssetsDrawingsLiabilitiesIncomeCapital

1 Minute TestCan you remember The layout of a T account The acronym for ruling Debit and Credit?EndThis bar timer, will start when anywhere on the slide is clicked. The bar will move from left to right and the word End will appear at the end, accompanied by a Deep Gong sound. It is possible to change the duration of this timer to any time, by entering the animation settings, and changing the timing for rectangle 3. Note the time has to be entered as a number of seconds so if you want 2mins & 30secs this is entered as 150 (60X2 + 30 = 150).26The Accounting Equation Assets- Liabilities = CapitalMr. BarryA-level Accounting Year 12Important definitionsAssetsResources that a business owns and uses to run a business and to produce and sell goods and servicesNon-Current Assets (NCA) and Current Assets (CA)Examples are Machinery (NCA), Buildings (NCA) and Cash (CA)Mr. BarryA-level Accounting Year 12Important definitionsLiabilitiesAmounts that the business owed to third partiesNon-Current Liabilities (NCL) and Current Liabilities (CL)Examples are Debentures (NCL) and bank overdrafts (CL)Mr. BarryA-level Accounting Year 12Important definitionsCapitalInvestment in the business made by the ownerMade up of initial investment plus profits made, less profits withdrawn by the owner in the form of drawingsMr. BarryA-level Accounting Year 12Important definitionsDrawingsFunds withdrawn from the business by the owner for personal useMr. BarryA-level Accounting Year 12Example transactions ruling up accountsOverview of capital Started in business with capital of 5000 as a cheque paid into the account Ruling up appropriate accounts

Overview of fixed assetsBought office equipment 2500 paying in chequeRuling up appropriate accounts

Overview of expensesPaid rent of office 500 by chequeRuling up appropriate accounts

Overview of incomeReceived commission of 100 by chequeRuling up appropriate accounts

Overview of Owners drawingsWithdrew 250 from the bank for own useRuling up appropriate accounts

Overview of LoansReceived a loan of 1000 from James HendersonRuling up appropriate accounts