Accounting NotesThe following topics will be explained in details:Accrual accountingBalance sheet.Income statement .Reporting period & Reporting date.Related fields of study.
Accounting definitionAccounting :is the skills or activity of keeping records of the money a person or organization earns and spend.Accounting: is the practice and knowledge of systematically identifying, measuring, recording and reporting of qualitave and quantitative information in respect of the economic activities of the business.
Accrual accountingIn accordance with accrual accounting, the effects of transaction that are incurred on credit, are recorded in the accounting records when the transaction is incurred, not only at the point of time when payment take place.e.g. when a customer purchase trading stock on credit. The business record this transaction by debiting trade receivable and credit trading stock. when the payment takes place the business debit bank and credit trade receivable.
Balance sheet1. The simple way to explain a balance sheet one can say its “ Assets=Equity + Liabilities”.2. Where by under Assets we have “non current assets and current assets”.3. Under equity we have “capital and retained earnings”.4. Under liabilities we have “non current liabilities and current liabilities”.
The structure of balance sheet.Assets Equity and liabilitiesNon-current assets (A) EquityTangible assets •capital•Long term investment •Retained earningsCurrent assets (B) liabilities•Inventory Non current liabilities•Cash and cash equivalents •Long term loan•Receivables Current liabilities •Current portion of long term loanTotal assets(A+B)
Income statementIncome statement is the statement of profit and loss.This statements provide information about the financialperformance of the company for the reporting period,however this statement is managed monthly.Financial performance is the relationship between theincome and the expenses of the company for a reportingperiod.This statement reflect the profit that the company made fora certain month.
The structure of the incomeStatement of profit & loss statementSales 1867Less : cost of sales (1200)= gross income 667Plus: other income 12548=profit before expenses 13215Less: other expenses (2465)=profit before tax 10750Less: income tax (2451)=profit for the month 8299
Reporting period and reporting date Reporting period : the useful life of an entity is divided into twelve months. January till December. Reporting date : the last day of a reporting period is known as the reporting date. "namely 31 December”
Related fields When your studying accounting, this are the fields that you can work to :1. Management accounting2. Financial management3. Auditing4. Internal control5. Taxation
Important toolsThe most important thing that you should know in Taccounting is the “ ” accounts.Incomes on the “T” accounts increase on debit sideand decrease on credit side.Expenses on the “T” account increase on credit sideand decrease on debit side.“T” account is the ledger account
Accounting is fun Loan repayment Income expense s s Tax paymen Profit or t lossDon’t wait for the last day to record income and expenses, like this manrecord them every day when it arise, to avoid heavy load of work.Manage your work
Expenses ProfitIncomes Accounting Debit loss Credit