1.
CHAPTER-1
INTRODUCTION TO ACCOUNTING

2.
Meaning of accounting;
•Accounting is a systematic recording of all financial transactions
of a business.
Accounting is a process of recording, classifying, summarizing,
analyzing and reporting the financial transactions related to a
business.

3.
BUSINESS TRANSACTION
Business transaction (financial transaction) is an event that are
taking Place in a business, and which can be expressed in terms of
money.

4.
Accounting consist of;
•Recording
classifying
summarizing
analyzing
reporting financial
transactions

5.
Accounting can be divided into two sections;
•1.bookkeeping and 2. accounting
Book keeping
it is a process of detailed recording of all the
financial transactions of a business. (i.e., it includes only the
activities of recording and classifying business transactions)
The basis of maintaining records is double entry book keeping.
It is only a part of accounting. Accounting uses the book-
keeping records to prepare financial statements at regular
intervals.
The book keeping task performed by a book keeper.
Accounting work performed by an accountant.

6.
Basic terms in accounting
Assets
Things owned by a business are regarded as the resources of the business
or the assets of the business.
• Assets have a monetary value which help you to generate profit in your
business.
• example:
• building of a business,
• furniture,
• machinery,
• cash , inventory (stock), trade receivable, ( ie,money owing to a business)
etc. .

7.
Inventory(stock) or goods or
merchandise
•Inventory refers to all the items or commodities held by a business
for an intense to resale in the market to earn a profit .
•Example;
If a newspaper seller uses a vehicle to deliver newspapers to the
customers, only the newspaper will be considered as inventory or
stock. Vehicle not considered as inventory.

8.
Trade receivables
•Trade receivables are defined as the amount owed to the business
by its Customers.
•Debtor- a debtor is an individual or organization that owes the
money
to the business.
Credit sale means –providing goods with an agreement to pay later.
•That is –(the amount due to the business from credit customer is
referred to as trade receivables)
• Amount owed by credit customers.

9.
TERMS IN ACCOUNTING
Assets are the resources with monetary value
which are owned by the business for
generating profit.
Two types:
Non current asset :
assets which are owned for a long term
purpose.
Example:land,building,furniture machinery…
Current assets: assets which are owned for a
short term purpose.
example:inventory,cash, trade receivable…

10.
Assets can be classified into 2;
1. Non –current assets (Fixed assets) and
2. Current assets
Non-current assets; are the assets that the business intends to keep
and make use of for a long time(more than one year).
Example;
Machinery, vehicle, furniture, building, equipments,land.

11.
current assets;
•Assets that are quickly turned into cash and are of benefit to the
business for a short time (less than one year).
example;
inventory, cash and bank balances, trade receivables are current
assets.

12.
Liabilities: Amount owed by a business to other business, organization
or individuals.
Two types:
Non current liabilities :are amount due that are likely to be repaid in a
future financial period.
example: bank loan, debentures etc…
Current liabilities:are amounts due that will be repaid within the
financial year.

13.
Capital:
Any resources provided by the owner of the business are known as capital.
It is the total resources provided by the owner and represents
what the business owes the owner.
The amount owed by the business to the owner of that business is called
capital.
example:
Mr. x started business with $ 3000 .he also contributed his personal
computer to his business valued at $ 1000.so total capital of a business is
3000(as cash)+1000(as computer)= $4000.

14.
Liabilities
Liability is defined as obligations that your business needs to fulfill.
The amount owed by the business to other than owner is called
liabilities.
example:
taking loan from bank.
Money invested by your friend is a liability.

15.
Liabilities are of two types;
•1. Non-Current liabilities, and
•2. current liabilities
non- current liabilities; are the amounts that are likely to be repaid
in a future financial period (ie, after more than one year)
current liabilities; are amount due that will be repaid within the
financial period (less than one year)
Example ;trade payables.

16.
Trade payables;
Trade payable is any sum of money owed by a business to its
suppliers or vendors.
Example;
when you buy goods or services with an arrangement to pay at a
later
date, such amount till it is paid is referred to as trade payables (or
accounts payable)

17.
Statement of financial position
The statement of financial position also known as Balance sheet
represents assets, liabilities and equity of a business at a point of
time.
Financial position is the current balances of the recorded assets,
liabilities and equity of an organization.
Financial statements are prepared for 12 months periods from the
date the business started.
I started my business on 1st
April 2020, my financial year-

18.
Statement Of financial Position as on …..
•Assets $ Liabilities $
Bank 4000
Furniture 5000
Inventory 1000 capital 10000
10000 10000