MODULE 1: The Building Blocks The Objectives for this Module are: -To understand the basic terms and concepts in accounting (covered in this module) -To practice basic accounting concepts -To be exposed to examples that highlight core concepts -To demystify the field of basic accounting and finance for professionals who may not have a background in the subject

1. A Financial Refresher
MODULE 1
The
Building
Blocks
Introduction to Finance
Definitions and Purpose
Financial Terms
Concepts & Examples
Next Steps

2. Introduction
Finance and accounting are often viewed as difficult,
particularly by those who consider math not their favorite
subject. Fortunately, finance is not rocket science. If taken
logically and in simple stages it is a subject that can be
learned. Finance can be learned just like any life skills — all it
takes is a willingness, openness and commitment to try.
You may know more about accounting and finance than
you realize...

3. Accounting
Accounting: The process of financially measuring, recording, summarizing
and communicating the economic activity of an organization.
Informally it is the science of recording, classifying, and summarizing financial
transactions (information) for the purpose of decisionmaking and
transparency. It is referred to as the language of business. Like any other
language, it has its own unique vocabulary and rules. It is important that
anyone involved in making business decisions understands the basic
accounting concepts that form the basis of financial management.
As a service activity, accounting does not provide answers. Rather,
accounting provides the information required to answer questions such
as:
(1) What are the resources of the organization?
(2) What debts does it owe?
(3) Are its operating expenses too high relative to revenue?
(4) Are the organization’s current lending activities generating enough income
for it to be sustainable?
These are very important questions that need to be answered in order to
sustainably manage an organization.

4. Finance Terms
Transactions - An event or activity that involves monetary value.
Account - It is a space that we use in order to record and/or
summarize certain types of expenses
Chart of Accounts - A list of all accounts, categorized and coded in
groups that are related and consistent. Some main (parent) accounts
may have sub (child) account(s). Sub accounts add up to the main
account.
Financial Statement - It is a sheet or a report that summarizes a
certain set of accounts in an agreed layout which makes it easier for the
audience to read and analyze
Revenue - Money earned from selling goods or services
Expense - Cost of goods or services that a business buys and or uses
in order to earn revenue,
Capital - The owner’s investment in the business. it is also the owner’s
equity,
Activity: FlashCard Practice

5. Concepts & Examples
Basic Principles/The Rules of Accounting
To ensure consistency in accounting practices across organizations and
countries, accountants agreed on a set of concepts and rules for financial
statements regardless of location or organization. These basic principles do
not change and make up the rules of accounting, influencing how the
financial activities are recorded. For this Module, we will just cover a few
concepts.
Activity: FlashCard Practice

6. Concepts & Examples
The Business Entity Concept
Every business is a separate entity, distinct from its owner and from
every other entity. Therefore, records and reports of a business
(entity) should focus only on the business itself and should reflect the
business view not include any personal transactions or assets of
either its owner or those of another business.
Example: A typical example of a Business Entity Concept is
an owner of a business who at the same time manages the
business and gets a salary (owner/manager salary). The
business, as an entity, would record the owner’s salary as an
expense—this is because it is paid by the business entity. Yet
the owner, in his/her manager role, is a separate entity and
their salary is an income, not an expense.
Activity: FlashCard Practice

7. Concepts & Examples
Double-Entry Accounting (Dual Aspect Concept)
Every transaction affects and is recorded in two or more accounts in an
entity’s’ books. This is also referred to as the Dual Aspect Concept. Thus
requires entries in two or more places or accounts or a “double-entry”. At
least one account takes, and another account gives.
Example: A simple example is if the business entity decided to
buy an asset (such as tool), one account will give the money to
buy the tool, i.e., cash from the safe so the cash will decrease,
and another account will take equivalent amount, i.e., tools
account will increase.
Activity: FlashCard Practice

8. Principles & Examples
The Realization Principle and Matching Principle
Revenues and expenses must be assigned and matched in the same
accounting period in which they occurred not when it was collected in cash
or paid.
Example: When a business pays rent for 10-months in advance,
the rental expense for Month 1 should only be one month. It can
not be the full 10-month amount. In each month following, one
month's rent would be charged. The impact of the 10-month
advance payment would be on the cashflow not the cost and
expense.
Activity: FlashCard Practice

9. Principles & Examples
The Consistency Principle
The entity must consistently apply the same accounting principles from
period to period. This ensures that reports from various periods may be
compared to produce meaningful conclusions regarding the financial
position of the organization and the results of its operations.
Example: If a business reports the financial year from July 1 to
June 30, they have to be consistent with this reporting period
every year.
Activity: FlashCard Practice

10. Next Steps...
Once you have finished reviewing these slides you may proceed to the
following sections of this Module (if you opened these slides in a
separate window, close out this window or tab and return to MODULE 1
in CourseSites):
• Review the Resources
• Complete the FlashCard Review
• Check your understanding with the Self-Review
Note: A PDF version of this slide deck is also available for download
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