1. T H E A C C O U N T I N G C Y C L E
FINANCIAL
ACCOUNTING
2. AN INTRODUCTION TO DOUBLE-ENTRY
BOOKKEEPING
• Important questions:
• Are you making a profit?
• Do you have enough money to pay your commitments
on time?
• Are you making the best use of the funds invested.
3. • Accounting is about providing accurate and
comprehensive financial information to those involved in
making decisions, so that the business can survive, be
successful and be run efficiently.
• Record keeping is called bookkeeping.
• The preparation of financial statements and providing
some interpretation of what the statements reveal is
often called accounting.
4. TYPES OF BUSINESS ORGANISATION
• Sole trader
• Partnerships
• Limited liability companies
• Not-for-profit organisations
5. WHAT ARE THE FINANCIAL
STATEMENTS
• The income statement
• Non-profit organisations: An income and expenditure
account.
• The statement of financial position. (Balance Sheet)
6. THE ACCOUNTING CYCLE
• Stage 1: Collecting source documents.
• Stage 2: Listing key details in books of prime entry.
• Stage 3: ‘Posting’ the information shown in the books of
prime entry to ledger accounts.
• Stage 4: Checking and control systems.
• Stage 5: Summarising financial information periodically.
7. ASSETS
• Resources with a monetary value which are owned by a
business.
• Cash at hand/ Cash at bank
• Trade receivables: Amounts owed by credit customers.
8. LIABILITIES
• Amounts owed by a business to other businesses,
organisations or individuals.
• Trade payables: Amounts owed by a business to
suppliers.
9. THE ACCOUNTING EQUATION
• Assets = Capital + Liabilities
• Duality concept: There are always two entries
• made for every transaction. One on the Debit side and
one on the credit side.
