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Frank Wood’s Business
Accounting
Chapter 1
Introduction
• Chapter 1 of the book "Frank Wood's Business Accounting 1, 13th
Edition".
• This chapter covers the fundamental concepts of accounting,
including the principles of accounting, the accounting equation, and
the double-entry bookkeeping system.
• Accounting is the process of recording, classifying, and summarizing
financial transactions to provide information that is useful in making
business decisions. This information is used by various stakeholders,
including business owners, investors, creditors, and government
regulators.
Principles of Accounting
• There are several principles of accounting that guide the preparation of financial statements. These principles
include:
• The Business Entity Concept - This concept recognizes that the business is separate from its owners and should be
treated as a distinct entity. It requires that transactions involving the business should be recorded separately from
those of its owners.
• The Going Concern Concept - This concept assumes that the business will continue to operate for the foreseeable
future. It implies that the financial statements should reflect the business's long-term outlook and not just its
current situation.
• The Accounting Period Concept - This concept requires that financial statements be prepared for specific periods
of time, such as a month or a year. It helps to provide a clear picture of the business's financial performance over
time.
• The Cost Concept - This concept requires that assets be recorded at their historical cost, rather than their current
market value. This helps to ensure that the financial statements reflect the business's original investment in its
assets.
The Accounting Equation
• The accounting equation is a fundamental concept in accounting. It
states that assets equal liabilities plus equity. This equation must
always balance, meaning that the total assets must always be equal to
the total liabilities and equity.
• Assets are resources owned by the business, such as cash, inventory,
and property. Liabilities are obligations owed by the business, such as
loans and accounts payable. Equity represents the residual interest in
the assets of the business after deducting liabilities. It includes capital
contributed by the owners and retained earnings.
Double-Entry Bookkeeping System
• The double-entry bookkeeping system is a method of recording
financial transactions that ensures that the accounting equation
always remains in balance. This system requires that every
transaction be recorded in two accounts: a debit account and a credit
account.
• Debits and credits are used to record increases and decreases in
different types of accounts. For example, assets are increased by
debits and decreased by credits, while liabilities and equity are
increased by credits and decreased by debits.
Conclusion
• In conclusion, accounting is a vital function in business that involves
recording, classifying, and summarizing financial transactions. The
principles of accounting, the accounting equation, and the double-
entry bookkeeping system are fundamental concepts that provide a
framework for preparing accurate and reliable financial statements.
Understanding these concepts is essential for anyone who wants to
make informed business decisions.

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Frank Wood-Business accounting Chapter 1.pptx

  • 2. Introduction • Chapter 1 of the book "Frank Wood's Business Accounting 1, 13th Edition". • This chapter covers the fundamental concepts of accounting, including the principles of accounting, the accounting equation, and the double-entry bookkeeping system. • Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. This information is used by various stakeholders, including business owners, investors, creditors, and government regulators.
  • 3. Principles of Accounting • There are several principles of accounting that guide the preparation of financial statements. These principles include: • The Business Entity Concept - This concept recognizes that the business is separate from its owners and should be treated as a distinct entity. It requires that transactions involving the business should be recorded separately from those of its owners. • The Going Concern Concept - This concept assumes that the business will continue to operate for the foreseeable future. It implies that the financial statements should reflect the business's long-term outlook and not just its current situation. • The Accounting Period Concept - This concept requires that financial statements be prepared for specific periods of time, such as a month or a year. It helps to provide a clear picture of the business's financial performance over time. • The Cost Concept - This concept requires that assets be recorded at their historical cost, rather than their current market value. This helps to ensure that the financial statements reflect the business's original investment in its assets.
  • 4. The Accounting Equation • The accounting equation is a fundamental concept in accounting. It states that assets equal liabilities plus equity. This equation must always balance, meaning that the total assets must always be equal to the total liabilities and equity. • Assets are resources owned by the business, such as cash, inventory, and property. Liabilities are obligations owed by the business, such as loans and accounts payable. Equity represents the residual interest in the assets of the business after deducting liabilities. It includes capital contributed by the owners and retained earnings.
  • 5. Double-Entry Bookkeeping System • The double-entry bookkeeping system is a method of recording financial transactions that ensures that the accounting equation always remains in balance. This system requires that every transaction be recorded in two accounts: a debit account and a credit account. • Debits and credits are used to record increases and decreases in different types of accounts. For example, assets are increased by debits and decreased by credits, while liabilities and equity are increased by credits and decreased by debits.
  • 6. Conclusion • In conclusion, accounting is a vital function in business that involves recording, classifying, and summarizing financial transactions. The principles of accounting, the accounting equation, and the double- entry bookkeeping system are fundamental concepts that provide a framework for preparing accurate and reliable financial statements. Understanding these concepts is essential for anyone who wants to make informed business decisions.