Fundamentals of accounting showcased the basic approach to understanding and managing accounting systems in a simplified manner. Personnel in accounting and financial reporting roles would find the presentation a practice and refresher material for successful bookkeeping and financial reports.

1. FUNDAMENTALS OF
ACCOUNTING
REPORT AND ACCOUNTS
By
Edu Umechukwu

2. OUTLINE
1. Introduction
2. Objectives of the paper
3. Accounting concepts
4. Recording transactions
5. Accounting methods
6. Report and Accounts
7. Sections of an Account
8. Performance Metrics
9. Conclusion
10.(Q/A)
2

3. INTRODUCTION
Accounting is the process that involves the recognition of a
transaction and the systematic recording and analysis of the
financial information.
It helps a business to evaluate its performance and to plan for
growth and profitability.
3

4. • Demystify the subject of accounting to enable managers
appreciate its adoption as a useful tool.
• Explain the basic principles and concepts behind the
recording of transactions in the books of account.
• Discuss how to record transactions and the accounting
methods to adopt.
• State the types of report and accounts to be presented to
management with its components.
• Explain how to measure the performance of a business for
decision purposes.
OBJECTIVES OF THE PAPER
4

5. ACCOUNTING CONCEPTS
5
• Economic entity: The company is seen as a separate
legal entity different from its owners.
• Economic measurement: Transactions should be
recognized, measured and reported in a monetary unit.
• Periodicity: Transactions should be recognised and
reported in the period in which it occurred.
• Going concern: The business is expected to continue in a
foreseeable future without a threat to its extinction.
• Matching principle: Transactions should be linked to the
related event or counterparty.

6. RECORDING A TRANSACTION – Double Entry
Double entry recording: Transactions have two actions –
Giving and Receiving. Increase or decrease. When one side
is debited, the other is credited to ensure the transaction is
balanced.
6

7. RECORDING A TRANSACTION – Rules of
Double Entry
7

8. RECORDING A TRANSACTION – Single Entry
• Rules don’t apply in recording of transaction using the
single entry methods.
• Transactions are recorded as a memoranda of income and
expenses.
• Accounting information are maintained in the books of
original entry – sales day book, purchases day book, cash
book etc.
• Single entry recording are the simplest and widely adopted
by small enterprises.
8

9. ACCOUNTING METHODS
Accrual Method
Transactions are recognised at
the point it is completed not the
time payment is made.
Revenue is recognised the
time related service is
performed. Expense is
recognised when it occurred.
Cash Method
Transaction are recognised as
they occur and at the point the
payment is made.
9

10. ACCOUNTING CYCLE
10

11. REPORTS AND ACCOUNT - Types
The report and accounts presented to management that will
help to assess the result of operation and business
performance include:
• Revenue report
• Expenditure report
• Purchases report
• Inventory report
• Report on Cash/Bank movements
• Profit and loss account
• Receivable and Payable account
11

12. REPORTS AND ACCOUNT - Components
12

13. REPORTS AND ACCOUNT– Components
13

14. BASIC PERFORMANCE METRICS
14
Operatin
g margin
Net Profit
/Turnover
Gross
profit
margin
Gross
profit/
Turnover
Inventory
turnover
Cost of
Goods
Available
for sale/
Average
Inventory
Working
capital
ratio
Current
Asset –
Current
Liabilities
Current
ration
Current
Assets/
Current
Liabilities
Return
on
investme
nt
Turnover/
Total
Investmen
ts

15. CONCLUSION
Accounting remains the only recognised language of a
business. The process involves the recognition, recording,
analysing and reporting of financial information for decision
purposes.
Businesses that do not have adequate system of book keeping
and accounting controls are exposed to the risk of collapse.
15