This document is a comprehensive, structured guide ideal for anyone preparing to learn or teach the fundamentals of accounting. Designed across four weeks, it introduces essential concepts and practices, building a solid foundation for understanding how financial records are organized and interpret...
1- definition and purpose of accounting: accounting is about recording , summarising,
and communicating financial information to help users make informed decisions. It acts as
the language of business.
2- users of economic information:
- Managers
- Investors
- Employees
- Lenders
- Customers
- Government agencies
Why do users need economic information?
Many reasons such as decision making, investment, assessing stability, and regulatory
compliance.
3- types of accounting:
- Financial accounting: aimed at external users like: (investors and regulators) why?
To show a company's financial health
- Management accounting: helps internal users (mainly managers or making day to
day decisions )
4- types of businesses:
- Sole traders
- Partnerships
- Private limited companies : information can't be shared to the public< liabilities are
limited to the business.
- Public limited companies : information can be shared to the public, liabilities are
limited to the business
5- regulatory bodies and framework:
Organisations like the financial accounting standards board (FASB) and the international
accounting standards board (IASB), explaining key concepts and the role of of accounting in
many business settings.
Week 2: the accounting equation
1- accounting equation:
assets= liabilities + owners equity
Assets: are what a business owns (cash,equipment etc)
Liabilities: are what a business owes (loans or bills)
Owners equity: is the owners investment in the business after all debts are paid
2- double entry bookkeeping: every transaction affects at least two parts of the equation to
keep it balanced.
, For example:
If you buy a machine, it increases assets (you own a new machine) but decreases cash (you
pay for it)
3- financial statements:
- Statement of financial position (balance sheet): shows the assets, liabilities, equity at
a specific time
- Statement of profit or loss: shows revenue and expenses over a period to reveal
profit or loss.
- Cash flow statement: tracks cash inflows and outflows
- Statement of changes in equity: shows changes in owners equity over time
4- revenues and expenses:
revenue : money earned from from selling goods and services
Expenses costs incurred to make that revenue. Subtracting expenses from revenue gives
you profit.
profit + revenue-expenses
If it is a negative number its a loss if its positive its a profit.
5- transactions:
Examples include:
- Adding cash to start the business increase both assets and owners equity
- Buying a computer on credit increases assets and liabilities
The goal is always to keep the equation balanced showing a clear picture of the business’s
financial health.
Week 3: journal entries (completing the accounting cycle)
The accounting cycle steps:
1. Identify the transactions:
Example: if a business buys the supplies the transaction needs to be documented with a
source like a receipt.
Question: why is it important to record every transaction?
Answer: it keeps financial records accurate and ensures no critical financial activity is
missed.
2. Analyse the transaction:
Decide which accounts are affected and by how much.
Example: buying supplies would decrease cash but increase supplies
Question: what would happen if we didn't analyse the transactions?
Answer: it could lead to errors in accounts, causing inaccurate financial statements.
3. Journal entries:
Record each transaction in the journal. Each transaction is record as both debit and credit.
Example: if we pay 500 in cash for office equipment , we debit (add to) the equipment
account and credit (deduct from) the cash account.
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