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accountants record and report financial information in accounting records and reports

exp: of accounting records; sales in 1 month, receipt, invoices, payroll

accountants work in all organisation

accounting records : sources of information,

accounting reports : summarise information for a period of time exp total income, payroll, sales,

net worth statement : a statement of the financial position of a person on a specific date
- use in loaning bank
- usually drown up when asking for asking for a loan from a bank
- the difference between personal assets and personal liabilities is called personal net
- assets - liabilities = net worth

assets : anything of value that is owned is called an assets

liability : anything that you owned
equity : net worth of the business

accounting information is used by business owner, manager, government

interpret = explain

accounting = accounting system = P R A I R

P = plan
R = record
A = analyse
I = Interpret
R = report

financial statement = financial reports that summarise the financial condition and operation
exp : income statement, balance sheet (SOFP), statement of cash flow (SoCF), SoCSE

Entrepreneurship = forms ur own business, focus to expand the business


Why is accounting called the language of business?

ans : accounting provides financial information to everyone who needs it to make good business
decisions. you can read financial information like a story

Service business : a business that mainly fork on servicing people to meet their need
Proprietorship : business that is owned by 1 person and that person has all of the responsibility
business plan : written document of how the business will operate, it describes the operation

owner’s equity : - the amount remaining after the value of all liabilities is subtracted from the value
of all assets
- what the owner owns
- what the owner has a right to legally the rights to own the assets of a business are called

accounting equation
- the equation shows the relationship among assets, liabilities and owner’s equity

Why is accounting called the language of business?

Assets = Liabilities + owner’s equity

Paying on account : buy goods/ service but not pay cash; pay later
A person who is owed is called creditor

transaction : any business activity that changes assets. liabilities, or owner’s equity
account : a record that summarises all the transactions pertaining to a single item in the
accounting equation
account title : the name given to an account
account balance : the difference between the increases and decreases in an account
capital account : the account used to summarise the owner’s equity in a business

revenue : an increase in equity resulting from the sale of goods or service eg. cash received for
expense : the cost of goods or services used to operate a business ‘not like liability’ e.g.. rent,
electricity, telephone, advertising
withdrawals /drawing : an assets taken from the business for the owner’s personal use

GAAP : generally accepted accounting principles : the standards and rules that accountants follow
while recording and reporting financial activities are commonly referred to

14th september
- 27 word math questions
- 15 true / false
- 2 exercise o the accounting equation

Ethics : the principles of right and wrong that guide an individual in making decisions
Business ethics : the use of ethics in making business decisions

compound interest is earning interest on interest.

In other words, the money earns interest, and then the interest earns interest.

Rule of 72 allows you to calculate how long it will take the original investment to double.

saving : money you set aside to reach a goal

Interest : the amount the bank pays you each months for the use of your money

Wednesday market
november 12
Feb 21

receive cash = cash increased

paid cash = cash decreased
sales = owner’s equity increased
sold on account = account receivable increases
revenue is recorded = at the time of sale (not always when the cash is received)
expense = owner’s equity decreased

Chart of accounts
a list of accounts used by a business
- balance sheet account
- income statement accounts

every business transaction affects at least two accounts

accounting system is known as ‘double-entry system’
double entry bookkeeping, double entry accounting

for every transaction

- must have at least one debit account
- and one credit account

Debit (Dr.)means left / left side / left sided entry in an account Increases asset, expense and
drawing account. decrease liability and equity
Credit (Cr.) means right / right side / right sided entry in an account Increase liability and equity
Decrease asset, expense and drawing account.
T account = an accounting device used to analyse transaction
Normal balance = the side of the account that is increased

two accounting rules =

1.) Assets are on the left side of the accounting equation.
Assets increase on the left, debit side of the account
2.)Liabilities and the owner’s capital

Accounts Receivable = assets

Accounts Payable = liability

Drawing and contra is separated from capitol in owner’s equity

**Increase investment

Debit DEAD

***increase with debit

Credit CLIC

Income (Revenue)
***increase with credit

Take non- cash assets like shampoo

Credit supplies
Debit drawing