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BACC - Coggle Diagram
BACC
chapter 2 : double entry system and accounting cycle (part 1)
Analysing Business Transactions
5 steps transaction analysis
-/+
rules of debit and credit
category
amount
accounts affected
bought equipment for cash
+
dr
A
x
equipment
-
cr
A
x
cash
Journalise Business Transactions
in the General Journal
Information is recorded in the chronological order
Credit entry is then recorded below debit (with an indent)
Narration
Book of Original Entry
*each transaction must affect at least TWO different accounts
debit=credit
Debit entry is recorded first
Examples
Issue of Ordinary Shares to Shareholders
Borrowing
The Accounting Cycle
Accounting Period Concept
financial statements are prepared at the end of each accounting period
life span of business is broken into regular intervals
going concern concept
assume businesses continue to operate for a long time
assets valued at historical cost and not at disposable value
Posting Journal Entries to Ledger Accounts
The Double Entry Accounting System
Formats
T-Account
Columnar Account
more applicable In real life
rules of double entry system
Shareholders' Equity
:arrow_up_small: credit, :arrow_down_small: debit
revenue
:arrow_up_small: credit, :arrow_down_small:debit
expense
:arrow_up_small: debit, :arrow_down_small: credit
liabilities
:arrow_up_small: credit, :arrow_down_small: debit
assets
:arrow_up_small:debit, :arrow_down_small:credit
double entry system
all accounts found in general ledger
listing of all accounts is called the chart of accounts
shows :arrow_up_small: and :arrow_down_small: in each item of the accounting equation by accounts
Preparing Pre-Closing trial balance
definition
list of the ending balances of all the accounts in the general ledger
debits=credits
chapter 1 : introduction to accounting and business
Accounting Concepts
Monetary
Only financial transactions are recorded
Historical
amount paid will
not
be adjusted
Amount recorded from source documents
Record transactions for the actual amount paid
Accounting Entity
Owner and Business are
separate
entities
Personal Transactions are kept separate
Only Business Transactions are recorded
Effects of Business Transactions on the Accounting Equation
Partial payment of accounts payable
:arrow_down_small:cash by x, :arrow_down_small: accounts payable by x
Inventory returned to supplier
:arrow_down_small: inventory by x, :arrow_down_small: accounts payable by x
Bought Inventory on credit
:arrow_up_small: Inventory by x, :arrow_up_small: Accounts Payable
Bought Inventory by cash
:arrow_down_small: cash by x, :arrow_up_small: inventory by x
Borrowing from the bank
:arrow_up_small: assets by x, :arrow_up_small: liabilities by x
Issue of ordinary shares to shareholders
:arrow_up_small: cash by x , :arrow_up_small: ordinary share capital by x
The Accounting Equation
Assets = Liabilities+Owner's Equity
Liabilities: Debts owed by businesses to outside parties
Owner's Equity: Owner's claim on net assets of business
Assets : Properties of value owned by a business
Equation Manipulations
Liabilities = Owner's Equity - Assets
Owner's Equity = Assets - Liabilities
Effects of Revenue and Expenses on the Accounting Equation
Expenses
Cost incurred in running a business to create revenue
Decreases shareholder's equity
Business Transactions
Customer Returned Inventory (on credit)
:arrow_down_small: accounts receivable by x, :arrow_up_small:sales returns by x
:arrow_up_small:inventory by y, :arrow_down_small: cost of sales by y
Collection from Accounts Receivable
:arrow_up_small: cash by x, :arrow_down_small: accounts receivable by x
Payment of Expenses
on cash
:arrow_down_small: cash by x, :arrow_up_small: expense by x
Bought Office Supplies
on credit
:arrow_up_small: accounts payable by x, :arrow_up_small: office supplies by x
on cash and credit
:arrow_down_small: cash by x , :arrow_up_small: accounts payable by y , :arrow_up_small: office supplies by x+y
on cash
:arrow_down_small: cash by x, :arrow_up_small: office supplies by x
Sold Inventory for Cash
:arrow_up_small: cash by x, :arrow_up_small:sales revenue by x
:arrow_down_small: inventory by y, :arrow_up_small: cost of sales by y
Revenue
Amount earned selling goods to customer/by providing services
Increases shareholder's equity
What is Accounting
process of analysing,recording, summarising, reporting and interpreting financial information of a business
Business Organisations
Sole Proprietorship
one owner, owner makes all decisions for business
Partnership
at least 2 owners, share decision making and risks of business
Company
owned by shareholders, "limited" attached to name of company
types of businesses
trading
buy and sell products
manufacturing
companies that make their own products
service
actual services provides for clients
Language of Business
provides information to
employees
investors
owners
creditors
managers
tax authorities
chapter 3: double entry system and the accounting cycle (part 2)
Preparing a post-closing trial balance
only have assets, liabilities and retained earnings
Prepare closing entries
Closing Temporary Accounts
Prepare Financial Statements
statement of profit or loss
results of operations
revenue and expense
income statement
statement of financial position
balance sheet
Assets, Liabilities and Shareholders' Equity