Lecture 3 Accounting Equation Duality Just a general chat to get them using their common sense to think about different businesses

Shareholders Funds (Capital) Accounting Equation Shareholders Funds (Capital) Assets Liabilities - = Introduce as quickly as possible the concept of duality and debits and credits. Participants who have not studied before won’t understand it but the constant use of the terminology will reinforce the language over time

Application of A/cing Equation Dave has set up a business selling tables. In January the business has the following transactions: Dave starts his business with $5,000 that he borrowed from his mother. Dave’s mother expects him to pay the money back in the future. The business bought 10 tablets for $500 each which Dave paid for with cash. The business sold all 10 tables straightaway for $600 each in cash. How do we represent these transactions? How much cash does he have? How much profit? Use the concept of duality and use the debits and credits when doing this. New starts won’t understand but it reinforces the language. I do these on the screen in excel as well.

Application of A/cing Equation How do we represent these transactions? How much cash does he have? How much profit?

Application of A/cing Equation Transaction Asset/ Expense/ Loss Income /Liability $5,000 that he borrowed from his mother   10 tables for $500 each 10 tables straightaway for $600 Make this debits and credits. Cash goes up, liability goes up, duality. Dr Cash Cr Liability. Don’t wait until slide 62 to talk about debits and credits

Application of A/cing Equation Transaction Cash $5,000 that he borrowed from his mother   10 tables for $500 each 10 tables straightaway for $600 Make this debits and credits. Cash goes up, liability goes up, duality. Dr Cash Cr Liability. Don’t wait until slide 62 to talk about debits and credits

Calculation of Profit Sales x Opening Inventory Purchases Closing Inventory (x) Cost of Sales Gross Profit

Balance Sheet