Introduction to Book-keeping and Accounting

What is Book-Keeping? Recording business transactions in financial terms

What is Accounting? Accounting is concerned with the use of financial information from within the book- keeping system

The books of account provide information relating to: What the business owns What the business owes The income and expenditure of the business

This information is summarised and reported in the form of financial statements which consist of the Profit and Loss Account and the Balance Sheet Why do you think this information is important and who do you think may require this information?

The work of the Book-keeper Preparing business documents to be issued by the business and recording any transactions relating to these documents in the books of account Checking business documents received by the business and recording any transactions relating to these documents in the books of account

Making and recording payments Checking and recording receipts Preparing monies for banking Checking the accuracy of transactions processed

The book-keeper needs to recognise that their work is often confidential Business information should only be disclosed to others with the permission of the appropriate line manager, or proprietor/director of the business

The Book-Keeping System Information is gathered from a number of Source Documents Invoices Credit notes Cheques Received Cheques Issued

The Book-Keeping System Information is gathered on Primary Accounting Records Day Books Journal Cash Book Petty Cash Book

The Book-Keeping System Information is recorded using Double Entry Book-Keeping Sales Ledger Purchases Ledger General (Nominal) Ledger

The Book-Keeping System A summary of all the accounts is compiled on a Trial Balance This is a mathematical check that the double entries have been recorded accurately

The Book-Keeping System Information from the Trial Balance is analysed to prepare the Final Accounts Profit and Loss Account Balance Sheet

The Book-Keeping System Source Documents Primary Accounting Records Double Entry Book-keeping Final Accounts Trial Balance (Level 2) (Level 3)

The Accounting Equation Assets - Liabilities = Capital What a business owns What a business owes Money introduced by the owners The vast majority of a business’s transactions will affect the assets and liabilities of that business.

Activity In your groups think about the following scenario…. You would like to start up a pizza home delivery business Think about what you would need? Money to start the business? Where from? Would customers need receipts? What bills would you need to pay? You have ten minutes to come up with as many ideas as you can think of