Accounting: Introduction Mr. BarryA-level Accounting Year 12

Mr. BarryA-level Accounting Year 12

A change to the school day Mr. BarryA-level Accounting Year 12

Starter Activity 1 On the postit given, can you answer the following questions (use both sides) – Why did you choose accounting? – What are you most looking forward to studying in this year in the accounting course? End A-level Accounting Year 12Mr. Barry

Format of this Year Unit 1: Financial AccountingUnit 2: Financial and Management Accounting Mr. BarryA-level Accounting Year Lessons every two weeks Ensure you are aware of the times and places of each lesson (Week A & Week B)

TopicsWeek Purpose of Accounts2 Double Entry2-4 Trial Balance5 Simple final accounts for sole traders6-7 Assessment8 Adjustments for final accounts9-12 Daybooks13-14 Assessment15 Correcting errors and suspense account2 Bank reconciliation3 Control accounts4 Accounting Concepts/ ACCN 2 Theory5-6 Limited company accounts7-8 More advanced Matters/ Budgetary and Budgetary control9-10 Mr. BarryA-level Accounting Year 12

Icebreaker Time Mr. BarryA-level Accounting Year 12

Mr. BarryA-level Accounting Year 12 Form into Pairs now

Activity On the postit given, can you answer the following questions (use both sides) Find your partners – Favourite colour – Favourite pastime – Best moment from the summer holidays End Mr. BarryA-level Accounting Year 12

Time to Stand Up Mr. BarryA-level Accounting Year 12

Topic 1- Purposes of accounting Mr. BarryA-level Accounting Year 12

Business Transactions What does it involve?  Purchasing resources e.g. raw materials, labour, capital equipment, land (can be called factors of production).  Selling goods and services that have been produced or purchased from a supplier  The business needs to keep a record of ALL transactions. The use of till rolls record sales, invoices record purchases which are entered into a Purchases Book. Mr. BarryA-level Accounting Year 12

Mr. BarryA-level Accounting Year 12

Purposes of keeping Accounting records To assess profitability and solvency by assessing what has happened in the past. An aid to decision-making to enable the production of cash budgets, projected profit and loss accounts and balance sheets. (Forecasting for the future) Monitoring and control. To monitor what has actually happened and compare with forecasts and take any necessary corrective action. To enable HM Revenue and Customs to assess the correct amount of income taxes and value added tax. (Legal requirement) Minimising the chances of fraud Evidence for external borrowings as when applying for a bank loan Mr. BarryA-level Accounting Year 12

Recording and Reporting what has happened in the past All businesses must be able to assess whether the business is profitable Recording historic income and expenditure, and producing an income statement, enables this to be done Producing a statement of financial position (balance sheet) enables a business to assess whether they are solvent Mr. BarryA-level Accounting Year 12

Forecasting the future Based on what happened historically, owners are able to forecast what they anticipate will happen in the future, in the form of cash budgets or projected income statements and statements of financial position Mr. BarryA-level Accounting Year 12

The USERS of Accounting Information (STAKEHOLDERS) Owners InvestmentManagers Analysts Community Government Groups Competitors Suppliers Employees Customers Lenders e.g. Banks The BUSINESS STAKEHOLDERS have different reasons for accounting information. List them. Mr. BarryA-level Accounting Year 12

Mr. BarryA-level Accounting Year 12

Topic 2- Double-Entry Mr. BarryA-level Accounting Year 12

Double-Entry Book-Keeping Aims: – To understand the dual aspect of book-keeping – To be able to carry out basic double entry transactions from given information

Getting started: For every financial transaction there is a dual aspect – so you would do two book- keeping entries in two different ledger accounts Accounts are where the business will record all associated transactions e.g. wages, rent paid, sales (but by customer names), purchases (but by supplier/creditor name) Lay out of an account shown on the top half of page 7 of text book – please copy this out In reality wages take up pages in hand-written book-keeping systems, but we will put several on a one page For our exercises we will use a simpler format Double-Entry Book-Keeping

Debits & Credits Accounts are often called T accounts, they have two sides – debit & credit Principle of double entry is that for every transaction one account is debited and the other account is credited Debit entries are made on left hand side of the appropriate account & credit are made on the right hand side The general rules are: – If account gains value, or is recording an asset or expense – DEBIT SIDE – If account gives value, or is recording a liability or an income item – CREDIT SIDE

Mr. BarryA-level Accounting Year 12

The Layout Mr. BarryA-level Accounting Year 12 DEBIT (DR)CREDIT (CR) Date Details Total (£) The date of the transaction The account to which the other part of the transaction is posted The amount of the transaction

DEAD CLIC Mr. BarryA-level Accounting Year 12 DEBIT (DR)CREDIT (CR) Date Details Total (£) Expenditure Assets Drawings Liabilities Income Capital

1 Minute Test Can you remember The layout of a T account The acronym for ruling Debit and Credit? End

The Accounting Equation Assets- Liabilities = Capital Mr. BarryA-level Accounting Year 12

Important definitions Assets  Resources that a business owns and uses to run a business and to produce and sell goods and services  Non-Current Assets (NCA) and Current Assets (CA)  Examples are Machinery (NCA), Buildings (NCA) and Cash (CA) Mr. BarryA-level Accounting Year 12

Important definitions Liabilities  Amounts that the business owed to third parties  Non-Current Liabilities (NCL) and Current Liabilities (CL)  Examples are Debentures (NCL) and bank overdrafts (CL) Mr. BarryA-level Accounting Year 12

Important definitions Capital  Investment in the business made by the owner  Made up of initial investment plus profits made, less profits withdrawn by the owner in the form of drawings Mr. BarryA-level Accounting Year 12

Important definitions Drawings  Funds withdrawn from the business by the owner for personal use Mr. BarryA-level Accounting Year 12

Example transactions – ruling up accounts – Overview of capital Started in business with capital of 5000 as a cheque paid into the account Ruling up appropriate accounts – Overview of fixed assets Bought office equipment 2500 paying in cheque Ruling up appropriate accounts – Overview of expenses Paid rent of office 500 by cheque Ruling up appropriate accounts – Overview of income Received commission of 100 by cheque Ruling up appropriate accounts – Overview of Owner’s drawings Withdrew 250 from the bank for own use Ruling up appropriate accounts – Overview of Loans Received a loan of 1000 from James Henderson Ruling up appropriate accounts