1. INTRODUCTION TO BASIC ACCOUNTING AND FINANCE

2. Origins of Trade & Commerce

3. 150,000 years ago : first evidence of barter trade
35,000 – 30,000 BC : trading between different cultures
700 BC – earliest use of coin as a mode of payment/transaction
1494 : Italian Mathematician Luka Pacioli creates modern book keeping
2009 : the launch of BITCOIN (cryptocurrency)
Xxxx ? : era of crypto currency

4. What is Accounting?

5. Simply said accounting is
The task of recording transactions
Hence it is a historical recording system ( past tense)
What is a transaction?
An activity where a good or service is provided in exchange for a monetary consideration
Why do we need to record transactions?
No all transactions happen in cash basis
Even cash basis, there lies a responsibility to various stake holders

6. What is finance?

7. Is the study of how money/funds are managed and acquired towards running an entity
An entity can be an individual, a company or a government organization.
Why finance is important?
Money/funds are needed to operate any activity. It’s the life blood of an individual, a company or a government entity.

8. Why do we need to know about Finance & Accounting

9. Concept of owner vs steward
Owner – who brings the money to run the business
Steward – who is entrusted by the owner to manage the business
Both can be the one and the same or two different people.
But in most cases owner and steward are two different groups
The steward has a duty, obligation and responsibility to the owners regarding
The operation of the business
Responsibility towards the owners money

10. Concept of ownership & legal liability

11. Why is this important?
Sole Proprietorship : owner is liable personally
Limited Partnership : partners are liable personally
Limited Liability :
the company is recognized as a separate legal entity (a separate legal person)
The owners are only liable to the extent of their ownership
Who are the owners of a limited liability?
The shareholders
The directors, the commissioners only manage the business on behalf of the shareholders

12. Conclusion Almost all of you will Work for a limited liability or
Start your own limited liability
Which means either you are
Responsible for the owners money or
You are trusting others to run a business with your money
THAT IS WHY IT IS IMPORTANT TO UNDERSTAND ACCOUNTING AND FINANCE

13. Basic Concepts - Accounting

14. Law of Conservation of Energy
energy can neither be created nor destroyed; rather, it can only be transformed from one form to another.
The same can be said about FUNDS in a business

15. Simple example
Mr A starts a limited liability (PT A) by bringing in IDR 10,000,000 and putting it in a bank account.
Owners investment – is called the Share Capital
PT A – owes this money to the owner
Any funds that is owed to the owners are called Share Capital
Bank balance – is called an Asset
How is the fund position ? From the PT A point of view
Share capital : 10,000,000
Bank Balance (Cash) : 10,000,000
CAPITAL = ASSETS

16. What is the fund position now?
PT A obtains a bank loan of IDR 50 Million and buys equipment (IDR 45 Million) and raw materials (IDR 15 Million) to start a bakery and cake shop.
What is the fund position now?
Share capital : 10,000,000
Bank Loan : 50,000,000
Total : 60,000,000
Equipment : 45,000,000
Raw Materials : 15,000,000
Total : 60,000,000
The bank loan is called a liability – something the company owes to a third party.
CAPITAL + LIABILITY = ASSET (basis of balance sheet, neraca saldo)

17. PT A after operating for 3 months reports
Sales : IDR 25,000,000
Purchases : (IDR 10,000,000)
Salaries & oheads : (IDR 10,000,000)
Total expenses : (IDR 20,000,000)
Profit/Loss : IDR 5,000,000
(Assuming all transactions happened on cash basis)
the profit is with PT A in the form cash
So how will the fund position look now?

18. This is the simplest form of a balance sheet
What is the fund position now? Share capital : 10,000,000 Profit Reserve : 5,000,000 Bank Loan : 50,000,000 Total : 65,000,000 Equipment : 45,000,000 Cash : 5,000,000 Raw Materials : 15,000,000 Total : 65,000,000 Profit is the return a business gets for its entrepreneurship
This is the simplest form of a balance sheet

19. Typical format of a Balance Sheet

20. Typical format of a Profit and Loss statement

21. there is another important document prepared
The Cash flow statement
this shows the cash movement within the company during the reporting period

23. End of session 1
QUESTIONS?