1. recording financial information for users:
BUSINESS ACCOUNTING
recording financial information for users:
managers
owners
creditors
bank managers
investors
Inland Revenue
Accountant
Yearly Financial Reports
Cost/Financial/ Management/Chartered
Bookkeeper
Day to Day records
Account Technician
Sets up systems
Auditor
Independent Accountants
Checks Accuracy of Final Reports
DECISION MAKING
Expand business, buy more assets,
employ more workers
relevant - timely provide future + past
reliable - factual+verifiable+neutral
understandable - easily understood
comparable - period to period
TUAKAU COLLEGE
Keril Simpson

2. 5 (+1)
Key Elements to
Accounting
are:

3. Accounting: Notes for Teachers
ASSETS
Introduction to Accounting
uses of funds
Able to be measured in financial + monetary ($NZ) terms
$800 Machinery, $500,000 Land, $4,000 Bank, $12,000 Accounts Receivable
(PAST, PRESENT, FUTURE)
PAST transaction – (be the result of a previous exchange)
Debtors (customers) purchased pizzas/petrol/repairs on credit last month
Logan’s Bakery purchased the $30,000 delivery van last month (PAST transaction)
PRESENT control - (able to deny others use /claim legal ownership)
Logan’s Bakery can take legal action against customers that do not repay their debts.
Logan’s Bakery can deny others the right to drive the van and is registered as having
legal ownership (PRESENT transaction)
FUTURE economic benefits -
The Van will be used to attract orders + deliver pizza’s to customers generating earnings/revenue/profits for Logan’s Bakery for many accounting periods
When the debtors (accounts receivable) pay their accounts, Logan’s Bakery Bank account will increase enabling the business to purchase more ingredients to sell more pizzas. (FUTURE economic benefits)
Academic PowerPoint

4. PROPERTY PLANT EQUIPMENT land motor vehicles INTANGIBLE goodwill
ASSETS
(uses of funds)
are classified as:
money in
bank accounts
or in cash
withdrawals
deposits
stock business
resells quickly
Madbutcher = meat
Hannahs = shoes
CURRENT
Cash / can be converted quickly into cash within the current accounting period -1 year
(order of liquidity)
Inventory
Cash in Bank
Accounts Receivable
Are debtors/customers
owe $ to the business
have 30 days
to pay up
shares in other
companies +
term deposits
INVESTMENTS
Shares in Watties
PROPERTY PLANT EQUIPMENT
land
motor vehicles
INTANGIBLE
goodwill
patents
NON-CURRENT
not intended for resale
will generate production over many accounting periods
(IPI)
used to produce/generate
sales of the
good or service
has no physical presence

5. Accounting: Notes for Teachers
Introduction to Accounting
LIABILITIES
Sources of funds
Debts
Outside equity
Able to be measured in monetary ($) terms
$800 loan , $5000 Bank Overdraft, $30,000 mortgage, $6,000 Accounts Payable
must be repaid
20/4/2028
(PAST, PRESENT, FUTURE)
PAST transaction
The Bank overdraft was obtained/arranged/organized previously by Logan’s Bakery
Logan’s Bakery purchased ingredient on credit from our suppliers (account payable) last month
PRESENT obligation to repay
The lender, bank, creditor of loan/mortgage/account will expect to be repaid on due date
this is a legal requirement of the contract agreement Logan’s Bakery signed.
FUTURE outflow of resources
When the loans/ suppliers are repaid Logan’s Bakery will not be able to spend on other items, and there will be a decrease in asset bank
Academic PowerPoint

6. (sources of funds from outside the business)
LIABILITIES
(sources of funds from outside the business)
are classified as:
CURRENT LIABILITIES
debts the business must repay
within the period (generally financial year)
Bank OD
Creditors
Pay up
NON-CURRENT LIABILITIES
debts the business must
repay
over next accounting period
( 1 year)
Hire Purchase
mortgage due 2025

7. Accounting: Notes for Teachers
Introduction to Accounting
INCOME
(inflows of $/REVENUE)
Sources of Income
Business generates in order to offset (pay) costs +
Asset BANK increases
Income increases ☞ Net Profit increases
☞ Increases Equity
Takings
Charges
Fees
Sales
commission received
discount received
rent received
interest received
IS NOT CAPITAL INVESTED BY OWNER
Fees for a doctor (service)
Takings for a concert
Sales for a local supermarket (trading)
Discount received from suppliers
Commissions received by a real estate agent
Interest Received from Bank
Charges received by a garage
Rent received from tenants
Academic PowerPoint

8. Accounting: Notes for Teachers
Introduction to Accounting
EXPENSES
Expenses are ($ outflows/consumption):
costs/losses incurred by the business in order to earn revenue
DISTRIBUTION EXPENSES(or you’ll be given the name for a service co.)
advertising salesmen wages, repairs to delivery van, storage, shop) costs
ADMINISTRATION EXPENSES
office wages, insurance, general expenses, accountants charges, bad debts, discounts allowed
FINANCIAL COSTS
Interest paid on loans, overdrafts, mortgages
DECREASE ASSET BANK
DECREASE NET PROFIT
IS NOT DRAWINGS TAKEN BY OWNER
Academic PowerPoint

9. Accounting: Notes for Teachers
Introduction to Accounting
Profit
GROSS PROFIT
Sales – cost goods =
enough to cover DAF
Business
REVENUES
Business
CosTs
COST OF GOODS
+ DISTRIBUTION:
Advertising
Salesmen’s wages
Delivery, Petrol
ADMINISTRATION:
Internet
Power
Insurance
Rent
Office expenses
General expenses
FINANCIAL:
Interest on bank OD
Sales Or
Takings, Charges, Fees
+ other revenues
Commission received
Discount received
Rent received
Interest received
NET PROFIT
GP + OR - DAF =
cover drawings
give a return to owner
Academic PowerPoint

10. Accounting: Notes for Teachers
Introduction to Accounting
DRAWINGS
Drawings are those items the owner withdraws from the business for his/her personal use.
DRAWINGS
can include
cash - inventory - other assets eg
computers, motor vehicle, furniture etc
Drawings decreases equity – less investment – less capital
Academic PowerPoint

11. Accounting: Notes for Teachers
Introduction to Accounting
EQUITY
ASSETS - LIABILITIES (debts) = RESIDUAL VALUE
(source of funds, the owner's claim against business assets)
ASSETS $
LIABILITIES $
EQUITY ?
ASSETS $
LIABILITIES $
EQUITY ?
ASSETS $280,000.00
LIABILITIES $
EQUITY ?
MOVEMENTS IN EQUITY
for Tuakau Repairs
AS AT 31/03/2017
CAPITAL beginning of accounting period
(the initial $ invested/contributed by the owner)
PLUS
NET PROFIT (revenue - costs)
the business makes at the end of each accounting period
LESS
Drawings
($ or assets taken for personal use)
Capital 1/03/2016
$50,000
PLUS Additional Capital
$60,000 ?
PLUS Net Profit
$90,000
LESS Drawings
$40,000
Capital 31/03/2017
MOVEMENTS IN EQUITY for Tuakau Takeaways AS AT today's date
Capital at last year $50,000, additional capital invested by owner $60,000
van + $10,000, cash + food taken by owner $30,000, Net Profit for Year was $90,000
Academic PowerPoint

12. Accounting: Notes for Teachers
Introduction to Accounting
5 (+1) KEy ELEmEnts to Accounting are:
Expenses
selling
administration
financial
Income
income
from
operating
current
non-current
Investments
PPE
intangible
Assets
Liabilities
Equity
capital
$ invested
by owner
stock or
cash
taken by
owner
( +
Drawings)
current
non-current
Fees
Sales
wages
advertising
bad debts
interest paid
Mortgage
Bank OD
Creditors
Pay up
L + I + Eq
A + Ex (+ D) =
Academic PowerPoint

13. Accounting: Notes for Teachers
Introduction to Accounting
Accounting Equation
The Basis of Recording Financial Transactions
Uses of funds = Sources of Funds
Where $ spent = Where $ from
A = L + E
A + Ex (+ D) = L + I + Eq
wages
advertising
bad debts
interest paid
Mortgage
Bank OD
Creditors
Pay up
fees
sales
Academic PowerPoint