1. REVISION- CONCEPTS Y11 Accounting

2. Accounting Definitions  Assets- Past transaction, control of use, future economic benefit  Liabilities- Past transaction, obliged to pay, future sacrifice  Income- Inflow, increase profit, increases equity, increases bank and not owner contributions  Expenses- Outflow, decreases profit, decreases equity, decreases bank and not owner drawings  Owners Equity- Assets - Liabilities

3. Accounting Definitions Cont…  “Current” – within 12 months  “Non-current” – more than 12 months  Distribution/Selling Expense – Any expense that you can directly link to selling the product  Administration Expense – Any “behind the scenes” expense that cannot be directly linked to sellling, but is necessary  Finance Cost – Any interest expense. ONLY interest!

4. Accounting Definitions Cont…  Depreciation- The systematic allocation over the assets depreciable amount over the assets useful life Either:  Asset Cost / Estimated useful life OR  Asset Cost – Residual Value/Salvage Value / Estimated useful life

5. Accounting Concepts  Historical Cost- Assets should be recorded at the price paid or consideration given at the time of purchase  Going Concern- It is assumed that the business will continue to operate into the foreseeable future

6. Accounting Concepts Cont…  Accounting Entity Concept- The affairs of the owner should be kept separate and distinct from the affairs of the business  Period Reporting Concept- Financial statements are prepared on an annual basis to allow comparisons to be made

7. Accounting Concepts Cont…  Monetary Measurement- All transactions are reported in NZ dollars  Accrual Basis- The effects of transactions are recognised when they occur and reported in the financial statements they relate to.

8. Exam Questions- Notes  You will need to be able to apply the concepts to given scenarios  Ensure you include the business name and/or asset/liability/income/expense name into your answer  Write full unabbreviated answers

9. Accounting Equation The Accounting Equation: Assets + Expenses + Drawings = Liabilities + Income + Owners Equity Both sides MUST ALWAYS balance Note: The effects of a transaction can both be on the same side e.g. -100 from Accounts Receivable + 100 in the bank

10. Accounting Equation Cont…  You will need to be able to:  Process transactions into the equation  Look at an accounting equation transaction and write a description about what has happened  The biggest transactions will have three effects e.g. Received $2000 in full settlement of a $2,200 account: Bank + 2,000 Expenses + 200 and Accounts Receivable -2,200