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1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 https://rumble.com/register/GRITUptodate/

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 Balancing A T-Account/Ledger Account 1- Identify the bigger side. Find the side which has bigger total. (Dr or Cr.) 2- Get a total 3- Write the same total on the other side of the T Account 4- Write difference amount in the smaller side as "Balance C/D" 5- Opposite to "Balance C/D" write "Balance B/D" with the first date of the next month. Purpose of Trial Balance: First Purpose: To check the arithmetic accuracy of accounting records The total on the Dr. Side and Cr. Side should agree or should be equal. Otherwise it will be taken as a sign of wrong recording of accounting transactions. Second Purpose: Facilitate the errors’ identification Third Purpose: To assist in the preparation of the financial statements (Income Statement & Statement of Financial Position)

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 What is a 'T-Account' A T-account is “an informal term for a set of financial records that use double-entry bookkeeping.” The term T-account describes the appearance of the bookkeeping entries. If a large letter T were drawn on the page, the account title would appear just above the T, debits would be listed under the top line of the T on the left side and the credits would be listed under the top line of the T on the right side, with the middle line separating the debits from the credits. BREAKING DOWN 'T-Account' In double-entry bookkeeping, a widespread accounting method, all financial transactions are considered to affect at least two of a company's accounts. Because of this, the credits and debits on each side of the T account must match. If a bookstore sold $20 worth of books, it might debit its cash account $20 and credit its books or inventory account $20. This double-entry system shows that the company now has $20 more in cash and a corresponding $20 less in books. “Every business transaction brings about at least a double change in the financial position of a business.” These two changes may take place in any one or two basic elements of accounting. THE IS NO EXCEPTION TO THIS PRINCIPLE Debit Side?? POSITIVE Side for Business Why? Either Assets are Increasing Or Responsibility is Decreasing Credit Side?? NEGATIVE Side for a Business Why? Either Assets are Decreasing Or Responsibility is Increasing

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels!2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706!3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month!4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706!5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips!Follow our Channel:https://www.facebook.com/GRITuptodate@grituptodate4591https://www.febspot.com/ref/3714354) EXPENSES: Formal Definition: Decrease in owner's equity resulting from the cost of goods, fixed assets, and services and supplies consumed in the operations of a business. Informal Definition: The costs of doing business. The stuff we used and had to pay for or charge to run our business.E.g Building, utility Bills, Employee Salaries etc.5) REVENUE: Formal Definition: The gross increase in owner's equity resulting from the operations and other activities of the business. Informal Definition: Amounts a business earns by selling services and products and investing. Amounts billed to customers for services and/or products. DEBTORS: People/firms who owe money to the business. Included as assets.CREDITORS: people/firms to whom the business owes money. Included as liability.PURCHASE: Something a business buys with the prime intention of selling. If a ice cream company buys van for selling ice creams, the van would not be included in the purchase account, rather a new account “Motor vehicle” would be made. SALE: sale of those goods which were bought with the prime intention of selling and in which the business normally deals in e.g ice cream sold by the ice cream company. Selling the van (mentioned above) would not be included in sales.PURCHASE RETURN: When the business returns back, items purchased, to the supplier due to faults or low quality ,etcSALES RETURN: When customers return back, items sold, to the business.DRAWING: Money drawn out of the business by the owner for personal use.CARRIAGE = The cost to the business of delivering goods to its customers (Carriage Outwards) OR having goods delivered by its suppliers (Carriage Inwards)RETURNS = Goods/stock sent back to the business by its customers (Return Inwards/ Sales Returns) OR goods/stock the business sends back to its suppliers (Return Outwards/Purchase Returns)PREPAYMENT = An expense paid in advance (part of next year’s or next month’s)ACCRUAL = An expense that has not been paid (Some of this years)

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 1 Financial Accounting 1.1 The accounting cycle  explain & apply the principles of the double entry system to record business transactions - Accounting system: a system of collecting, storing & processing financial information & accounting data used by managers. - Double-entry bookkeeping: a system of recording accounting transactions that recognises that there are two sides / aspects to every transaction. • All transactions have a dual aspect. • Every debit entry in an acc. in the ledger must have a corresponding credit entry. • Every credit entry in an acc. in the ledger must have a corresponding debit entry.  apply the accounting equation - Assets = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 - Assets: something which is owned by / owed to a business - Capital: initially the amount of money invested in the business by the owner. After the first trading period, it is adjusted by the profit for the year less any drawings plus any additional capital contributed. It is the net amount which the business owes to the owner - Liabilities – the amount of money owing to people outside the business for the use of their resources

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 BUSINESS ENTITY CONCEPT: According to this concept, the business is considered as a separate business entity from its owner(s). Thus the financial information of the business will be recorded and reported separately from its owner’s personal financial information. CONDITIONS FOR CONSIDERING A MONETARY EVENT AS “TRANSACTION” 1. There must be Two Parties Involved 2. The event must be Measurable in Terms of Money. 3. The Event must result in Transfer of Property and Service. 4. The events must Change the Financial Position of the Business. MAKING OF ACCOUNTS AND DOUBLE ENTRY SYSTEM: Instead of constantly drawing up balance sheets after each transaction what we have instead is Double Entry System. DOUBLE ENTRY: Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, in which each entry is recorded to maintain the relationship. BREAKING DOWN 'DOUBLE ENTRY': In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to prepare accurate financial statements directly from the books of account and detect errors.

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels! 2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706! 3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month! 4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706! 5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 https://www.febspot.com/ref/371435 BUSINESS ENTITY CONCEPT: According to this concept, the business is considered as a separate business entity from its owner(s). Thus the financial information of the business will be recorded and reported separately from its owner’s personal financial information. CONDITIONS FOR CONSIDERING A MONETARY EVENT AS “TRANSACTION” 1. There must be Two Parties Involved 2. The event must be Measurable in Terms of Money. 3. The Event must result in Transfer of Property and Service. 4. The events must Change the Financial Position of the Business. MAKING OF ACCOUNTS AND DOUBLE ENTRY SYSTEM: Instead of constantly drawing up balance sheets after each transaction what we have instead is Double Entry System. DOUBLE ENTRY: Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, in which each entry is recorded to maintain the relationship. BREAKING DOWN 'DOUBLE ENTRY': In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to prepare accurate financial statements directly from the books of account and detect errors.

1. The Complete Guide to Cambridge Accounting 7707 and 9706 for O Levels A Levels!2. The Secret to Getting Great Grades in Cambridge Accounting 7707 and 9706!3. How to Ace Cambridge Accounting 7707 and 9706 in Just One Month!4. The Most Comprehensive Guide to Cambridge Accounting 7707 and 9706!5. Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips!Follow our Channel:https://www.facebook.com/GRITuptodate@grituptodate4591https://www.febspot.com/ref/371435 INTRODUCTION TO THE ACCOUNTING EQUATION:From the large, multi-national corporation down to the corner beauty salon, every business transaction will have an effect on a company's financial position. The financial position of a company is measured by the following items: 1. Assets (what it owns)2. Liabilities (what it owes to others)3. Owner's Equity (the difference between assets and liabilities)THE ACCOUNTING EQUATION (or basic accounting equation) offers us a simple way to understand how these three amounts relate to each other. The accounting equation for a sole proprietorship is:ASSETS = CAPITAL + LIABILITIESThe accounting equation for a corporation is: ASSETS are a company's resources—things the company owns. Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we see that the amount of assets must equal the combined amount of liabilities plus owner's (or stockholders') equity.CAPITAL: Resources provided by the owner to business. It is often called as Equity as well.LIABILITIES are a company's obligations—amounts the company owes. Examples of liabilities include notes or loans payable, accounts payable, salaries and wages payable, interest payable, and income taxes payable (if the company is a regular corporation). Resources of a Business can be explained through accounting equation as;Resources of the business = Who provided themASSETS (What are the resources a business HAS) = CAPITAL + LIABILITIES (Who supplied them or to whom business OWES) ASSETS:1- CURRENT ASSETS:Current assets include cash and cash equivalents, accounts receivable (Debtors), inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash. 2- NON-CURRENT/ FIXED ASSETS (Also Called Long Term Assets)A fixed asset is a long-term tangible or In Tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. LIABILITIES1- CURRENT LIABILITIES:Current liabilities are debts payable within one yearTitles of Transactions:• Trade Payables/Creditors/(Accounts Payables)• Bills Payable • Bank Overdraft • Outstanding expenses • Advances from customers 2- NON-CURRENT/ LONG-TERM LIABILITIES:Long-term liabilities, in accounting, form part of a section of the balance sheet that lists liabilities not due within the next 12 months. REVENUEFormal Definition: The gross increase in owner's equity resulting from the operations and other activities of the business. Informal Definition: Amounts a business earns by selling services and products and investing. Amounts billed to customers for services and/or products.1- OPERATING REVENUE: Revenues resulting from the normal operations of a business such as the revenues resulting from the sale of products and services to your customers. 2- NON-OPERATING REVENUE &GAINS: Non-operating revenue accounts include all types of income that you receive that are not part of your main line of business. In other words, revenues or gains resulting from something other than from normal business operations. EXPENSES:Formal Definition: Decrease in owner's equity resulting from the cost of goods, fixed assets, and services and supplies consumed in the operations of a business. Informal Definition: The costs of doing business. The stuff we used and had to pay for or charge to run our business.Categories of Expenses = 4(1- Operating/ Revenue Expenses (2- Capital/ Non Current Expenses(3- Non-Operating Expenses, (4- Cost of Sales or Cost of Goods Sold)1- OPERATING / REVENUE EXPENSES (OPEX)The expenses related to normal daily operationsfor the current accounting period such as wages, rent, advertising, insurance, etc. While not absolutely necessary, the Operating Expenses are often grouped into two main functional areas of operation: Selling ExpensesSelling Expenses are expenses incurred and related to making sales. Examples are sales salaries & wages, fringe benefits, advertising, travel, entertainment, catalogues, rent, utilities, telephone, commissions, warehousing, shipping, depreciation, office supplies, postage, etc. General and Administrative Expenses (G&A)2- CAPITAL EXPENSES (CAPEX):The Costs or Amounts Spent to acquire or to improve a long term/ non Current Asset is called Capital Expenses.

Get Ahead in Cambridge Accounting 7707 and 9706 with These Easy Tips! Like, Share and Subscribe for more Informative Videos Follow our Channel: https://www.facebook.com/GRITuptodate @grituptodate4591 What is Accounting? “The process of Identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of information.” Definition 2: The process of recording, classifying, summarizing and interpreting financial information in terms of events involving money in order to provide people with necessary information (Reports) for further decision making. If we analyze this definition, we get the following components: • It is about recording transactions • Categorization/classifying transactions in order to make them more meaningful. • Summarizing results briefly • Interpreting the financial information in terms of different reports according to the users of information (e.g. Owner – Balance sheet etc.) • Transactions should be only of financial nature. • The recorded transactions are then classified according to set rules • Results are then interpreted for people who are interested in this information Accountants capture and record all the transactions, operations, and activities that have financial consequences for a business. Accountants are also involved in other activities in finance that impact a business, such as weighing the costs of new ventures, participating in strategies for mergers and acquisitions,quality management, tracking financial performance, as well as tax strategy. DIFFERENCE BETWEEN BOOK-KEEPING AND ACCOUNTING: • Book keeping is mainly concerned with record keeping or maintenance of books of account. It includes identifying the financial transactions, measuring them in terms of money, recording them in the books of original entry and then classifying them into ledger. • Accounting is more than Book-keeping. Apart from the standard practices of Book-keeping it involves summarizing the classified information in the form of Profit and Loss Account and Balance Sheet, drawing meaningful information from them and communicating this information with the interested parties i.e. stakeholders. • ‘Booking keeping’ is a part of accounting as it only involves recording of economic events. AIMS & OBJECTIVES OF ACCOUNTING: Accounting has many objectives including letting people and organizations know:  To keep a systematic record of business transactions  To calculate Profit and Loss  What the business worth  To ascertain the financial position of the business  How much they owed?  How much they borrowed?  To provide financial information to different users of this information. WHO ARE USERS OF ACCOUNTING INFORMATION? STAKEHOLDER: “A person, group or organization that has interest or concern in an organization and can either affect or be affected by the business.” These stakeholders or users might include: • Owner/Shareholders: How much profit? • Managers: How business performed and how they can improve the performance in future • Employees: To know the profits so that they could demand better wages? • Investors: Is it safe and profitable to invest in the business? (Banks or Other interested investors) • Suppliers: Will the business be able to pay for their supplies? • Government: How much tax should be collected? • Lenders: It is safe to lend money to the business? BRANCHES OF ACCOUNTING: Financial Accounting: It is about recording business transactions in a systematic manner, to ascertain the profits or losses of the business by preparing Profit and Loss Account and Balance Sheet. Cost Accounting: It involves finding out the total cost and unit cost of goods and services produced by the business. Management accounting: Accounting table and formats may not make sense to a person other than an accounting. This is where Management accounting comes in. It is presenting the accounting information in a manner which a layman manager could understand. It involves ratio analysis, budgets, cash flows etc. We will be covering some parts of Management accounting in Analysis of Final Accounts section. ACCOUNTING CONCEPTS: 1. CASH VERSUS ACCRUAL ACCOUNTING: The two principal methods of keeping track of the money that flows in and out of a business are a) Cash & b) Accrual Accounting. CASH METHOD: Most small businesses use the cash method, in which income is reported in the year it is received, and expenses are deducted in the year they are paid. Many small businesses, especially retail businesses, use the cash basis method of accounting, which is based on real-time cash flow. On the day a check is received, it becomes a cash receipt. ACCRUAL METHOD: Under the accrual method, income is reported when it is earned and expenses deducted when incurred, regardless of whether money has changed hands yet. In practical terms, this difference in timing is relevant if your company keeps inventory on hand or handles transactions on credit. For example, a consultant completes a project in January but isn’t paid for it at the time. The business that has been serviced recognizes all expenses in relation to that contract when they were incurred, even though the consultant has not been paid. Both the income and expenses are recorded for the current tax year, even if payment is received and bills are paid the following February. ACCOUNTING PERIOD: The life a business is considered to be indefinite. But for accounting purposes, the life of the business is divided into specified periods of time. The period may be a month, a half year, a full year or any length of time. BUSINESS ENTITY CONCEPT: According to this concept, the business is considered as a separate business entity from its owner(s). Thus the financial information of the business will be recorded and reported separately from its owner’s personal financial information. CONDITIONS FOR CONSIDERING A MONETARY EVENT AS “TRANSACTION” 1. There must be Two Parties Involved 2. The event must be Measurable in Terms of Money. 3. The Event must result in Transfer of Property and Service. 4. The events must Change the Financial Position of the Business. CLASSIFICATION OF TRANSACTIONS IN ACCOUNTING: There are three main categories of transactions in business. 1. Cash Transactions 2. Credit Transactions 3. Paper Transaction 1. CASH TRANSACTIONS: If the value of a transaction is met in Cash Immediately, Then the transaction is called “Cash Transaction”. Identification: The Word “Cash” or “For Rs.”Are mentioned in the transaction. Example: ABC Company bought Goods for Cash Rs. 100. 2. CREDIT TRANSACTION: If the Value of a transaction is NOT met in cash immediately, rather, the value is promised on a legal paper to meet on a future date. Identification: The word “On Credit” is mentioned in the transaction. Example: Aslam Bought Building of Rs. 20000 on Credit. Credit Transactions are further divided into 2 types. ACCOUNT PAYABLES/ CREDITORS: If the business “GETS” something of value from a party but in return the Business “GIVE ITS WORD” on a legal paper stating payment on a future date. Now, It is an obligation (Liability) of the business to fulfill its promise. These kinds of promises are called as “Account Payables/ Creditors”. Account Payables are always treated as “Liability” to a Business. ACCOUNT RECEIVABLE / DEBTORS: If the business “GIVES” something of value to a party but in return the Party “GIVE ITS WORD” on a legal paper stating payment on a future date. Now, it is an obligation of the party to fulfill its promise. These kinds of promises are called as “Account Receivables/ Debtors”. Due to their legal identity and conversion ability, Account Receivables are always treated as “Asset” to a Business. 3. PAPER TRANSACTIONS: When there is no question of meeting the value of a transaction, then those transactions are called Paper Transactions. For Example, if a business lost goods in theft, due to fire or any other disaster then “in return”, the business does not get anything back. So, those paper transactions (i.e Incident Report) are treated as “Decrease in Capital” of the owner.