Submit Search
Upload
Introduction to double entry bookkeeping.ofp
•
11 likes
•
9,527 views
Kaung Myat Tun
Follow
Basic Accounting for beginners
Read less
Read more
Education
Report
Share
Report
Share
1 of 29
Recommended
Double Entry System & Accountin Equation
Double Entry System & Accountin Equation
Gurkirat Singh
Accounting Equation Presentation
Accounting Equation Presentation
Fahad Mohiz
Basics of accounting
Basics of accounting
Aditya K
Introduction to Basic Accounting Concept
Introduction to Basic Accounting Concept
Kamrul Hasan
THE ACCOUNTING CYCLE IN BRIEF
THE ACCOUNTING CYCLE IN BRIEF
CENTURION UNIVERSITY
Inventories and the Cost of Goods Sold
Inventories and the Cost of Goods Sold
Muhammad Unaib Aslam
Topic 3 Double entry book keeping
Topic 3 Double entry book keeping
Srinivas Methuku
The Accounting Cycle:Accruals and Deferrals
The Accounting Cycle:Accruals and Deferrals
Muhammad Unaib Aslam
Recommended
Double Entry System & Accountin Equation
Double Entry System & Accountin Equation
Gurkirat Singh
Accounting Equation Presentation
Accounting Equation Presentation
Fahad Mohiz
Basics of accounting
Basics of accounting
Aditya K
Introduction to Basic Accounting Concept
Introduction to Basic Accounting Concept
Kamrul Hasan
THE ACCOUNTING CYCLE IN BRIEF
THE ACCOUNTING CYCLE IN BRIEF
CENTURION UNIVERSITY
Inventories and the Cost of Goods Sold
Inventories and the Cost of Goods Sold
Muhammad Unaib Aslam
Topic 3 Double entry book keeping
Topic 3 Double entry book keeping
Srinivas Methuku
The Accounting Cycle:Accruals and Deferrals
The Accounting Cycle:Accruals and Deferrals
Muhammad Unaib Aslam
Accounting cycle- a bird eye view b
Accounting cycle- a bird eye view b
mounika ramachandruni
Job Order Costing
Job Order Costing
narman1402
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Bibek Prajapati
Introduction To Accounting
Introduction To Accounting
Yousef Hani
Ch04
Ch04
ESHETIE MEKONENE AMARE
Accounting principle
Accounting principle
veena Madaan
Double entry system
Double entry system
RaJesh Thakur
SAP business one - master data 2016
SAP business one - master data 2016
Shiyad Ismail
4.1 The General Ledger
4.1 The General Ledger
VCE Accounting - Michael Allison
Final Accounts of a Sole Trade Business
Final Accounts of a Sole Trade Business
Jatinder Saini
Basic accounting principles
Basic accounting principles
Umar Gul
Accounting cycle
Accounting cycle
Kulbeer Bumrah
Accounting basics
Accounting basics
RITESH KUMAR SINGH
Accounting Cycle
Accounting Cycle
Suman Mia
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
eprentise
Introduction to Financial Accounting
Introduction to Financial Accounting
We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.
Accounting concepts and principles - Made Easy
Accounting concepts and principles - Made Easy
Bhavita Bhatt
Revenue recognition ppt
Revenue recognition ppt
DineshChoudhary111
Oracle R12 Cash Management New Features
Oracle R12 Cash Management New Features
Sanjay Challagundla
Inventory Accounting
Inventory Accounting
We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.
Trial balance
Trial balance
KULDEEP MATHUR
Accounts project on Ledger and Trial Balance
Accounts project on Ledger and Trial Balance
Yash Trivedi
More Related Content
What's hot
Accounting cycle- a bird eye view b
Accounting cycle- a bird eye view b
mounika ramachandruni
Job Order Costing
Job Order Costing
narman1402
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Bibek Prajapati
Introduction To Accounting
Introduction To Accounting
Yousef Hani
Ch04
Ch04
ESHETIE MEKONENE AMARE
Accounting principle
Accounting principle
veena Madaan
Double entry system
Double entry system
RaJesh Thakur
SAP business one - master data 2016
SAP business one - master data 2016
Shiyad Ismail
4.1 The General Ledger
4.1 The General Ledger
VCE Accounting - Michael Allison
Final Accounts of a Sole Trade Business
Final Accounts of a Sole Trade Business
Jatinder Saini
Basic accounting principles
Basic accounting principles
Umar Gul
Accounting cycle
Accounting cycle
Kulbeer Bumrah
Accounting basics
Accounting basics
RITESH KUMAR SINGH
Accounting Cycle
Accounting Cycle
Suman Mia
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
eprentise
Introduction to Financial Accounting
Introduction to Financial Accounting
We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.
Accounting concepts and principles - Made Easy
Accounting concepts and principles - Made Easy
Bhavita Bhatt
Revenue recognition ppt
Revenue recognition ppt
DineshChoudhary111
Oracle R12 Cash Management New Features
Oracle R12 Cash Management New Features
Sanjay Challagundla
Inventory Accounting
Inventory Accounting
We Learn - A Continuous Learning Forum from Welingkar's Distance Learning Program.
What's hot
(20)
Accounting cycle- a bird eye view b
Accounting cycle- a bird eye view b
Job Order Costing
Job Order Costing
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Financial accounting Meaning . This is useful for, BCOM,MCOM,CA,CS,CMA STUDENTS
Introduction To Accounting
Introduction To Accounting
Ch04
Ch04
Accounting principle
Accounting principle
Double entry system
Double entry system
SAP business one - master data 2016
SAP business one - master data 2016
4.1 The General Ledger
4.1 The General Ledger
Final Accounts of a Sole Trade Business
Final Accounts of a Sole Trade Business
Basic accounting principles
Basic accounting principles
Accounting cycle
Accounting cycle
Accounting basics
Accounting basics
Accounting Cycle
Accounting Cycle
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
Asset Revaluation or Impairment – Understanding Release 12 Fixed Assets Options
Introduction to Financial Accounting
Introduction to Financial Accounting
Accounting concepts and principles - Made Easy
Accounting concepts and principles - Made Easy
Revenue recognition ppt
Revenue recognition ppt
Oracle R12 Cash Management New Features
Oracle R12 Cash Management New Features
Inventory Accounting
Inventory Accounting
Viewers also liked
Trial balance
Trial balance
KULDEEP MATHUR
Accounts project on Ledger and Trial Balance
Accounts project on Ledger and Trial Balance
Yash Trivedi
Trial balance
Trial balance
mc aa
Trial Balance
Trial Balance
Marcus9000
Double Entry
Double Entry
creativemedia
Trial balance
Trial balance
Sumit Sahu
Ledger
Ledger
SANGEETHASHAINU
Double entry systme
Double entry systme
Asian Institute of Virtual Learning
Journal, Ledger, Trial Balance and Balance Sheet
Journal, Ledger, Trial Balance and Balance Sheet
Sadat Faruque
Viewers also liked
(9)
Trial balance
Trial balance
Accounts project on Ledger and Trial Balance
Accounts project on Ledger and Trial Balance
Trial balance
Trial balance
Trial Balance
Trial Balance
Double Entry
Double Entry
Trial balance
Trial balance
Ledger
Ledger
Double entry systme
Double entry systme
Journal, Ledger, Trial Balance and Balance Sheet
Journal, Ledger, Trial Balance and Balance Sheet
Similar to Introduction to double entry bookkeeping.ofp
Assessment of working capital finance project
Assessment of working capital finance project
Supa Buoy
Assessment of working capital finance project for finance, subsidy & projec...
Assessment of working capital finance project for finance, subsidy & projec...
Radha Krishna Sahoo
Assessment of working capital finance project
Assessment of working capital finance project
Supa Buoy
Introduction to Financial Accounting
Introduction to Financial Accounting
ICFAI Business School
Tips and Tools for Great Financial Management (handout 1 of 1)
Tips and Tools for Great Financial Management (handout 1 of 1)
Greenlights
Manage your Business Finances with QuickBooks
Manage your Business Finances with QuickBooks
John Wessells
Chapter 1 management accounting
Chapter 1 management accounting
metnashikiom2011-13
0601069 study of assessment methods of working capital requirement
0601069 study of assessment methods of working capital requirement
Supa Buoy
Assessment of working capital finance project by noname
Assessment of working capital finance project by noname
Sahil Monu
Presentation on Accounting Principles
Presentation on Accounting Principles
Zakir Khan
Working capital management
Working capital management
Vikash Kumar
0601069 study of assessment methods of working capital requirement
0601069 study of assessment methods of working capital requirement
Supa Buoy
Financial Statements Analysis
Financial Statements Analysis
Vinny Wu
Accounting principles and Conventions
Accounting principles and Conventions
Student at university of sargodha grw campus
Accounting Notes OF MBA
Accounting Notes OF MBA
Babasab Patil
Accounting principle by Mushfiqul Haque Mukit
Accounting principle by Mushfiqul Haque Mukit
Mohammad Mushfiqul Haque Mukit
Ch01
Ch01
Eddy Suranta
Cash an Asset: In Balance Sheet|importance of cash as an asset in the balance...
Cash an Asset: In Balance Sheet|importance of cash as an asset in the balance...
Super 20 Training Institute
Acc week 1
Acc week 1
Shu Shin
3.3 using financial data to measure and assess performance (part 2) - moodle
3.3 using financial data to measure and assess performance (part 2) - moodle
MissHowardHA
Similar to Introduction to double entry bookkeeping.ofp
(20)
Assessment of working capital finance project
Assessment of working capital finance project
Assessment of working capital finance project for finance, subsidy & projec...
Assessment of working capital finance project for finance, subsidy & projec...
Assessment of working capital finance project
Assessment of working capital finance project
Introduction to Financial Accounting
Introduction to Financial Accounting
Tips and Tools for Great Financial Management (handout 1 of 1)
Tips and Tools for Great Financial Management (handout 1 of 1)
Manage your Business Finances with QuickBooks
Manage your Business Finances with QuickBooks
Chapter 1 management accounting
Chapter 1 management accounting
0601069 study of assessment methods of working capital requirement
0601069 study of assessment methods of working capital requirement
Assessment of working capital finance project by noname
Assessment of working capital finance project by noname
Presentation on Accounting Principles
Presentation on Accounting Principles
Working capital management
Working capital management
0601069 study of assessment methods of working capital requirement
0601069 study of assessment methods of working capital requirement
Financial Statements Analysis
Financial Statements Analysis
Accounting principles and Conventions
Accounting principles and Conventions
Accounting Notes OF MBA
Accounting Notes OF MBA
Accounting principle by Mushfiqul Haque Mukit
Accounting principle by Mushfiqul Haque Mukit
Ch01
Ch01
Cash an Asset: In Balance Sheet|importance of cash as an asset in the balance...
Cash an Asset: In Balance Sheet|importance of cash as an asset in the balance...
Acc week 1
Acc week 1
3.3 using financial data to measure and assess performance (part 2) - moodle
3.3 using financial data to measure and assess performance (part 2) - moodle
Recently uploaded
The basics of sentences session 2pptx copy.pptx
The basics of sentences session 2pptx copy.pptx
heathfieldcps1
Disha NEET Physics Guide for classes 11 and 12.pdf
Disha NEET Physics Guide for classes 11 and 12.pdf
chloefrazer622
Código Creativo y Arte de Software | Unidad 1
Código Creativo y Arte de Software | Unidad 1
Maestría en Comunicación Digital Interactiva - UNR
Mattingly "AI & Prompt Design: The Basics of Prompt Design"
Mattingly "AI & Prompt Design: The Basics of Prompt Design"
National Information Standards Organization (NISO)
Russian Call Girls in Andheri Airport Mumbai WhatsApp 9167673311 💞 Full Nigh...
Russian Call Girls in Andheri Airport Mumbai WhatsApp 9167673311 💞 Full Nigh...
Pooja Nehwal
Advance Mobile Application Development class 07
Advance Mobile Application Development class 07
Dr. Mazin Mohamed alkathiri
Student login on Anyboli platform.helpin
Student login on Anyboli platform.helpin
RaunakKeshri1
Ecosystem Interactions Class Discussion Presentation in Blue Green Lined Styl...
Ecosystem Interactions Class Discussion Presentation in Blue Green Lined Styl...
fonyou31
BAG TECHNIQUE Bag technique-a tool making use of public health bag through wh...
BAG TECHNIQUE Bag technique-a tool making use of public health bag through wh...
Sapna Thakur
Sports & Fitness Value Added Course FY..
Sports & Fitness Value Added Course FY..
Disha Kariya
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
EduSkills OECD
Arihant handbook biology for class 11 .pdf
Arihant handbook biology for class 11 .pdf
chloefrazer622
Sanyam Choudhary Chemistry practical.pdf
Sanyam Choudhary Chemistry practical.pdf
sanyamsingh5019
Nutritional Needs Presentation - HLTH 104
Nutritional Needs Presentation - HLTH 104
misteraugie
Beyond the EU: DORA and NIS 2 Directive's Global Impact
Beyond the EU: DORA and NIS 2 Directive's Global Impact
PECB
JAPAN: ORGANISATION OF PMDA, PHARMACEUTICAL LAWS & REGULATIONS, TYPES OF REGI...
JAPAN: ORGANISATION OF PMDA, PHARMACEUTICAL LAWS & REGULATIONS, TYPES OF REGI...
anjaliyadav012327
mini mental status format.docx
mini mental status format.docx
PoojaSen20
SOCIAL AND HISTORICAL CONTEXT - LFTVD.pptx
SOCIAL AND HISTORICAL CONTEXT - LFTVD.pptx
iammrhaywood
Paris 2024 Olympic Geographies - an activity
Paris 2024 Olympic Geographies - an activity
GeoBlogs
Z Score,T Score, Percential Rank and Box Plot Graph
Z Score,T Score, Percential Rank and Box Plot Graph
Thiyagu K
Recently uploaded
(20)
The basics of sentences session 2pptx copy.pptx
The basics of sentences session 2pptx copy.pptx
Disha NEET Physics Guide for classes 11 and 12.pdf
Disha NEET Physics Guide for classes 11 and 12.pdf
Código Creativo y Arte de Software | Unidad 1
Código Creativo y Arte de Software | Unidad 1
Mattingly "AI & Prompt Design: The Basics of Prompt Design"
Mattingly "AI & Prompt Design: The Basics of Prompt Design"
Russian Call Girls in Andheri Airport Mumbai WhatsApp 9167673311 💞 Full Nigh...
Russian Call Girls in Andheri Airport Mumbai WhatsApp 9167673311 💞 Full Nigh...
Advance Mobile Application Development class 07
Advance Mobile Application Development class 07
Student login on Anyboli platform.helpin
Student login on Anyboli platform.helpin
Ecosystem Interactions Class Discussion Presentation in Blue Green Lined Styl...
Ecosystem Interactions Class Discussion Presentation in Blue Green Lined Styl...
BAG TECHNIQUE Bag technique-a tool making use of public health bag through wh...
BAG TECHNIQUE Bag technique-a tool making use of public health bag through wh...
Sports & Fitness Value Added Course FY..
Sports & Fitness Value Added Course FY..
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
Arihant handbook biology for class 11 .pdf
Arihant handbook biology for class 11 .pdf
Sanyam Choudhary Chemistry practical.pdf
Sanyam Choudhary Chemistry practical.pdf
Nutritional Needs Presentation - HLTH 104
Nutritional Needs Presentation - HLTH 104
Beyond the EU: DORA and NIS 2 Directive's Global Impact
Beyond the EU: DORA and NIS 2 Directive's Global Impact
JAPAN: ORGANISATION OF PMDA, PHARMACEUTICAL LAWS & REGULATIONS, TYPES OF REGI...
JAPAN: ORGANISATION OF PMDA, PHARMACEUTICAL LAWS & REGULATIONS, TYPES OF REGI...
mini mental status format.docx
mini mental status format.docx
SOCIAL AND HISTORICAL CONTEXT - LFTVD.pptx
SOCIAL AND HISTORICAL CONTEXT - LFTVD.pptx
Paris 2024 Olympic Geographies - an activity
Paris 2024 Olympic Geographies - an activity
Z Score,T Score, Percential Rank and Box Plot Graph
Z Score,T Score, Percential Rank and Box Plot Graph
Introduction to double entry bookkeeping.ofp
1.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com BUSINESS ACCOUNTING Part 1 Introduction to Double Entry Bookkeeping
2.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com Contents 1. Accounting Equation and Balance sheet 2. Double Entry System 3. Inventory 4. Effect of Profit or loss 5. Balancing-off accounts 6. The trial balance 2
3.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com Contents 1. Accounting Equation and Balance sheet 2. Double Entry System 3. Inventory 4. Effect of Profit or loss 5. Balancing-off accounts 6. The trial balance 3
4.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● What is accounting? Process Identifying Economic Judgements Measuring Information Decisions Communicating 4
5.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● What is the objectives of accounting? Letting people and organizations know: 1. If you are making a profit or a loss; 2. What your business is worth; 3. What a transaction was worth to you; 4. How much cash you have; 5. How wealthy you are; 6. How much you are owed; 7. How much you owe to someone else; 8. Enough information so that you can keep a financial check on the things you do. To provide information for decision-making! 5
6.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Who use accounting information? 1. Managers : Day-to-day decision-makers; need to know how well things are progressing financially and about the financial status of the business. 2. Owner(s) of the business : whether or not the business is profitable; what are financial resources. 3. Bank : if you are thinking to borrow money from there. 4. Tax inspectors : to calculate the taxes payable 5. Partner : when sharing ownership with someone else 6. Investors : whether or not to invest their money in the business Stakeholders owner Partner employee directors managers inspectors Bank buyers shareholders Etc. Investors suppliers 6
7.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Accounting Equation Resources Resources = supplied by the owner supplied by the owner Capital = Assets Capital = Assets - Liabilities Assets = Capital + Liabilities Resources : Resources : = what they are who supplied them 7
8.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions Accounting equation is expressed in a financial position statement called the balance sheet. The balance sheet shows the financial position of an organization at a point in time. The balance sheet is not the first accounting record to be made, nor the first that you will learn how to do, but it is a convenient place to start to consider accounting. Let's look at how a series of transactions affects the balance sheets. 8
9.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 1. The introduction of capital On 1 May 2012, Kaung started in business and deposited $60,000 into a bank account opened espically for the business. The balance sheet would show: Note how the top part of the balance sheet contains the assets and the bottom part contains the capital. This is always the way the transacction is presented in a balance sheet. 9
10.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 2. The purchase of asset by cheque On 3 May 2012, Kaung buys a small shop for $32,000 paying by cheque. The effect of this transaction on the balance sheet is that the cash at the bank is decreased and the new asset, building, is added. Note how the two parts of the balance sheet 'balance'. That is, their totals are the same. This is always the case with balance sheets. 10
11.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 3. The purchase of an asset and the incurring of a liability On 6 May 2012, Kaung buys some goods for $7,000 from Htun Lin(Creditor), and agrees to pay for them some time within the next two weeks. The effect of this is that a new asset, inventory, is acquired, and the liability for the goods is created. Note how the liability (the account payable) is shown as a deduction from the assets. This is exactly the same calculation as is presented in the most common form of the accounting equation. 11
12.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 4. Sale of an asset on credit On 10 May 2012, goods which cost $600 were sold to Chit Hein(Debtor) for the same amount, the money to be paid later. The effect is reduction in the stock of goods and creation of a new asset. 12
13.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 5. Sale of an asset for immediate payment On 13 May 2012, goods which cost $400 were sold to Thura for the same amount. Thura paid for them immediately by cheque. Here one asset, inventory, is reduced, while another asset, cash at bank, is increased. 13
14.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 6. The payment of a liability On 15 May 2012, Kaung pays a cheque for $3,000 to Htun Lin(Creditor) in part payment of the amount owing. The asset of cash at bank is therefore reduced, and the liability to the creditor is also reduced. Note how the total of each part of the balance sheet has not changed. The business is still worth $60,000 to 14 the owner.
15.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Balance Sheet & Effects of Business Transactions 7. Collection of an asset Chit Hein(Debtor), who owned Kaung $600, makes a part payment of $200 by cheque on 31 May 2012. The effect is to reduce one asset, account receivable, and to increase another asset, cash at bank. 15
16.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Equality of the accounting equation • Every transaction has affected two items • Sometimes, it has changed two assets by reducing one and increasing the other (effect has been different) • No change was made to the total of either section of the balance sheet (except start up time) • Equality between their two totals has been maintained 16
17.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Equality of the accounting equation • The effect of each of these seven accounting transaction actions upon the two sections of the balance sheet is shown below: Number of Assets Capital and Effect on balance sheet totals transaction as Liabilities above 1 + + Each side added to equally 2 + A plus and a minus both on the assets side - cancelling each other out 3 + + Each side has equal additions 4 + A plus and a minus both on the assets side - cancelling each other out 5 + A plus and a minus both on the assets side - cancelling each other out 6 - - Each side has equal deductions 7 + A plus and a minus both on the assets side - cancelling each other out 17
18.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Equality of the accounting equation • The effect of each of these seven accounting transaction actions upon the two sections of the balance sheet is shown below: Example of transaction Effect (1) Owner pays capital into the bank ↑ Increase asset (Bank) ↑ Increase capital (2) Buy inventory by cheque ↓Decrease asset (Bank) ↑ Increase asset (Inventory) (3) Buy inventory on credit ↑ Increase asset (Inventory) ↑ Increase liability (Accounts payable) (4) Sale of inventory on credit ↓Decrease asset (Inventory) ↑ Increase asset (Accounts receivable) (5) Sale of inventory for cash (cheque) ↓Decrease asset (Inventory) ↑ Increase asset (Bank) (6) Pay creditor ↓Decrease asset (Bank) ↓Decrease liability (Accounts payable) (7) Debtor pays money owing by cheque ↑ Increase asset (Bank) ↓Decrease asset (Accounts receivable) (8) Owner takes money out of the ↓Decrease asset (Bank) ↓Decrease capital business bank account for own use (9) Owner pays creditor from private ↓Decrease liability ↑ Increase capital money outside the firm (Accounts payable) The last two types of transactions do cause the totals of each part of the balance sheet to change (as did 18 the very first, when capital was introduced to the business by the owner.) When the capital changes, the totals of the two parts of the balance sheet both change.
19.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● More detailed presentation of the balance sheet 19
20.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Learning outcomes • Accounting is concerned with the recording, classifying and summarizing of data and then communicating what has been learnt from it. • It may not only be the owner of a business who will need the accounting information. It may need to be shown to others, e.g. the bank or the Inspector of Taxes. • Accounting information can help the owner(s) of a business to plan for the future. • The accounting equation is : Capital = Assets – Liabilities. • The two sides of the accounting equation are represented by the two parts of the balance sheet. • The total of one part of the balance sheet should always be equal to the total of the other part. • Every transaction affects two items in the accounting equation. Sometimes that may involve the same item being affected twice, once positively (going up) and once negatively (going down). • Every transaction affects two items in the balance sheet. • Capital will be reduced if a business makes a loss. The loss means that assets have been reduced and capital is reduced by the same amount so as the maintain the balance in the accounting equation. • In accounting, we always use brackets to indicate negative numbers. 20
21.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 1. Complete the gaps in the following table: Assets Liabilities Capital $ $ $ (a) 12,500 1,800 (b) 28,000 4,900 (c) 16,800 12,500 (d) 19,600 16,450 (e) 6,300 19,200 (f) 11,650 39,750 21
22.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 2. Which of the items in the following list are liabilities and which of them are assets? (a) Loan to Yan Lin Aung (b) Bank overdraft (c) Fixtures and fittings (d) Computers (e) We owe a supplier for inventory (f) Warehouse we own (g) Cash in hand (h) Loan from Thura Minn Minn (i) Machinery 22
23.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 3. State which of the following are wrongly classified: Assets Liabilities _____________________________________________________________________________ Loan from Aung Thu Hein Inventory Cash in hand Accounts receivable Machinery Money owing to bank Accounts payable Premises Motor vehicles 23
24.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 4. Ye Naing Tun is setting up a new business. Before actually selling anything, he bought a van for $4,500, a market stall for $2,000 and an inventory of goods for $1,500. He did not pay in full for his inventory of goods and still owes $1,000 in respect of them. He borrowed $5,000 from Kaung. After the events just described, and before tradeing starts, he has $400 cash in hand and $1,100 cash at bank. Calculate the amount of his capital 5. Draw up Toyota's balance sheet from the following information as at 31 December 2011: $ Capital 9,700 Accounts receivable 1,200 Van 3,800 Accounts payable 1,600 Fixtures 1,800 Inventory 4,200 Cash at bank 300 24
25.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 6. Complete the columns to show the effects of the following transactions: Effect upon Assets Libilities Capital (a) We pay a creditor $70 in cash. (b) Bought fixtures $200 paying by cheque (c) Bought goods on credit $275 (d) The proprietor introduces another $500 cash into the business (e) Htun Lin lends the business $200 in cash (f) A debtor pays us $50 by cheque (g) We return goods costing $60 to a supplier whose bill we had not paid (h) Bought additional shop premises paying $5,000 by cheque. 25
26.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Review questions 7. Zaw Myo Htet has the following items in his balance sheet as on 30 April 2012: Capital $18,400: Accounts payable $2,100; Fixtures $2,800; Car $3,900; Inventory $4,550; Accounts receivable $2,780; Cash at bank $6,250; Cash in hand $220. During the first week of May 2012 (a) He bought extra inventory for $400 on credit. (b) One of the debtors paid him $920 by cheque. (c) He bought a computer by cheque $850. You are asked to draw up a balance sheet as on 7 May 2012 after the above transactions have been completed. 26
27.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Glossary • Account payable (Creditor) : A person to whom money is owned for goods is known in accounting language as a creditor. • Account receivable (Debtor) : A person who owes the business money is known in accounting language as a debtor. • Assets : Resources owned by a business. • Balance sheet : A statement showing the assets, liabilities and capital of a business. • Bookkeeping : The process of recording data relating to accounting transactions in the accounting books. • Capital : The total of resources invested and left in a business by its owner. • Equity : Another name for the capital of the owner. • Inventory : Goods in which the business normally deals that are held with the intention of resale. They may be finished goods, partly finished goods or raw materials awaiting conversion into finished goods which will then be sold. • Liabilities : Total of funds owed for assets supplied to a business or expenses incurred not yet paid. 27
28.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Glossary • Non-current assets (fixed assets) : are assets which have a long life bought with the intention to use them in the business and not with the intention to simply resell them, e.g. buildings, machinery, fixtures, motor vehicles. • Current assets : are assets consisting of cash, goods for resale or items having a short life (i.e. no more than a year remaining on the date of the balance sheet). For example, the value of inventory in hand goes up and down as it is bought and sold. Similary, the amount of money owing to us by debtors will change quickly, as we sell more to them on credit and they pay their debts. The amount of money in the bank will also change as we receive and pay out money. • Current liabilities : are those liabilities which have to be paid within no more than a year from the date on the balance sheet, e.g. accounts payable for goods purchased. 28
29.
copyright © 2012
Kaung Myat Tun www.kaungmyattun.com 1. Accounting Equation and Balance Sheet ● Reference • Frank Wood's BUSINESS ACCOUNTING 1 eleventh edition 29