This document teaches anyone who is new to accounting or still trying to understand accounting, the basics and how to apply them to complex examples. Most of the time teachers or lecturers innocently do not teach the concepts at a basic level, this document will teach you the basics and help you un...
In these notes we will look at the basic level of accounting, we will
look at how accounting works, how to classify accounts, and finally
go on to look at complex examples of accounting and more in-depth
financial accounting. We will mainly discuss the classification of
accounts and how they increase and decrease, we will look at how
we balance an account, the accounting equation, accounting cycle,
vat calculations, a summary of markup equations, how to apply
them, and how to do a general journal. Then we will look at more
complex accounting, depreciation calculations, financial statements
of a sole trader, partnerships.
Introduction:
Accounting can be formally described as an organizational system,
that many organizations, firms, businesses, and even households
use to coordinate their finances. We specifically look at businesses in
these notes. Imagine how people and businesses would be, without
any sort of system to coordinate their finances. It would be a
complete mess. Accounting is like organizing your room, imagine if
things were out of place and you did not know where things went or
where to put them, it would be so frustrating. Just like accounting,
we need to put values into respective homes and categorize them, so
that we can measure the performance of businesses or
organizations.
Accounting is organized or coordinated through ledgers, notes,
journals, and statements. When we talk about “the books” of a
, business or a firm, we are referring to the accounting records that
contain all the documents above.
The Double-entry system
Luca Pacioli developed this modern form of accounting, which we
use in our accounting methods today. The double-entry system
refers to two book entries, one debit, and one credit. This double-
entry system will affect all the transactions, this means every
transaction will have at least one debit and one credit. Debits and
credits help to decide which side an account increases on, and which
side of an account decreases on. So, when we record a transaction,
we need to decide which account will increase or decrease and
whether each account will increase or decrease on the debit or credit
side.
What are accounts? These refer to the tools in accounting that help
run a business. These tools include assets, inventories, receivables,
capital, incomes, liabilities, and finally expenses. It is further
categorized as Assets, Owners Equity, and Liabilities.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Kaylee358. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.75. You're not tied to anything after your purchase.
