Comprehensive Guide to Accounting Principles and Practices

This presentation provides a comprehensive introduction to accounting, covering key concepts such as the accounting equation (Assets = Liabilities + Capital), the double-entry system, and the layout of the statement of financial position. It explains the roles of assets, liabilities, capital, accounts receivable, and accounts payable. The presentation uses examples of business transactions to illustrate how these transactions affect the accounting equation and the statement of financial position. It also delves into the double-entry system, explaining debits and credits, and how they are used to record increases and decreases in assets, liabilities, and capital. Finally, the presentation touches on inventory management, distinguishing between purchases, returns inwards, returns outwards, and sales, and how these affect inventory accounts. This presentation is an excellent resource for students learning the basics of accounting.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.1
Topic 1
Introduction and
Double Entry System

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.2
Learning objectives
After you have studied this chapter, you should
be able to:
➢ Explain what accounting is about
➢ List the main users of accounting information
and what accounting information they are
interested in
➢ Present and explain the accounting equation
➢ Explain the relationship between the
accounting equation and the layout of the
statement of financial position (balance sheet)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.3
Learning objectives (Continued)
➢ Explain the meaning of the terms assets,
capital, liabilities, accounts receivable
(debtors) and accounts payable (creditors)
➢ Describe how accounting transactions
affect the items in the accounting equation
➢ Draw up statements of financial position
after different accounting transactions have
occurred

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.4
What is accounting?
Accounting can be defined as:
The process of identifying, measuring and
communicating economic information to
permit informed judgements and decisions
by users of that information.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.5
Users of accounting information
➢ Managers
➢ Owner(s) of the business
➢ A prospective buyer
➢ The bank
➢ Tax inspectors
➢ A prospective partner
➢ Investors
➢ Creditors

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.6
The accounting equation
Resources in business = Resources supplied by
owner
Assets = Capital
But if someone else has provided some of the
assets:
Assets = Capital + Liabilities
Assets – Liabilities = Capital

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.7
Land
Equipment
Buildings
Cash
Motor
vehicles
Stocks/
inventory
Prepaid
expensesAc
counts
Accounts
Receivable/
debtor/
customer
Asset
Accounts
Asset Accounts

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.8
Accrued
Liabilities
Unearned
Revenue
Notes
Payable
Accounts
Payable/
creditor/
Supplier
Liability
Accounts
Liability Accounts

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.9
Owner’s
Equity
Revenues
Owner’s
Capital
Owner’s
Withdrawals
Expenses
Owner’s Equity

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.10
The statement of financial position
and the effects of business
transactions
On 1 May 2013, Mr. Bashier started in business
and deposited RM60,000 into a bank account
opened specially for the business
Statement of financial position as at 1 May 2013
Assets: Cash at bank RM60,000
Capital RM60,000

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.11
The statement of financial position
and the effects of business
transactions (Continued)
On 3 May 2013, Mr. Bashier buys a small shop for
RM32,000, paying by cheque
Statement of financial position as at 3 May 2013
ASSETS RM
Shop 32,000
Cash at bank 28,000
60,000
Capital 60,000

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 1.12
On 6 May 2013, Mr. Bashier buys some goods for RM7,000
from Mr. Sam and agrees to pay for them some time
within the next two weeks
Statement of financial position as at 6 May 2013
Assets RM
Shop 32,000
Inventory 7,000
Cash at bank 28,000
67,000
Less: Account payable (7,000)
60,000
Capital 60,000
The statement of financial position
and the effects of business
transactions (Continued)