BAFS Compulsory Part Introduction to Accounting

Transcription

1 BAFS Compulsory Part Introduction to Accounting : Technology Education Section Curriculum Development Institute Education Bureau, HKSARG April

2 Beauty Full Co. 2 BAFS Compulsory Part

3 3 BAFS Compulsory Part

4 Source Documents Evidence of transactions, including: Sales and purchases invoices Debit and credit notes Bank statements Copies of cheques issued and recieved Cash vouchers 4 BAFS Compulsory Part

5 Double Entry System: Assets, Liabilities and Capital Types of accounts Examples To record Entry in the account Assets Premises, van, fixtures, stock, cash, cash in bank, accounts receivable, etc. An increase A decrease Debit Credit Capital Owner s capital An increase A decrease Credit Debit Liabilities Accounts payable, bank loan, etc. An increase A decrease Credit Debit 5 BAFS Compulsory Part

6 Example On July 2 of Year 1, BF Co. purchased a van for $50,000 in cash. Accounts Types of Accounts Increase / decrease Entry in the account Van Asset Increase Debit Cash Asset Decrease Credit 6 BAFS Compulsory Part

7 Example July 1 Cash 50,000 Van Cash July 1 Van 50,000 7 BAFS Compulsory Part

8 Example On July 15 of Year 1, BF Co. bought fixtures for $30,000 from BD Ltd on credit. Accounts Types of Accounts Increase / decrease Entry in the account Fixtures??? BD Ltd??? 8 BAFS Compulsory Part

9 Answer On July 15 of Year 1, BF Co. bought fixtures for $30,000 from BD Ltd on credit. Accounts Types of Accounts Increase / decrease Entry in the account Fixtures Asset Increase Debit BD Ltd Liability Increase Credit 9 BAFS Compulsory Part

10 Example July July July July 10 BAFS Compulsory Part

11 Answer Fixtures July 15 BD Ltd 30,000 July BD Ltd July July 15 Fixtures 30, BAFS Compulsory Part

12 Double Entry System: Stocks Returns inwards Returns outwards Types of accounts Purchases Sales To record An increase A decrease An increase A decrease An increase A decrease An increase A decrease Entry in the account Debit Credit Credit Debit Debit Credit Credit Debit 12 BAFS Compulsory Part

13 Example On July 8 of Year 1, BF Co. sold goods for $10,000 to M Chan on credit. Accounts Types of Accounts Increase / decrease Entry in the account M Chan Asset Increase Debit Sales Sales Increase Credit 13 BAFS Compulsory Part

14 Example July 8 Sales 10,000 M Chan Sales July 8 M Chan 10, BAFS Compulsory Part

15 Example On July 22 of Year 1, M Chan refunded goods he bought for $1,000. Accounts Types of Accounts Increase / decrease Entry in the account Returns Inwards Returns Inwards Increase Debit M Chan Asset Decrease Credit 15 BAFS Compulsory Part

16 Example July 22 M Chan 1,000 Returns Inwards M Chan July 22 Returns Inwards 1, BAFS Compulsory Part

17 Example On July 6 of Year 1, BF Co. purchased goods for $9,000 from F Li on credit. Accounts Types of Accounts Increase / decrease Entry in the account Purchases??? F Li??? 17 BAFS Compulsory Part

18 Answer On July 6 of Year 1, BF Co. purchased goods for $9,000 from F Li on credit. Accounts Types of Accounts Increase / decrease Entry in the account Purchases Purchases Increase Debit F Li Liability Increase Credit 18 BAFS Compulsory Part

19 Example July July Year $ July July 19 BAFS Compulsory Part

20 Answer Purchases July 6 F Li 9,000 July F Li July July 6 Purchases 9, BAFS Compulsory Part

21 Example On July 27 of Year 1, BF Co. returned goods previously bought from F Li for $800. Accounts Types of Accounts Increase / decrease Entry in the account F Li??? Returns Outwards??? 21 BAFS Compulsory Part

22 Answer On July 27 of Year 1, BF Co. returned goods previously bought from F Li for $800. Accounts Types of Accounts Increase / decrease Entry in the account F Li Liability Decrease Debit Returns Outwards Returns outwards Increase Credit 22 BAFS Compulsory Part

24 Answer F Li July 27 Returns Outwards 800 July Returns outwards July July 27 F Li BAFS Compulsory Part

25 Double Entry System: Revenue and Expenses Types of Accounts Examples To record Entry in the account Revenue Commission received, etc. An increase A decrease Credit Debit Expense Rent, government rates, motor expense, salary, etc. An increase A decrease Debit Credit 25 BAFS Compulsory Part

26 Example On 28 July of Year 1, BF Co. paid motor expenses for $3,500 by cheque. Accounts Types of Accounts Increase / decrease Entry in the account Motor Expenses Expense Increase Debit Bank Asset Decrease Credit 26 BAFS Compulsory Part

27 Example July 28 Bank 3,500 Motor Expenses Bank July 28 Motor expenses 3, BAFS Compulsory Part

28 Example On July 3 of Year 1, BF Co. paid rent expenses for $15,300 by cash. Accounts Types of Accounts Increase / decrease Entry in the account Rent Expenses??? Cash??? 28 BAFS Compulsory Part

29 Answer On July 3 of Year 1, BF Co. paid rent expenses for $15,300 by cash. Accounts Types of Accounts Increase / decrease Entry in the account Rent Expenses Expense Increase Debit Cash Asset Decrease Credit 29 BAFS Compulsory Part

31 Answer Rent expense July 3 Cash 15,300 July Cash July July 3 Rent Expense 15, BAFS Compulsory Part

32 Double Entry System: Drawings Type of Account Drawings To record An increase A decrease Entry in the account Debit Credit 32 BAFS Compulsory Part

33 Example On July 20 of Year 1, owner of BF Co. drew cash for $5,000. Accounts Types of Accounts Increase / decrease Entry in the account Drawings Drawings Increase Debit Cash Asset Decrease Credit 33 BAFS Compulsory Part

34 Example July 20 Cash 5,000 Drawings Cash July 20 Drawings 5, BAFS Compulsory Part

35 Example On July 28 of Year 1, owner of BF Co. took away goods of $3,000. Accounts Types of Accounts Increase / decrease Entry in the account Drawings Drawings Increase Debit Purchases Purchases Decrease Credit 35 BAFS Compulsory Part

36 Example July 28 Purchases 3,000 Drawings Purchases July 28 Drawings 3, BAFS Compulsory Part

37 Journalise Transactions Transactions are classified and entered into books of original entry. Books of original entry include: Sales journal Purchase journal Returns inwards journal Returns outwards journal Cash book General journal 37 BAFS Compulsory Part

38 Open the Books Open a general journal to record the assets, liabilities and capital of Beauty Full Co based on the background information given. 38 BAFS Compulsory Part

39 Example 39 BAFS Compulsory Part

41 Sales Journals Record credit sales transactions in the sales journal. 41 BAFS Compulsory Part

43 Returns Inwards Journal Record the sales returns to the returns inwards journal. 43 BAFS Compulsory Part

45 Purchase Journal Record credit purchases transactions in the purchases journal. 45 BAFS Compulsory Part

47 Returns Outwards Journal Record the purchases returns to the returns outwards journal. 47 BAFS Compulsory Part

49 General Journal & Cash Book Make use of the bank statement, copies of cheques issued and received, cash vouchers and invoice and record the respective transactions in the general journal and cash book. 49 BAFS Compulsory Part

50 Example Rent Payment To record an increase in expense, entry made in the debit side To record a decrease in asset (bank balance), entry made in the credit side 50 BAFS Compulsory Part

51 Example Rent Payment Also record the payment by cheque on the right-hand side (credit) of the cash book 51 BAFS Compulsory Part

52 Example Debtor Repayment 5% cash discount if paid within 60 days 52 BAFS Compulsory Part

53 Example Debtor Repayment 53 BAFS Compulsory Part

54 Example Creditor Settlement 5% cash discount if paid within 60 days 54 BAFS Compulsory Part

55 Example Creditor Settlement 55 BAFS Compulsory Part

58 Post Entries to Ledger Accounts Set up the following ledger accounts for Beauty Full Co: General ledger Accounts receivable ledger Accounts payable ledger 58 BAFS Compulsory Part

59 Example Posting to General Ledger 59 BAFS Compulsory Part

60 Example Posting to Accounts Receivable Ledger 60 BAFS Compulsory Part

61 Example Posting to Accounts Payable Ledger 61 BAFS Compulsory Part

62 Example Posting to General Ledger Posted to cash book 62 BAFS Compulsory Part

63 Example Posting to General Ledger 1 63 BAFS Compulsory Part

64 Example Posting to Accounts Receivable Ledger 2 64 BAFS Compulsory Part

65 Example Posting to Accounts Receivable Ledger Post to cash book Post to cash sales discount account 65 BAFS Compulsory Part

66 Example Posting to Accounts Payable Ledger 1 66 BAFS Compulsory Part

67 Example Posting to Accounts Payable Ledger 2 67 BAFS Compulsory Part

68 Example Posting to Accounts Payable Ledger Post to cash purchases discount account Post to cash book 68 BAFS Compulsory Part

69 Uses of Trial Balance Checking the accuracy of double entry records: Under the double entry system, total debit balances and total credit balances are equal. If they are not equal, it means error(s) have been made. There could still be errors even if trial balance balances. Used as a basis for preparing the income statement and the balance sheet. 69 BAFS Compulsory Part

70 Steps to Prepare Trial Balance Balance off all the ledger accounts and the cash book. List all balances, either debit or credit, of all accounts in the trial balance separately. Add up all the debit and credit balances correspondingly and check whether the totals of debit side and credit side are equal. Check for errors if they are not equal. 70 BAFS Compulsory Part

71 Balance Off an Account Input $400,000 to the credit side of the Premises account to balance it off. The balance is then transfer to next month. 71 BAFS Compulsory Part

73 Prepare Financial Statements Two most important financial statements are: Income statement Balance sheet 73 BAFS Compulsory Part

74 Income Statement Less = Add Less = Sales Cost of good sold Gross profit Other incomes Expenses Net Profit Less cash sales discount & returns inwards Calculate from from opening stock, purchase, cash Purchase discount, Returns outwards & closing stock List List all all expenses 74 BAFS Compulsory Part

76 Balance Sheet Current Assets Fixed Assets Less Current Liabilities Long-term Liabilities Financed by: Capital + Net Current Assets 76 BAFS Compulsory Part - =

78 Conclusions Accounting helps us to Record, classify and summarise data Communicate information Calculate profit and loss Have a better control of the financial resources Enhance effective operations 78 BAFS Compulsory Part

79 The End 79 BAFS Compulsory Part