ACCOUNTING

 

Accounting Department

• Financial Statements
• Books of Prime Entry

Glossary and Further Explanations

• Accounting - the recording, measuring and analysis of transactions in order to make informed decisions.
• involves not only books of accounts, but also preparing and interpreting financial statements. 
• Asset - a resource in the business which generates future cash inflows.
• Book keeping - is the recording of business transactions in books of accounting.
• involves the use of 'special' books of accounts e.g. ledger, cash book, petty cash book and journals.
• Books of Accounts - these are specially ruled books used in accounting e.g. petty cash book, cash book and the ledger (the main/principal book of accounts; basically where all transactions end up in). 
• Capital - money or resources invested in a business by the owner, aiming to make profit. 
• The business is regarded as a separate entity, hence all personal resources transferred into the business will be classified as capital.
• Current asset - an asset used over a short period of time (usually some months to a year). 
• It can be changed into another form of an asset within the short period of time, e.g. cash, inventory, trade receivables and bank. 
• Non-current assets - Assets used in a business for a long period of time (usually more than a year).
• They can either be tangible or intangible.
• for example: machinery, labour, land, equipment, investments and goodwill.
• examples of intangible non-current assets are good will (reputation) and royalties (from copyrighted work).
• Labour is an asset, but in accounting it is not regarded or recorded, the same applies to human resources. The reason being; according to money measurement concepts, we cannot record human resources as assets because it is difficult/impossible to attach monetary value to people. We only record transactions which can be expressed in monetary terms.
• Drawings - money or resources withdrawn from the business, by the owner, for private use. 
• Expenses - day to day running costs of a business.
• Income - money gained from normal business activities and other activities which cannot be classified as operating activities.
• Liabilities - 
• Capital - this represents the owner's investment in the business and it is the amount owed by the business to the owner.
• Non-current liabilities - these are amounts owed by the business which are not due for repayment within the next 12 months (e.g. long-term loan and mortgage).
• Current liabilities - these are short-term liabilities. They are amounts owed by the business which are due for repayment within the next 12 months. Their values constantly change (e.g. trade payables and bank overdraft).
• Purchases - goods bought for resale.
• Sales - income received for goods sold.

Extra Information

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