introduction to book-keeping and accounting. what is book-keeping? recording business transactions...

Introduction to Book-keeping and Accounting

What is Book-Keeping?

Recording business transactions in financial terms

What is Accounting?

• Accounting is concerned with the use of financial information from within the book-keeping system

• The books of account provide information relating to:

• What the business owns

• What the business owes

• The income and expenditure of the business

• This information is summarised and reported in the form of financial statements which consist of the Profit and Loss Account and the Balance Sheet

• Why do you think this information is important and who do you think may require this information?

The work of the Book-keeper

• Preparing business documents to be issued by the business and recording any transactions relating to these documents in the books of account

• Checking business documents received by the business and recording any transactions relating to these documents in the books of account

• Making and recording payments

• Checking and recording receipts

• Preparing monies for banking

• Checking the accuracy of transactions processed

• The book-keeper needs to recognise that their work is often confidential

• Business information should only be disclosed to others with the permission of the appropriate line manager, or proprietor/director of the business

The Book-Keeping System

Information is gathered from a number of Source Documents

Invoices

Credit notes

Cheques Received

Cheques Issued


Information is gathered on Primary Accounting Records

Day Books

Journal

Cash Book

Petty Cash Book


Information is recorded using Double Entry Book-Keeping

Sales Ledger

Purchases Ledger

General (Nominal) Ledger


A summary of all the accounts is compiled on a Trial Balance

This is a mathematical check that the double entries have been recorded accurately


Information from the Trial Balance is analysed to prepare the Final Accounts

Profit and Loss Account

Balance Sheet


Source Documents

Primary Accounting Records

Double Entry Book-keeping

Final Accounts

Trial Balance

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The Accounting Equation

Assets - Liabilities = CapitalWhat a business owns

What a business owes

Money introduced by the owners

The vast majority of a business’s transactions will affect the assets and liabilities of that business.

Activity

• In your groups think about the following scenario….

• You would like to start up a pizza home delivery business

• Think about what you would need? Money to start the business? Where from? Would customers need receipts? What bills would you need to pay?

• You have ten minutes to come up with as many ideas as you can think of