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Vũ Quốc Thông (PhD.)     10/10/2020 Nature of a business What is accounting? Financial statement Accounting equation Analyse and record transactions Vũ Quốc Thông (PhD.) Vũ Quốc Thông (PhD.) 10/10/2020 Describe the characteristics of an account  List the rules of debit and credit and the normal balances of accounts  Prepare a trial balance      What is an Account and its usefulness? Characteristics of an Account Debit and credit Trial balance Vũ Quốc Thông (PhD.)    10/10/2020 Assets = Liabilities + Owner’s Equity Revenues: a result of providing services or selling products to customers Expenses: the using up of assets and the consuming of services in the process of earning revenues     What is an Account and its usefulness? Characteristics of an Account Debit and credit Trial balance Vũ Quốc Thông (PhD.)  10/10/2020 A record (“place”) to record the increase and decrease of each item on the Financial Statement ◦ Cash account: record the increase and decrease of cash ◦ Fixed Assets account: record the increase and decrease of fixed assets ◦ Liabilities account: record the increase and decrease of liabilities ◦ 10 Assets + Owner’s Capital = Liabilities + – + Owner's Withdrawals Revenues Equity – Expenses 11 Vũ Quốc Thông (PhD.) Columnar Account Account Title 10/10/2020 T Account Account Title 12  There are columns: ◦ ◦ ◦ ◦ Account title Debit Credit Balance 13 Vũ Quốc Thông (PhD.)  10/10/2020 There are parts: ◦ Title ◦ Debit side (Dr) ◦ Credit side (Cr) 14  When an amount entered on the left side of an account (whatever!!!), is called debits to the account (or the account is said to be debited) E.g.?  When an amount entered on the right side of an account (whatever!!!), is called credits to the account (or the account is said to be credited) 15 Vũ Quốc Thông (PhD.) 10/10/2020 Fill in the blanks: a When an amount entered on the left side of an account, is called ……… to the account b When an amount entered on the right side of an account, is called ……… to the account 16  Normal balance of account is the side of an account, whether debit or credit, to which increases to the account are recorded 17 Vũ Quốc Thông (PhD.) 10/10/2020 Account Type Normal Debit Asset (+) Normal Credit Liability (+) Owner Equity / Capital (+) Revenue (+) Expense (+) Gain (+) Loss (+) 18  Remember: ◦ After Eating Dinner (Debit) ◦ Let’s Read Comics (Credit) refer: https://www.youtube.com/watch?v=mkCXrCKCRL8 Write down: - Which account types increase by Debit? - Which account types increase by Credit? ! * Every transaction affects at least two accounts 19 Vũ Quốc Thông (PhD.) 10/10/2020 Put (X) in the appropriate place: Account types Liability Increase by Debit Increase by Credit X Asset Revenue Expense Capital Owner’s Drawing 20 For ABC company:  Deposit in bank account for initial capital investment (e.g $10,000)  Purchase a machine by cash (e.g $1,500)  Sell goods to customer and receive cash (e.g $ 2,000) Exercise C1 21 Vũ Quốc Thông (PhD.) 10/10/2020 REMEMBER!  The sum of debits must always equal the sum of the credits WHY …? 22 Akola sell fashion quality jewelry, handbags… to women (Uganda) From small store, the shop-owner now expands to 250 national stores and 23 online selling 10 Vũ Quốc Thông (PhD.) 10/10/2020 HOW …?   the shop-owner NEEDs TO rely on recordkeeping processes, transaction analysis, inventory accounting, and financial reporting She adds that the greatest obstacle to launching Akola was “not having an accounting background.” Case in details… 24 • Transaction authorised • Transaction takes place • Business document prepared • Entry recorded in journal • Entry posted to ledger 25 11 Vũ Quốc Thông (PhD.)  10/10/2020 Steps: ◦ 1: Determine which account is affected by the transaction ◦ 2: Increase or Decrease? ◦ 3: Debit or Credit? Exercise C1 26   “Trial” is process of proving or testing TB is used as a proof that the debit balances equal credit balances  Remember: TB does not ensure that the ledger is 100% correct 27 12 Vũ Quốc Thông (PhD.) 10/10/2020 28 Note on Acct Name! Prepare a TB  You have a list of transactions (provided in class)  Please help me to prepare a TB Remember to follow steps as below: ◦ Record transactions in journal ◦ Post to accounts ◦ Generate a TB 29 13 Vũ Quốc Thông (PhD.)      10/10/2020 Column incorrectly added Amount incorrectly entered on TB Posted a wrong amount Debit posted as credit, or vice versa Debit or credit omitted 30  The following errors still make a TB to be balanced: ◦ Not journalising a transaction or posting a transaction ◦ Recording the same wrong amount for both debit and credit parts of a transaction ◦ Recording the same transaction more than once ◦ Posting a part of a transaction correctly as a debit or credit but to the wrong account E.g.? 31 14 Vũ Quốc Thông (PhD.) 10/10/2020 Each student watch the video: https://www.youtube.com/watch?v=PMH6nw2OPHI After watching, describe how to prepare a TB in a paragraph? 32   Matching (p 74 - 75) Multiple choice (p 75) 33 15