Slide 1.

CHAPTER 1
INTRODUCTION

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.2

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 Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.3

BRANCHES OF ACCOUNTING
Two main branches:
Financial

Accounting (for external users and focuses

on information regarding the whole organization)
Management Accounting (for internal users and
centers on costing information for operational
decision making purposes )
The focus of BA100 is Financial Accounting

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.4

WHAT ARE THE OBJECTIVES OF

ACCOUNTING?
Is the business making a profit or a loss?
What is the business worth?
What is a transaction worth?
How much cash is in the business?
How wealthy is the business?
How much is the business owed?
How much does the business owe?
Keeping a financial check on activities.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.5

TYPES OF ENTITY
Sole traders
Partnerships
Clubs
Manufacturing entities
Companies

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.6

SOLE TRADER/ PROPRIETOR

Single owner

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.7

PARTNERSHIPS

Minimum 2 owners

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.8

CLUBS / ORGANIZATIONS

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.9

MANUFACTURING COMPANY

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.10

COMPANIES

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.11

WHAT IS BOOKKEEPING?
Bookkeeping is the process of recording
data relating to accounting transactions
in the accounting books.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.12

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 Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 1.13

THE ACCOUNTING EQUATION

Resources supplied by the owner = Resources in the
business

Capital = Assets
But if someone else has provided some of the assets:
Capital = Assets - Liabilities
Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

ACCOUNTING EQUATION IS LIKE A

SCALE
IT SHOULD ALWAYS BALANCE
Slide 1.14

= CAPITAL +
LIABILITIES
ASSETS

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012