FAC1502 FINANCIAL ACCOUNTING CORE
ACCOUNTING PRINCIPLES AND STEP BY
STEP EXPLANATIONS 2026 STUDY GUIDE
◉ INCOME
Answer: Revenue and Gains. Income increases in economic benefits
during the accounting period in the form of inflows or
enhancements of assets or decreases of liabilities that result in
increases in equity.
◉ EXPENDITURE
Answer: Normal expenses and losses. Is incurred o earn income.
Expenses are decreases in economic benefits during an accounting
period, in the forms of outflows. Depletions of assets or incurrences
of liabilities which results in decrease in equity.
◉ INFLUENCE OF PROFIT OR LOSS ON EQUITY
Answer: Income (Profit) increases and expenditure (Losses)
decreases the owner's interest.
Equity = Capital + Income - Expenses
Equity = Capital + Net Profit
Equity = Capital - Net Profit
,◉ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Answer: Reflects the financial performance for financial period. The
incoe and expenditure accounts are called nominal accounts.
◉ STATEMENT OF CHANGES IN EQUITY
Answer: Reflects changes in capital contributions; change in income
and equity. The balance of the equity at the end of the financial
period is then shown in the statement of financial position. Profit (+)
increases equity; Losses (-) decrease equity.
◉ ACCOUNTING POLICIES AND EXPLANATORY NOTES
Answer: Prepared to give additional information on items appearing
in the financial statements. Usually shown after the statement of
cash flows.
◉ THE EFFECT OF TRANSACTIONS ON THE BASIC ACCOUTING
EQUATION (BAE)
Answer: A transaction is an agreed upon transfer of value from one
party to another which affects (changes) the amounnt; Nature of
composition of an entity's assets, liabilities or equity.
◉ THE GENERAL LEDGER ACCOUNT
Answer: An account is opened in the general ledger for every asset;
liability and equity item. Every account appears on its own on a
, plage in the ledger and each account is given a number, which is
known as a folio number.
◉ THE TRIAL BALANCE
Answer: A summary of all the financial data in the account ledgers
that ensures the figures are correct and balanced. An account with a
debit (dr) balance is shown on the debit (dr) side of the trial balance
and account with a credit (Cr) is hown on the credit (Cr) side of the
trial balance.
◉ NOTES
Answer: Additional information on items appearing in the financial
statements is given in the notes to the financial statements. These
explanatory notes are shown after the statement of cash flows.
◉ THE ACCOUNTING CYCLE
Answer: 1. Transactions
2. Source Documents
3. Journals
4. Ledgers
5. Financial Statements
6. Analysis
7. Decision Making
ACCOUNTING PRINCIPLES AND STEP BY
STEP EXPLANATIONS 2026 STUDY GUIDE
◉ INCOME
Answer: Revenue and Gains. Income increases in economic benefits
during the accounting period in the form of inflows or
enhancements of assets or decreases of liabilities that result in
increases in equity.
◉ EXPENDITURE
Answer: Normal expenses and losses. Is incurred o earn income.
Expenses are decreases in economic benefits during an accounting
period, in the forms of outflows. Depletions of assets or incurrences
of liabilities which results in decrease in equity.
◉ INFLUENCE OF PROFIT OR LOSS ON EQUITY
Answer: Income (Profit) increases and expenditure (Losses)
decreases the owner's interest.
Equity = Capital + Income - Expenses
Equity = Capital + Net Profit
Equity = Capital - Net Profit
,◉ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Answer: Reflects the financial performance for financial period. The
incoe and expenditure accounts are called nominal accounts.
◉ STATEMENT OF CHANGES IN EQUITY
Answer: Reflects changes in capital contributions; change in income
and equity. The balance of the equity at the end of the financial
period is then shown in the statement of financial position. Profit (+)
increases equity; Losses (-) decrease equity.
◉ ACCOUNTING POLICIES AND EXPLANATORY NOTES
Answer: Prepared to give additional information on items appearing
in the financial statements. Usually shown after the statement of
cash flows.
◉ THE EFFECT OF TRANSACTIONS ON THE BASIC ACCOUTING
EQUATION (BAE)
Answer: A transaction is an agreed upon transfer of value from one
party to another which affects (changes) the amounnt; Nature of
composition of an entity's assets, liabilities or equity.
◉ THE GENERAL LEDGER ACCOUNT
Answer: An account is opened in the general ledger for every asset;
liability and equity item. Every account appears on its own on a
, plage in the ledger and each account is given a number, which is
known as a folio number.
◉ THE TRIAL BALANCE
Answer: A summary of all the financial data in the account ledgers
that ensures the figures are correct and balanced. An account with a
debit (dr) balance is shown on the debit (dr) side of the trial balance
and account with a credit (Cr) is hown on the credit (Cr) side of the
trial balance.
◉ NOTES
Answer: Additional information on items appearing in the financial
statements is given in the notes to the financial statements. These
explanatory notes are shown after the statement of cash flows.
◉ THE ACCOUNTING CYCLE
Answer: 1. Transactions
2. Source Documents
3. Journals
4. Ledgers
5. Financial Statements
6. Analysis
7. Decision Making
