IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
CIE O LEVEL
ACCOUNTING
NOTES
By:
Muhammad Khisal Ahmed
Contact # 0345-4554615
Contact # 0345-4554615
,IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Contents
Accounting Equation ............................................................................................................................... 3
Ledger Accounts...................................................................................................................................... 4
Trial Balance ............................................................................................................................................ 5
Errors....................................................................................................................................................... 6
Error Correction (Suspense Account) ..................................................................................................... 6
Discounts................................................................................................................................................. 9
Books of Prime Entry............................................................................................................................... 9
Sales Day Book .................................................................................................................................... 9
Purchases Day Book .......................................................................................................................... 10
Sales Returns Day Book..................................................................................................................... 11
Purchases Returns Day Book ............................................................................................................ 12
Cashbook........................................................................................................................................... 13
General Journal ................................................................................................................................. 14
Petty Cashbook ..................................................................................................................................... 14
Accounting for Non-Current Assets ...................................................................................................... 15
Depreciation...................................................................................................................................... 15
Disposal ............................................................................................................................................. 16
Accruals ................................................................................................................................................. 17
Bad & Doubtful Debts ........................................................................................................................... 18
Financial Statements (Sole Trader) ....................................................................................................... 19
Income Statement ............................................................................................................................ 19
Financial Statements (Partnership)....................................................................................................... 21
Financial Statements (Limited Liability Company) ................................................................................ 24
Manufacturing Accounts....................................................................................................................... 27
Accounting Concepts ............................................................................................................................ 30
Accounting Ratios: ................................................................................................................................ 30
Profitability: ...................................................................................................................................... 30
Liquidity:............................................................................................................................................ 31
Business Documents ............................................................................................................................. 33
Capital and Revenue Expenditure ......................................................................................................... 35
Bank Reconciliation Statement ............................................................................................................. 36
International Accounting Standards (IAS) ............................................................................................. 37
Contact # 0345-4554615
,IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Accounting Equation
Accounting transactions and books are based on the following equation.
𝐴𝑠𝑠𝑒𝑡𝑠 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Assets: everything the business owns that has value or future economic benefit, e.g.
Vehicles, Buildings, Land, Bank, Cash and Debtors etc.
Capital: owner’s investment in the business.
Liabilities: money owed by the business to other individuals, groups or organizations, e.g.
creditors, loan and mortgage etc.
Every transaction must ensure that this equation remains balanced. Following example can
clarify this:
Date Details
1 Jan Owner started business with $10,000 in bank
3 Jan Bought Delivery Vans for $4,000 paid by cheque
7 Jan Bought goods on credit from Alpha for $1,000
9 Jan Paid amount due to Alpha by cheque
The above transactions will have the following impact on the equation:
Date Item Assets Capital Liabilities
1 Jan Capital No change Increase by No change
$10,000
Bank Increase by No change No change
$10,000
3 Jan Delivery Vans Increase by No change No change
$4,000
Bank Decrease by No change No change
$4,000
7 Jan Inventory Increase by No change No change
$1,000
Creditor No change No change Increase by
$1,000
9 Jan Bank Decrease by No change No change
$1,000
Creditor No change No change Decrease by
$1,000
Contact # 0345-4554615
, IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Ledger Accounts
All transactions must be recorded on ledger accounts (also called T-accounts). Ledgers are
divided into three categories:
1. Sales ledger: contains all accounts receivables
2. Purchases Ledger: contains all accounts payables
3. General Ledger: contains all other accounts e.g. sales, purchases, bank and capital
etc.
Following is a typical T-account:
XYZ A/C
Date Details $ Date Details $
Debit Side Credit Side
Every transaction affects two accounts.
One account will be debited and one will be credited.
Details will include the name of the other accounts being affected.
For example, owner started business with $10,000 in the bank on 1st Jan will be recorded as
follows:
Capital A/C
Date Details $ Date Details $
1 Jan Bank 10,000
Bank A/C
Date Details $ Date Details $
1 Jan Capital $10,000
The following table will used when figuring which account to debit or credit:
Type of Account Increase Decrease
Assets Debit Credit
Expenses Debit Credit
Liabilities Credit Debit
Incomes Credit Debit
Capital Credit Debit
Contact # 0345-4554615
By: Muhammad Khisal Ahmed
CIE O LEVEL
ACCOUNTING
NOTES
By:
Muhammad Khisal Ahmed
Contact # 0345-4554615
Contact # 0345-4554615
,IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Contents
Accounting Equation ............................................................................................................................... 3
Ledger Accounts...................................................................................................................................... 4
Trial Balance ............................................................................................................................................ 5
Errors....................................................................................................................................................... 6
Error Correction (Suspense Account) ..................................................................................................... 6
Discounts................................................................................................................................................. 9
Books of Prime Entry............................................................................................................................... 9
Sales Day Book .................................................................................................................................... 9
Purchases Day Book .......................................................................................................................... 10
Sales Returns Day Book..................................................................................................................... 11
Purchases Returns Day Book ............................................................................................................ 12
Cashbook........................................................................................................................................... 13
General Journal ................................................................................................................................. 14
Petty Cashbook ..................................................................................................................................... 14
Accounting for Non-Current Assets ...................................................................................................... 15
Depreciation...................................................................................................................................... 15
Disposal ............................................................................................................................................. 16
Accruals ................................................................................................................................................. 17
Bad & Doubtful Debts ........................................................................................................................... 18
Financial Statements (Sole Trader) ....................................................................................................... 19
Income Statement ............................................................................................................................ 19
Financial Statements (Partnership)....................................................................................................... 21
Financial Statements (Limited Liability Company) ................................................................................ 24
Manufacturing Accounts....................................................................................................................... 27
Accounting Concepts ............................................................................................................................ 30
Accounting Ratios: ................................................................................................................................ 30
Profitability: ...................................................................................................................................... 30
Liquidity:............................................................................................................................................ 31
Business Documents ............................................................................................................................. 33
Capital and Revenue Expenditure ......................................................................................................... 35
Bank Reconciliation Statement ............................................................................................................. 36
International Accounting Standards (IAS) ............................................................................................. 37
Contact # 0345-4554615
,IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Accounting Equation
Accounting transactions and books are based on the following equation.
𝐴𝑠𝑠𝑒𝑡𝑠 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Assets: everything the business owns that has value or future economic benefit, e.g.
Vehicles, Buildings, Land, Bank, Cash and Debtors etc.
Capital: owner’s investment in the business.
Liabilities: money owed by the business to other individuals, groups or organizations, e.g.
creditors, loan and mortgage etc.
Every transaction must ensure that this equation remains balanced. Following example can
clarify this:
Date Details
1 Jan Owner started business with $10,000 in bank
3 Jan Bought Delivery Vans for $4,000 paid by cheque
7 Jan Bought goods on credit from Alpha for $1,000
9 Jan Paid amount due to Alpha by cheque
The above transactions will have the following impact on the equation:
Date Item Assets Capital Liabilities
1 Jan Capital No change Increase by No change
$10,000
Bank Increase by No change No change
$10,000
3 Jan Delivery Vans Increase by No change No change
$4,000
Bank Decrease by No change No change
$4,000
7 Jan Inventory Increase by No change No change
$1,000
Creditor No change No change Increase by
$1,000
9 Jan Bank Decrease by No change No change
$1,000
Creditor No change No change Decrease by
$1,000
Contact # 0345-4554615
, IGCSE Accounting Notes
By: Muhammad Khisal Ahmed
Ledger Accounts
All transactions must be recorded on ledger accounts (also called T-accounts). Ledgers are
divided into three categories:
1. Sales ledger: contains all accounts receivables
2. Purchases Ledger: contains all accounts payables
3. General Ledger: contains all other accounts e.g. sales, purchases, bank and capital
etc.
Following is a typical T-account:
XYZ A/C
Date Details $ Date Details $
Debit Side Credit Side
Every transaction affects two accounts.
One account will be debited and one will be credited.
Details will include the name of the other accounts being affected.
For example, owner started business with $10,000 in the bank on 1st Jan will be recorded as
follows:
Capital A/C
Date Details $ Date Details $
1 Jan Bank 10,000
Bank A/C
Date Details $ Date Details $
1 Jan Capital $10,000
The following table will used when figuring which account to debit or credit:
Type of Account Increase Decrease
Assets Debit Credit
Expenses Debit Credit
Liabilities Credit Debit
Incomes Credit Debit
Capital Credit Debit
Contact # 0345-4554615
