Vardhan Shah
ACCOUNTING
NOTES
PREPARED BY:
VARDHAN SHAH
1
, Vardhan Shah
A
Chapter 1- Introduction to accounting
Key Terms:
➢ Book-Keeping is the detailed recording of all the financial transactions of a business.
➢ Accounting is using book-keeping records to prepare financial statements and to assist in
decision making.
➢ A statement of financial position shows the assets and liabilities of a business on a certain date.
➢ Capital is the total resources provided by the owner and represents what the business owes the
owner. It is also known as owners’ equity
➢ Inventory is the goods a business has available for resale.
➢ Trade payables represents the amount the business owes to the credit suppliers of goods.
➢ Trade receivables represent the amount owed to the business by its credit customers.
TIP: Anything provided for a business by the owner represents capital.
This is not necessarily in the form of money.
GOLDEN RULES:
• Personal A/C
1. Debit the receiver
2. Credit the giver
• Real A/C
1. Debit what comes in
2. Credit what goes out
• Nominal A/C
1. Debit all expenses and losses
2. Credit all incomes and gains.
2
, Vardhan Shah
ACCOUNTING EQUATION:
o Assets = Capital + Liability
o Capital = Assets - Liability
o Liability = Assets – Capital
TIP: If you know two elements of the accounting equation, you can
easily calculate the third element.
Format of accounting equation in a form of a statement of financial position:
Business Name
Statement of financial position at:
Assets $ Liabilities $
TIP: The totals of a statement of financial position must always agree: if
they do not you know that there is an error.
3
, Vardhan Shah
Chapter 2: Double Entry Book-Keeping – Part A
Key Terms:
➢ Double entry book-keeping is the process of making a debit entry and a credit entry for each
transaction.
➢ Drawings represent any value taken from the business by the owner of that business.
➢ A balance on a ledger account is the difference between the debit side and the credit side.
➢ Carriage is the cost of transporting goods.
➢ Carriage inwards is the cost of bringing the goods to the business and carriage outwards is the
cost of delivering the goods to the customers.
IMPORTANT: A ledger is traditionally a bound book where each account appears on a separate
page. Over the years, the ledger has developed into a looseleaf folder with separate sheets,
each containing a ledger account. Recent developments have seen the introduction of a
computer file divided into separate ledger accounts.
▪ Dr: Debit
▪ Cr: Credit
▪ Folio: A number column used for reference purposes
Account Name
Dr Cr
Date Details F $ Date Details F $
4
ACCOUNTING
NOTES
PREPARED BY:
VARDHAN SHAH
1
, Vardhan Shah
A
Chapter 1- Introduction to accounting
Key Terms:
➢ Book-Keeping is the detailed recording of all the financial transactions of a business.
➢ Accounting is using book-keeping records to prepare financial statements and to assist in
decision making.
➢ A statement of financial position shows the assets and liabilities of a business on a certain date.
➢ Capital is the total resources provided by the owner and represents what the business owes the
owner. It is also known as owners’ equity
➢ Inventory is the goods a business has available for resale.
➢ Trade payables represents the amount the business owes to the credit suppliers of goods.
➢ Trade receivables represent the amount owed to the business by its credit customers.
TIP: Anything provided for a business by the owner represents capital.
This is not necessarily in the form of money.
GOLDEN RULES:
• Personal A/C
1. Debit the receiver
2. Credit the giver
• Real A/C
1. Debit what comes in
2. Credit what goes out
• Nominal A/C
1. Debit all expenses and losses
2. Credit all incomes and gains.
2
, Vardhan Shah
ACCOUNTING EQUATION:
o Assets = Capital + Liability
o Capital = Assets - Liability
o Liability = Assets – Capital
TIP: If you know two elements of the accounting equation, you can
easily calculate the third element.
Format of accounting equation in a form of a statement of financial position:
Business Name
Statement of financial position at:
Assets $ Liabilities $
TIP: The totals of a statement of financial position must always agree: if
they do not you know that there is an error.
3
, Vardhan Shah
Chapter 2: Double Entry Book-Keeping – Part A
Key Terms:
➢ Double entry book-keeping is the process of making a debit entry and a credit entry for each
transaction.
➢ Drawings represent any value taken from the business by the owner of that business.
➢ A balance on a ledger account is the difference between the debit side and the credit side.
➢ Carriage is the cost of transporting goods.
➢ Carriage inwards is the cost of bringing the goods to the business and carriage outwards is the
cost of delivering the goods to the customers.
IMPORTANT: A ledger is traditionally a bound book where each account appears on a separate
page. Over the years, the ledger has developed into a looseleaf folder with separate sheets,
each containing a ledger account. Recent developments have seen the introduction of a
computer file divided into separate ledger accounts.
▪ Dr: Debit
▪ Cr: Credit
▪ Folio: A number column used for reference purposes
Account Name
Dr Cr
Date Details F $ Date Details F $
4
