Are you interested in studying bookkeeping or accounting but don't know where to start? Are you studying for your first year professional Bookkeeping exams or Financial Accounting exams (ACCA, CPA) and need to do some exam prep? Do you want to refresh bookkeeping and accounting skills from the past?
INTRODUCTION BOOKKEEPING AND ACCOUNTING
Bookkeeping and Accounting is not for everyone, but a rounded business person will understand how to keep proper and correct books. If you are a small business owner, or part of a larger organisation, having bookkeeping and accounting knowledge is a must have business skill.
CONTENTS AND OVERVIEW
We will first look at the role of a bookkeeper and the importance of that role in the business accounting process. We will then examine different types of business documents and reasons for document retention, filing and security. After we describe different types of transactions, we will then explain the terms Assets, Liabilities, Capital, Revenue and Expenditure. In addition to this we will also carry out some calculations using the Accounting Equation.
This course is short but comprehensive, and will take you about 30 min to watch all the tutorials. This course houses a fantastic question bank on the topics covered, ensuring the learner has the opportunity to apply their understanding to examples, making this course ideal for those taking first year professional Bookkeeping exams or Financial Accounting exams (ACCA, CPA) and want some additional help.
In addition to this, this course also contains detailed notes, and a chance to interact with other learners and the instructor, via the course community discussion board, and life time access.
A quick introduction to this course Introduction to Bookkeeping and Accounting
Try this short fun financial literacy game to get you in the mood of learning......and when you have completed this course, drop back and play it again
There is a certificate of completion available - learn how to earn your certificate in this lesson and get some valuable learning tips
A bookkeeper will record financial transactions and keep records, which are back up by valid documentation. These financial transactions are entered into the accounting records, which are also known as the BOOKS.
Financial transactions can include:
These records are used to prepare a set of accounts (also called financial statements or financial accounts).
It is important when bookkeeping that you keep accurate and complete records. You also have to remember that work that you do is confidential. It is important that the business only records transactions that specifically relate to the business. This means the business accounts must not include transactions or personal expenses of the owner. This is much easier for a Company then a sole trader and you must be very careful about this. Personal expenses will not be allowable on tax returns and there can be heavy fines for doing so.
It is also important to remember that Accounting is the process of using the bookkeeping information (the record of transactions) to prepare financial statements. So if you want to know accounting you must first know bookkeeping.
Bookkeeping records are kept to prepare both financial accounts and management accounts. Financial Accounts are prepared in accordance to legislations and have a particular format. Management accounts on the other hand are more detailed and aid in the day to day decision of the business. In addition to management there are a number of other's also interested in the business financial information
Suppliers are interested if you are requesting credit, as they need to ensure that you can make payments.
Banks are interested in your financial statements if you are requesting a loan or overdraft facility
Investors will be interested in your financial statements and management accounts as they want to ensure that you are investable
Tax authorise will be interested in both your financial statements and your bookkeeping and accounting records.
Most of us regularly go into a shop and give cash in exchange for some type of goods. So we understand what is meant by cash purchase (we buy goods from the shop with money). A cash sale is also something we are familiar with. From the shop's point of view, when a customer goes into the shop and gives cash for goods, the shop is making a cash sale.
Credit transactions happen when the goods are given to the customer in exchange for future payment. An invoice is sent to the customer which records who the customer is, the items that are sold, the date of the sale and the value of the transaction (how much the customer owes the supplier). It will also state how long the customer can wait before paying for the product, the credit terms – often 30 days. Because no cash has changed hands at the point of sale, the transaction is called a credit sale . The seller has made a credit sale, and the customer has made a credit purchase.
It is a good idea to get familiar with the purpose and content of some of the main documents used to provide evidence of financial transactions. Local legalisation will say how long these records should be kept but it is often several years. Reasons for this include to help settle disputes and for revenue and tax audits.
When bookkeeping it is important to record and file documents so that they can be easily retrieved. Local law will also define how long these records are to be kept for. For this reason many companies have a document retention policy. When we looked a documents earlier, each document has a unique number for easy filing and retrieval. Transactions can be recorded manually or on a computerised system.
When you are keeping information on employees, customers and suppliers, a master files is kept with details that do not change often such as name, address, bank accounts and payment terms. When storing information about these people you must follow the guidelines of the data protection legislation in your country:
Only store information that is relevant and up to date
The information must be securely stored
The person you hold the data about has the right to see that information, but you cannot show it to other people.
A lot of businesses will have a storage area in their building for documents called an Archive. An archive must be secure to protect data and keep it confidential.
You must securely destroy documents that you no longer need; for example, by using a shredder. This is because the documents can contain sensitive and confidential information, such as personal data.
Confidentiality and care of documents is essential, as we know that there are criminals who will try and make money from other people's data
An asset is something held and controlled by the business that can be converted into cash or cash equivalents. Assets can be further divided into Current Assets and Non-Current Assets
Current assets are expected to be generally used up, sold or collected in a short period (normally less than 12 months). Examples of current assets are:
Inventory/Stock is product or goods purchased and held for resale. It also includes raw materials that will be made into items to sell, work-in-progress and finished goods.
Non-current assets are assets that the business expects to continue using for a number of years in the business. For example:Equipment
As liability is something that a business owns. It's the recognition that economic benefit must pass as a result of something that has happened in the past.
As with assets, liabilities are also broken down into current and non-current liabilities. Noncurrent liabilities are due after 12 months whereas a current liability is due within 12 months.
Current liabilities would include money owed to supplier's trade creditors, bank overdrafts, and a non-current asset would include long terms loans from the bank.
Use this activitiy to gain an understanding of an asset and a liability
Assets are items that are owned by the business and liabilities are items that are owed to the business. These are both passive. You can include the delivery cost, installation and improvement of your non-current assets as capital expenditure. The costs of repairing a non-current asset are classed as revenue expenditure.
We get income when we make a sale, we incur an expense when we buy something. These are both activities. Income and expenses are found in the profit and loss.
So income and expenditure require an action, but assets and liabilities are just present in our business.
In your life, when you work, you earn money (income). You then use that money to buy food to give you the energy to work more (expenditure). Or you might buy a book (asset), which will give you pleasure, and you can use again (non-current asset), or you may choose to sell it (inventory).
Capital is a liability, but it is a special liability as it is not due to third parties such as banks and suppliers, but to the owners. Remember that the business and the person are separate, and the business needs to know how much is owned to the owner. When a business starts up, the owner puts in some money, maybe to pay the first few months' rent. When a business makes profit, this is part of the capital, or money owed to the owners. Assets and liabilities are also part of the capital.
This brings us on to the accounting equation
Assets – liabilities = capital
This also means that what a business owns, less what a business owes is equal what is owed to the owner.
For example, if a business has assets worth $35,000 and liabilities of $15,000 then we can calculate the capital belonging to the owners: $35,000 - $15,000 = $00,000. The owners have $20,000 of capital in the business.
Assets, Liabilities and capital are found on the Balance sheet
In this lesson we are going to introduce you to the concept of single entry accounting and the concept of double entry accounting
You should now be able to do the following:
Outline the importance of bookkeeping
Identify common business documents
Describe different types of transactions
Explain the importance of the accounting equation
Recognise reasons for document retention.
This lesson contains the notes to the course
It is fundamental that the concepts and terminology used in this course is both understood and retained if you wish to continue your studies in Bookkeeping or Accounting. All of the topics we covered in this course are examinable in Y1 Financial Accounting with almost every professional accounting body world wide (ACCA, CPA, CA) If you are unable to answer any of these questions, I would suggest that you re-visit the section or drop me a question on the discussion board. If you are able to answer all of these questions, congratulations, you are ready to move on to a more advanced course.....Best of Luck!!!!!
In this lesson you will learn more about professional bookkeeping and accounting exams
If you are growing your professional social profile, why don't you show of your certificate on your LinkedIn Profile. In this lesson you will learn how easy it is to active this. And if you want, you can then share your profile here on the discussion board with the community and connect with like minded people
Paula is a Qualified CPA with over 15 years' experience in the fields of Accountancy, Business Management,Process improvement, Internal Audit, Group accountant, Operations management and Training. All across a broad range of industries and sectors. Paula has been Key Speaker at many Accounting Events where her talks on Excel are received very positively. Taken from her experiences in Accounting and business fields, Paula also has Udemy courses for those wishing to up skill, especially in the area of Spreadsheets, Bookkeeping and Accounting.
Now an E-learning Educator 5+ years, Paula also has a focus on E-learning and online teaching. Drawn from her online teaching experience,Paula has a number of courses available to online teachers to help bridge the skills gap for those that teach or wish to teach online.