Accounting is the process of systematically collecting, interpreting and recording financial information to measure and summarise a business’ financial performance at a point in time.
Implementing an efficient record keeping system will enable a business owner to be up to date with their purchases/sales/expenses, monitor quantities of stock and ensure money is not tied up in surplus stock.
Creditors – people you OWE money TO
Debtors – people that owe YOU money.
Assets – An asset is something of financial value that is OWNed by you/business
Liability – A liability is something of monetary value that is OWEd to another person/business
Apart from taxation, business records are important because they help the owner know:
• How much profit (or loss) has been made
• How much is owed to creditors or owed BY debtors
• The total value of the business’ assets and liabilities
• How the business compares with other similar businesses
The worth of a business is usually dependent on the monetary value of the firm’s assets minus the value of its liabilities
A Net asset is the different between the assets and liabilities of a business.
PROPRIETORSHIP (OWNERS EQUITY)
Proprietorship is what the business owes to the
owner if all the assets are sold and the liabilities are paid off.
A balance sheet is a statement showing the assets and liabilities of a business ‘at a point in time’. Despite the changes, the balance on either side is still equal. This is because whatever occurs on one side of the balance sheet impacts the other.
Drawings are withdrawals of cash from the business by the owner for private purposes
Additional capital refers to the assets the owner contributes to the business in the form of cash or other assets such as a motor vehicle.
Transactions are usually made up of two basic...