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Accounting O Level

The document provides an overview of accounting principles, including the definitions of book-keeping and accounting, the double entry system, and the objectives of accounting. It explains the importance of accounting in decision-making and monitoring business performance, as well as the accounting equation and the classification of assets and liabilities. Additionally, it outlines the rules for debits and credits in accounting transactions.

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15 views

Accounting O Level

The document provides an overview of accounting principles, including the definitions of book-keeping and accounting, the double entry system, and the objectives of accounting. It explains the importance of accounting in decision-making and monitoring business performance, as well as the accounting equation and the classification of assets and liabilities. Additionally, it outlines the rules for debits and credits in accounting transactions.

Uploaded by

faiyzshahirplaypen
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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IGCSE / O’ LEVEL IN ACCOUNTING

INTRODUCTION
Book-keeping The recording of accounting data in the books of account or using a computerised
accounting package.
Accounting is using book-keeping records to prepare financial statements and to assist in decision-
making.
Accounting is (can be defined as) “the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of the information”.
Double entry System A system where each transaction is entered twice, once on the debit side and once
on the credit side.
The objectives of accounting:
Accounting has many objectives; including letting people and organisations know:
 If they are making a profit or a loss;
 What their business is worth;
 What a transaction was worth to them;
 How much cash they have;
 How wealthy they are;
 How much they are owed;
 How much they owe to someone else;
 Enough information so that they can keep a financial check on the things they do.
State the purposes of measuring business profit and loss.
The purpose of the profit and loss account is to show whether a business has made
a PROFIT or LOSS over a financial year.
Explain the role of accounting in providing information for monitoring progress and decision-
making.
Accountancy can support the decision making process and management activity. The objective of an
accounting system is to provide financial information concerning the studied company.
The information concerns the financial situation and the performance of a company and there is
intended to the users to taking decisions.
Users of accounting information: possible users of accounting information include-
 Managers
 Owner(s)
 A prospective buyer
 The bank
 Tax inspectors
 A prospective partner
 Investors, (existing/potential)
The accounting equation:
Assets = Capital (Equity) + Liabilities
Assets represent anything owned by or owing to the business. E.g. Land and buildings, fixtures and
fittings, Motor vehicle, inventory, Trade receivables, cash in hand, cash at bank etc.
Current assets: Assets consisting of cash, goods for resale, or items having a shorter life.
Non-current assets: Assets having long life and are bought with the intention to use in the business
and/but not for resale. E.g., Land and buildings, fixtures and fittings, computer, motor vehicle etc.
Capital is the total resources provided by the owner and represents what the business owes the owner.
Liabilities represent anything owed by the business.
Current liabilities: Liabilities to be paid for in the near future. E.g., accounts payable, bank overdraft etc.
Long-term liabilities: Long-term liabilities are a company's financial obligations that are due more than
one year in the future., e.g., bank loan, debenture etc.
Md. Mizanur Rahman Senior Accounting Teacher (IGCSE, O’ & A’ Level) Cell: 019 78 11 22 55
ACC-LAYOUT- 1
Effect of Transaction on Accounting Equation:
↑
1. Assets = Capital + Liabilities
↓
OR
↑ ↑ or ↑
2. Assets = Capital + Liabilities

OR

3. Assets = Capital + Liabilities


↓ ↓ or ↓
OR
↑
4. Assets = Capital + Liabilities
↓
OR
↑
5. Assets = Capital + Liabilities
↓
Double Entry Rules:
Debit Credit Credit
(+) (+) (+)
An increase An increase An increase
↑ ↑ ↑
01. Accounting Equation Assets = Capital(Equity) + Liabilities
↓ ↓ ↓
A decrease A decrease A decrease
(-) (-) (-)
Credit Debit Debit

Debit Credit
(+) (+)
An increase An increase
↑ ↑
02. Expenses & Income Expenses Income/Revenue
↓ ↓
A decrease A decrease
(-) (-)
Credit Debit
 The following acronyms may help you to remember the debit and credit accounts:
D Debit for:
P Purchases E Expenses
E Expenses Debit A Assets
A Assets D Drawings
03. 04.
R Revenue C Credit for:
L Liabilities Credit L Liabilities
S Sales I Income
C Capital
Md. Mizanur Rahman Senior Accounting Teacher (IGCSE, O’ & A’ Level) Cell: 019 78 11 22 55

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