Chapter 1:

Introduction to
Accounting
Prepared by: Adam Loh Zi Qian (EE2
@2024)
Table Of Contents
Accountin
1. Accounting vs
1. g
Bookkeeping
1 3
Equation

1. Assets,
1.
Statement of
Financial
liabilities,
2 capital 4 Position
(SOFP)
 Accounting
1. vs
Bookkeeping
1
● To understand and explain
the difference between
bookkeeping and
accounting
What do you think Accounting is
about ?

IS IT ONLY ABOUT CALCULATING

MONEY?
 “Accounting is a process
of collecting financial data,
classifying, summarising,
analysing, interpreting and
communicating.”
- Not counting money
only!
Bookkeeping v.s.
Accounting
Basis Bookkeeping Accounting

Scope Identifying financial Summarising the recorded

transactions, measuring them transactions, interpreting
in money terms, recording them and communicating
them into books of accounts results to the users

Stage It is primary stage It is secondary stage. It

begins where bookkeeping
ends

Objective The objective is to maintain The objective is to ascertain

systematic records of financial net results of operations and
transactions financial position and to
communicate information to
interested parties
Bookkeeping v.s.
Accounting
Basis Bookkeeping Accounting

Nature of Job This job is routine in nature This job is analytical and
dynamic in nature

Performance Junior staff perform the Senior staff perform the

function function

Relation Bookkeeping is the basis of Accounting begins where

accounting bookkeeping ends
Why do we learn
Accounting?
The Purpose of Accounting

● Provide important financial information that helps

interested parties to monitor progress.

● Helps with good decision-making (plan for future

development of business).

● Inform interested parties what a business is worth.

Who is interested to read
your income statement?
Interested parties
● Owner
○ know the profit and net worth of the business
● Investors
○ interested in profitability and market value of assets of
the business
● Bank manager
○ loan can be repaid when due?
● Trade payables (creditors)
○ interested in liquidity position (cash flow) and payment
period for trade payables
Interested parties
● Government
○ compile business statistics, check whether correct
amount of company tax is paid?

● Customers
○ ensure the continuity of supplies

● Employees
○ want to know that the company is able to
continue operating, to maintain jobs
An accounting cycle
Business documents
↓
Books of prime entry
↓
Ledger accounts
↓
Trial balance
↓
Financial statements
 Past Year Paper Section
Q1:

Q2:
 Past Year Paper Section
Q3:

Q4:
 Past Year Paper Section
Q5:

Q6:
 Accounting
1. vs
Bookkeeping
1
● To understand and explain
the difference between
bookkeeping and
accounting
 Assets,
liabilities, 1.
capital
● To explain the meaning of
assets, liabilities and
owner’s equity
2
Assets
● Resources of monetary value
that a business owns or are
owed to the business. (Always
standing as a business
perspectives)
Liabilities

● Amount that a business owes

people for resources supplied to
business. (Always standing as a
business perspectives)
Individual Activity: My personal
assets & liabilities
● On the sticky note, please list down AT
LEAST THREE of your personal
assets and liabilities. Please write
down the value of the asset and
liabilities also.

● After 3 minutes, a few students will

come out and present their personal
assets and liabilities.
 Asset Liabilities

Non-current Current Non-current Current

Asset Asset Liabilities Liabilities
(>1 year) (<1 year) (>1 year) (<1 year)
Example of Non-current asset

Motor
vehicles

Premises Machinery
Example of Current asset

Cash in
hand

Inventor
Balance at y
bank
Example of Non-current liabilities

Long-term loan (>1

year)
Example of Current liabilities
Bank overdraft
(negative balance
on bank)

Trade payables
Capital (Owner
equity)
● Funds raised by the owner to
fund a business idea
● In short, it means owner’s
investment.
● Business owes to owner
 BUSINE VS OWNER
SS
● Personal spending for owner and business is always
SEPARATED for the records.
Group Activity: My future
restaurant
● Discuss and write on the mahjong paper:
○ A type of restaurant that you would like to operate
○ Name of the restaurant
○ Lists as many assets that you can think of for your
business.
○ Write the estimated value of the asset.

● You only have 5 minutes!

● After 5 minutes, some group will be chosen to present

their ideas.
Instructions

1. An object will be passed down when the

music plays
2. When the music stops, the person with the
object in hand will need to answer the
question
3. If you answer wrongly, there will be a
punishment
4. GOOD LUCK!
Question 1:

State an example of non-

current asset.
Question 2:

State the definition of

liabilities.
Question 3:

Define capital in Accounting.

Question 4:

State the difference

between non-current asset
and current asset.
 Assets,
liabilities, 1.
capital
● To explain the meaning of
assets, liabilities and
owner’s equity
2
1. Accounti
ng
3 Equation
● To explain and apply the
accounting equation
From the asset listed, how do
you get the money to buy your
asset?
You borrow money from your
friend/bank, consider as
liabilities.

You get money from the

owner, consider as capital.
Asset = Capital +
Liabilities
 Past Year Paper Section
Q1:

Q2:
1. Accounti
ng
3 Equation
● To explain and apply the
accounting equation
 Statement of
1. Financial
Position
4 (SOFP)
● To understand that statements
of financial position record
assets and liabilities on a
specified date
Recording Statement of Financial
Position (SOFP),
● Every financial transactions will have a dual effect on
the accounting equation.

● ASSETS = CAPITAL + LIABILITIES even after

recording ∞ transactions.
 Always ASSETS = CAPITAL +
LIABILITIES
Antman opened a business bank
account and deposited $56 000 cash
into this account.
Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank 56000 Owner’s equity 56000

56000 56000
Antman purchased inventory for
$5000, paying by cheque.
Always ASSETS = CAPITAL + LIABILITIES

Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank (56000 - 5000) 51000 Owner’s equity 56000

Inventory 5000

56000 56000
Antman bought a motor vehicle
costing $6000 from Superman on
Always ASSETS = CAPITAL + LIABILITIES
credit.
Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank 51000 Owner’s equity 56000

Inventory 5000 Trade payable - Superman 6000

Motor vehicle 6000

62000 62000
Antman paid Superman $5000 by
cheque in part payment of Always
debt ASSETS = CAPITAL +
owing. LIABILITIES

Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank (51000 - 5000) 46000 Owner’s equity 56000

Inventory 5000 Trade payable - Superman 1000

(6000-5000)

Motor vehicle 6000

62000 62000
 Always ASSETS = CAPITAL +
LIABILITIES
Antman sold inventory for cash
$3000.
Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank 46000 Owner’s equity 56000

Inventory (5000-3000) 2000 Trade payable - Superman 1000

Motor vehicle 6000

Cash 3000

57000 57000
 Always ASSETS = CAPITAL +
LIABILITIES
Antman withdrew $3000 from the
bank for his personal use.
Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank (46000-3000) 43000 Owner’s equity (56000-3000) 53000

Inventory 2000 Trade payable - Superman 1000

Motor vehicle 6000

Cash 3000

54000 54000
 Always ASSETS = CAPITAL +
Antman bought motor vehicle of LIABILITIES

$1000 in cash from her own personal

funds.
Antman
Statement of financial position at 31 Oct 2022

Assets Liabilities

Bank 43000 Owner’s equity (53000+ 54000

1000)

Inventory 2000 Trade payable - Superman 1000

Motor vehicle (6000 + 1000) 7000

Cash 3000

55000 55000
Practice Time! (Coursebook pg 9)
Practice Time! (Coursebook pg 9)
 Statement of
1. Financial
Position
4 (SOFP)
● To understand that statements
of financial position record
assets and liabilities on a
specified date