Week 1 Balance Sheet (Accounts are permanent) Financial Position of an entity at a particular point in time What are the

he entitys resources and how were they financed Assess financial structure, liquidity (short-term focus), and solvency (long-term focus) Accounting Equation: Assets = Liabilities + Equity Assets = Liabilities + (Share Capital + Retained Profits + Revenue Expenses Dividends) Income Statement (Profit and Loss Statement) (Accounts are temporary) Financial Performance of an enterprise over a period of time Has the entity used its resources efficiently and effectively Income statement accounts are closed and balances transferred to retained profits account on balance sheet at end of account period Profit (Loss) = Revenue Expenses Notes Give additional detail to financial statements Financial statement assumptions Accounting entity activities of the entity are separate from those of its owners/members Accounting period life of business is divided into discrete time periods of equal length to determine financial performance and position Monetary Universally accepted medium of exchange through a measure of economic activity by a common denominator ($A) Historical costs Transactions are initially recorded at their original cost and treat assets in terms of use instead of resale Going concern Assumes accounting entity has a foreseeable future with no intention or need to liquidate Materiality Piece of information is material if its omission or misstatement could influence the economic decisions of users made on the basis of the financial statements.

Week 2 Balance Sheet To be reported on balance sheet, assets and liabilities must: 1. meet definition criteria 2. meet recognition criteria a. probable future economic benefit b. item has a cost or value that can be measured reliably If meet 1. but not 2., they are disclosed in the F/S notes. Assets (Current or Non-current) Future economic benefit Controlled by the entity Occurrence of past transactions or other past events Liability (Current or Non-current) Present obligation The entity is obligated to sacrifice economic benefits Working capital = Current Assets Current Liabilities Low/negative working capital means short-term financial difficulties Current ratio = Current Assets / Current Liabilities Equity (Net Assets) Links balance sheet & income statement Share (Owners) capital Retained profits Income Statement Revenue Represents increase in wealth of business Recognised when it is earned Expenses Represents decrease in wealth of business Incur in order to earn revenue Capitalise is when a cost is an asset and if cost is not capitalised it is expensed

Week 3

Journal entries are shorthand versions on transaction analysis Week 4

Revenues and expenses are temporary accounts Closed at end of accounting period o Debit all revenue accounts and credit P&L summary o Credit all expense accounts and debit P&L summary o Close P&L summary to retained profits Assets, liabilities and shareholders equity are permanent accounts Carried onto next accounting period Week 5 Accrual accounting records: Revenues when earned but not received Expenses when incurred but not paid Items that have no cash flow effect Types of adjustments: Deferrals o Revenue adjustment: Unearned revenue o Expense adjustment: Prepayment Accruals o Revenue adjustment: Accrued revenues o Expense adjustment: Accrued expenses Valuation: o Book value adjustments: Contra accounts Contra accounts: A/C receivable: allowance for doubtful debts Non-current assets: accumulated depreciation Intangibles: accumulated amortisation Inventory: Provision of obsolescence Week 6

Week 7 Understand the worksheet List accounts vertically o Assets (current -> non-current) -> Liabilities (current -> noncurrent) -> Shareholders equity -> Revenue -> Expense Steps: o Trial balance -> Adjustments -> Adjusted trial balance -> Income statement -> Closing entries -> Balance sheet

Explain the function of the special journals General journal o Sales and purchases return o Purchase of equipment o Credit transactions (except inventory) o Adjusting entries o Closing entries Special journals efficiently record the most common transactions such that amounts posted to general ledger are totals (used with subsidiary ledgers) o Sales journal: credit sales of inventory o Purchases journal: credit purchases of inventory o Cash receipts journal: all cash inflows (including cash sales) o Cash payments journal: all cash outflows (including cash purchases)

Record appropriate transactions in special and general journals and post to subsidiary ledgers and the general ledger Subsidiary ledger is a set of ledger accounts that collectively represent a detailed analysis of one general ledger account o A/C receivable

Understand trade discount and cash discount