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ACT 1100 INTRODUCTION TO ACCOUNTING

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ACT 1100 INTRODUCTION TO ACCOUNTING

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  1. ACT 1100INTRODUCTION TO ACCOUNTING Summer Course LECTURER: TROY J. WISHART

  2. Our Confession ACT 1100 Is EASY POP!

  3. Course Outline ACT 1100 Introduction to Accounting COURSE DESCRIPTION AND AIMS: • The aim of this course is to expose students to the mechanics of financial accounting. In addition students would be introduced to the history and development of accounting, accounting concepts, principles and practices.

  4. Course Outline • Summer Course CREDIT HOURS: • 8 hours per week • 6 hours Lecturers • 2 hours Tutorials • DURATION OF COURSE: • 8 WEEKS

  5. Course Outline COURSE CONTENT: •  Week 1: History, relevance and development of accounting. (Relationships between accounting and other sciences) – Accounting concepts, conventions and principles. • Definition of accounting and other relevant terminologies. 

  6. Course Outline COURSE CONTENT: • Week 1: Theory of Double Entry Accounting, balancing off of accounts and extracting a Trial Balance. • Week 2: The purchases, Sales and Returns Journals;- Entering, opening and closing entries in the General Journal and simple journal entries.

  7. Course Outline COURSE CONTENT: • Week 2: Adjustments for accruals, prepayments. • Week 3: Bad debts, provision for bad debts. • Week 3:REVISION & TEST 1 • Multiple Choice

  8. Course Outline COURSE CONTENT: • Week 4: Depreciation of fixed assets: Basis, policy and accounting entries. • Weeks 4-5:Preparation of simple financial statements for a sole proprietor – Trading, Profit and Loss Account and the Balance Sheet.

  9. Course Outline COURSE CONTENT: • Week 5: The three-Column Cash Book. • Week 6:REVISION & TEST 2 • Multiple Choice • Week 6: Bank Reconciliation Statement

  10. Course Outline COURSE CONTENT: • Week 7:GENERAL REVISION • Week 7-8: FINAL EXAMINATION

  11. Course Outline • ASSESSMENT: • Test 1 - 20 marks • Test 2 - 20 marks • Total - 40 marks • Final Exam - 60 marks • Total - 100 marks

  12. Course Outline ACT 110 Introduction to Accounting • GRADING SCHEME: • A = 75% - 100% • B = 65% to less than 75% • C = 55% to less than 65% • D = 45% to less than 55% • F = 0 to less than 45% •  To obtain a passing grade, a student must obtain at least forty-five percent (45%) of the marks awarded in the final examination, and a minimum of forty-five percent (45%) of the total marks.

  13. Course Outline ACT 110 Introduction to Accounting • RECOMMENDED READING: • Ghutier and Underwood: Foundation Accounting • Millicamp, A.H.: Foundation Accounting – D.P. Publications (recent edition) • Lucey, T: Costing – DP Publications – 3rd ed. (recent edition) • Whitehead, J. Book-keeping Made Simple • Any Other Relevant Reading Material

  14. Lecture Notes 1 History of Accounting

  15. History • Double Entry Bookkeeping emerged in Italy about the thirteenth century. • The oldest surviving records date from the last years of the thirteenth century. • Probably started many years before.

  16. History • The first record of a complete double entry system is the Massari (treasurers) accounts of the city of Genoa in 1340.

  17. History De Roover • Double entry was born when people came to see that you could not take something out of one pigeonhole without putting it into another.

  18. History • The first book on double entry bookkeeping to be published is Luca Pacioli’s book Summa de ArithmeticaGeometriaProportioni et Proportionalita (Review of Arithmetic, Geometry and Proportions)

  19. History • However, according to Peragallo the first person to write on double-entry was probably BenedettoCotrugli, whose book was completed in 1458 BenedettoCotrugli

  20. Lecture Notes 1 Definition and Concepts

  21. Definitions and Concepts Bookkeeping Systematic recording of each relevant business transactions

  22. Definitions &Concepts Bookkeeping • Transactions are to be recorded in a particular or prescribed manner • Only the business’s transactions are recorded • Personal transactions are to be excluded.

  23. Definitions &Concepts Bookkeeping • Transactions • Recorded as they occur or in chronological order based on the date of the transactions.

  24. Definitions &Concepts Accounting • Accounting is the recording, classification, summarizing of transactions and events in a significant manner, which are of a financial nature and interpreting of the results thereof.

  25. Definitions and Concepts Accounting • Transactions and Events are then summarized in accordance with generally accepted accounting practice. (Financial Statements)

  26. Definitions and Concepts Accounting • A transaction is an external event involving a transfer or exchange between two or more entities, • An Event generally is the source or cause of changes in assets, liabilities and equity, which may be external or internal.

  27. Definitions and Concepts Accounting • Accounting also involves the interpreting of the results. • Ratio Analysis is one of the Interpreting tools used, which gives further meaning to the financial information.

  28. Definitions and Concepts Financial Statement • Statements that reflect the collection, tabulation and summarizingof the accounting data.

  29. Definitions and Concepts Financial Statement • It includes: • Profit and Loss Account, • Balance Sheet, • Cash Flow Statement, • Notes to the accounts and the Directors’ • and Auditor’s reports.

  30. Definitions and Concepts BALANCE SHEET The balance sheet is a financial statement of a person or business as at a particular date or time.

  31. Definitions and Concepts BALANCE SHEET • The balance sheet changes after each transaction, such as: • One asset may increase while another will decrease • An asset may increase with a liability increasing to a similar extent, • An asset may decrease resulting in a liability decreasing to a similar degree.

  32. Definitions and Concepts Balance Sheet • It is prepared in a prescribed manner, • Each item has a particular place in the statement. • Consecutive balance sheets can also be used to determine the performance of a business.

  33. Definitions and Concepts Balance Sheet • Some of the items found in the Balance Sheet are – • Assets (Fixed and Current), • Liabilities (Long-term and Current), • Equity or Capital and Drawings

  34. Definitions and Concepts Assets Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

  35. Definitions and Concepts Assets • An economic benefit is expected from the action taken by the business in the future.

  36. Definitions and Concepts Assets • The item does not have to be owned by the business. • But might be controlled in such a way that it may be perceived as being owned.

  37. Definitions and Concepts Assets • The transaction or event must have occurred, not expected to occur. • Assets are therefore items or things owned by the business, as well as things controlled by the business.

  38. Definitions and Concepts

  39. Definitions and Concepts Fixed Assets These are assets that are held for use, rather than realizationand which are intended to provide services or generate revenues over future accounting periods.

  40. Definitions and Concepts Fixed Assets • Theyare items purchased by the business either to provide services or generate revenues over more than one accounting period.

  41. Definitions and Concepts Fixed Assets • If the item is purchased for resale it cannot be treated as a fixed asset.

  42. Definitions and Concepts Fixed Assets • Materiality (the significance of the value) is used to determine whether an item is a fixed asset and will be used for more than one accounting period.

  43. Definitions and Concepts Fixed Assets

  44. Definitions and Concepts Current Assets Those assets, which are intended to be held within a period of one year and are expected to be exhausted in one operating cycle.

  45. Definitions and Concepts Current Assets • These are assets that are expected: • To be used up by the business during the next accounting period, • To Change their form during the next accounting period.

  46. Definitions and Concepts Current Assets • The operating cycle is the period of time it takes a firm to buy inputs, make or market a product and collects the cash from a customer.

  47. ACT 1100INTRODUCTION TO ACCOUNTING Summer Course LECTURER: TROY J. WISHART

  48. Our Confession ACT 1100 Is EASY POP!

  49. Definitions and Concepts Liabilities Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

  50. Definitions and Concepts Liabilities • The obligation: • Must be currently existing • Or would have arisen from a past transaction.