1. Introduction to Accounting
Debit
Credit
Stage 1 Accounting

2. What is accounting? Accounting is the process of:
Recording
Reporting
Analysing
Interpreting
Accounting is the process of:
Recording business transactions in an accurate and systematic manner
Reporting financial information to interested parties (usually the people who have invested money in the business, ie the owners or proprietors)
Analysing and interpreting business transactions and accounting reports to help management/owners and other interested parties plan for the future

3. What is accounting? In other words:
Recording
Reporting
Analysing
Interpreting
In other words:
Accounting is the process of recording, reporting, analysing and interpreting of financial information to interested parties (usually the owners/shareholders and management) so that effective decisions can be made.

4. Accounting equation A = E Assets = Equity
The fundamental principle of accounting introduces the relationship that exists between the owner of a business and the business itself- that of assets and equities. The fundamental equation is:
Assets
Equity
A = E
Assets = Equity
Assets are items of value that belong to a business eg. cash, premises, trucks, stock etc..
Equities are amounts that the business owes to the owner(s) and other people eg. capital, mortgage, loan, creditors etc..

5. Accounting equation
Equities are the claims on the assets of the business. These claims fall into two distinct categories:
External claims: the amount borrowed from other people, known as liabilities (eg. Loan from bank)
Internal claims: the amount that the owner(s) invest in the business, known as
owner’s equity or proprietorship (ie. The business borrows from the owner) A
L + O/E
Therefore, the accounting equation can be expressed as:
Assets = Liability + Owner’s Equity

6. Accounting equation Assets = Equity
Example: Oliver Beer begins a business by investing $7,000 of his own money. The accounting equation would be:
Assets = Equity
Cash $7,000 = Owner’s investment $7,000
If Oliver Beer then borrowed $5,000 from the bank to provide the business with additional cash, the accounting equation would be:
Assets = Liabilities + Owner’s Equity
Cash $12,000 = Bank $5,000 +Owner’s investment $7,000 A
L + O/E

7. Balance Sheet
The assets of a business and the claims on these assets may be expressed in the form of a Balance Sheet. The balance sheet consists of a list of the assets owned by a business and a list of people who have a claim on those assets at a given date.
A balance sheet is an important report an accountant draws up for the owner of a business. A
L + O/E

8. Example: T Form Name of business Balance Sheet Date
Assets
Cash at bank
$12,000
Liabilities
Bank Loan
Owner’s Equity
Capital- O. Beer
$5,000
$7,000
Total Assets
Total Equities

9. Example: Narrative Form Name of business Balance Sheet Date
Assets
Cash at bank $12,000
Total Assets $12,000
Liabilities
Bank Loan $5,000
Proprietorship
Capital- O. Beer $7,000
Total Equities $12,000