1. Lecture 3 Accounting Equation Duality
Just a general chat to get them using their common sense to think about different businesses

2. Shareholders Funds (Capital)
Accounting Equation
Shareholders Funds (Capital)
Assets
Liabilities - =
Introduce as quickly as possible the concept of duality and debits and credits. Participants who have not studied before won’t understand it but the constant use of the terminology will reinforce the language over time

3. Application of A/cing Equation
Dave has set up a business selling tables. In January the business has the following transactions:
Dave starts his business with $5,000 that he borrowed from his mother.
Dave’s mother expects him to pay the money back in the future.
The business bought 10 tablets for $500 each which Dave paid for with cash.
The business sold all 10 tables straightaway for $600 each in cash.
How do we represent these transactions?
How much cash does he have?
How much profit?
Use the concept of duality and use the debits and credits when doing this. New starts won’t understand but it reinforces the language. I do these on the screen in excel as well.

4. Application of A/cing Equation
How do we represent these transactions?
How much cash does he have?
How much profit?

5. Application of A/cing Equation
Transaction
Asset/ Expense/ Loss
Income /Liability
$5,000 that he borrowed from his mother
10 tables for $500 each
10 tables straightaway for $600
Make this debits and credits. Cash goes up, liability goes up, duality. Dr Cash Cr Liability. Don’t wait until slide 62 to talk about debits and credits

6. Application of A/cing Equation
Transaction
Cash
$5,000 that he borrowed from his mother
10 tables for $500 each
10 tables straightaway for $600
Make this debits and credits. Cash goes up, liability goes up, duality. Dr Cash Cr Liability. Don’t wait until slide 62 to talk about debits and credits

7. Calculation of Profit Sales x Opening Inventory Purchases
Closing Inventory
(x)
Cost of Sales
Gross Profit

8. Balance Sheet