Introduction to Accounting

Coursework 1-Group Research

1.SUMMARY

Accounting subject is important to everyone,especially to those who would like to join the accounting firm or those who would join the business line like us,the marketing students.Of course,learning accounting will let us discover more about accounting and let us know how important accounting is to a business world.

2.INTRODUCTION.

The main purpose of a business that is set up are to earn profits.To earn profits,business owner or the accountant must know how to do or the steps of knowing whether the business earns profit or loss.The business owner will inject capitals inside to the business as a starter which are labelled as non current assets and current assets into the business.There would be debts,sales and purchases in the business.To know whether the business is doing well or not,business owner or accountant will prepare the financial statements such as statement of profit and loss and statement of financial position.All of the financial statements can show the business owner how much expenses and purchases that he/she made or how much profit and loss that he/she earn.

ACCOUNTING EQUATION.

The basic accounting equation represents a relationship between liabilities,assets and owner's equity.It can be expressed as following:

ASSETS=CAPITAL+LIABILITIES

PROFIT DETERMINATION.

Every business that were set up,no matter if is a small business or a big business there are expenses,cost,taxes and so on.To get profit is as following:

PROFIT=TOTAL REVENUE-TOTAL EXPENSES.

The business start making profit when their sales/income is higher than the expenses and revenue that cost the business owner.

ACCOUNTING CYCLE.

These are the following cycles that are arranged accordingly:-

(i)Source documents

(ii)7 books of prime entry

(iii)3 ledgers

(iv)Draft trial balance&Financial

(v)Adjustments

(vi)Adjusted trial balance & Financial

(vii)Closing entries

The accounting cycle is a step by step process for a business owner to know and can prepare their financial statements at the end.This cycle is a repeated process which starts from analyzing the source documents until the last step which is preparing financial statement.This process is repeated over and over again.This cycle starts with source documents like invoice,receipt,and payment vouchers that are used or receive by the business.Then,it will be recorded down into the General Journal.Then,from the General Journal it will be recorded down into the 3 ledgers and one of it is the General Ledger.Actually, the key components of accounting cycle that always need analysing and recording down transactions via journal entries before posting to the ledger.After posting to journal entries , it will transfer to ledger accounts.When all the transactions are completed in the journals and ledgers,a draft trial balance and a financial statement can be prepare.Then,adjusted trial balance will be prepare before closing down all the entries and financial report will be prepare which is financial statement.