DoubleEntry Accounting System

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Chapter One Introduction
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• Objectives
• At the end of the lesson, students should be able
  to
• explain the concepts of Accounting Entity,
• Accounting Period, Monetary Convention,
• Going Concern and Historical Cost.
• know the Accounting Cycle.

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Basic Book-keeping concepts
The Accounting Entity or Business
Entity Accounting Period Monetary Convention
The Going Concern The Historical Cost
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The Accounting Entity Or Business Entity concept
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Accounting Period
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The life of a business is divided into many equal
and fixed periods of time. Eg one year
Similar to your parents monthly
salary income expenses
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28 February 1998
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1 March 1998
March
May
April
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1 January 1998
Jan.
Jun.
Mar.
Apr.
May
Feb.
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31 August 1999
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Monetary Convention
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Can you tell me

• How much is your health worth?

• If I want to buy your attitude, how much
• should I pay you?

• Can I buy laziness from you?
  
• How much are you willing to sell?

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Do you think everything in the world can be
measured in terms of dollars and cents?
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Therefore, ONLY MONEY is used as the basic
measuring unit for financial reporting
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Going Concern
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Imagine you just set up a new company. Do you
think you want to sell off your business next
year? Why not? Assumption The business entity
will continue to operate and it will not close
down.
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All assets owned by the business are assumed to
be used into the unknown future. Hence, we value
the assets at historical costs.
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Historical Cost
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Can you still remember the 5 concepts ?
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Accounting Cycle
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One day, you bought a new handphone Nokia
8310 You also received an invoice from M1
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You decided to write down what you have spent on
a notebook so that you will not forget
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To record every different expenses on your
notebook seem very messy to you, so you decided
to keep a notebook for hobbies, books
stationery, food transport etc
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You want to see if your records are correct at
the end of the month Did you forget to record
anything?
Income Expense
Pocket money received 140 Hobbies 20 Food
Transport 70 Books Stationery 10 Sport
s Recreation 15 Handphone
bill 20 Left 5
140 140
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At the end of the month, you added up all your
pocket money received and the total amount of
money spent. Did you overspent on your hobbies?
Do you have some money to save for the month? How
much money do you have left at the end? Should
you cut down on your expenses next month?
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Source Documents (originals)
Can you link??
Books of Prime Entry (Journal Entries)
Ledgers
Trial Balance
Adjustments
Reports
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SUMMARY

• What have you learn today?
• Any questions?
• Do you find POA more interesting now?
• Class worksheet to test your understanding.