Introduction to Book-keeping and Accounting

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Introduction to Book-keeping and Accounting

• AAT Level 2 Basic Accounting 1

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What is Book-Keeping?
Recording business transactions in financial
terms

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What is Accounting?

• Accounting is concerned with the use of financial
  information from within the book-keeping system

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• The books of account provide information relating
  to
• What the business owns
• What the business owes
• The income and expenditure of the business

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• This information is summarised and reported in
  the form of financial statements which consist of
  the Profit and Loss Account and the Balance Sheet
• Why do you think this information is important
  and who do you think may require this information?

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The work of the Book-keeper

• Preparing business documents to be issued by the
  business and recording any transactions relating
  to these documents in the books of account
• Checking business documents received by the
  business and recording any transactions relating
  to these documents in the books of account

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• Making and recording payments
• Checking and recording receipts
• Preparing monies for banking
• Checking the accuracy of transactions processed

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• The book-keeper needs to recognise that their
  work is often confidential
• Business information should only be disclosed to
  others with the permission of the appropriate
  line manager, or proprietor/director of the
  business

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The Book-Keeping System
Information is gathered from a number of Source
Documents
Invoices
Credit notes
Cheques Issued
Cheques Received
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The Book-Keeping System
Information is gathered on Primary Accounting
Records
Day Books
Journal
Petty Cash Book
Cash Book
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The Book-Keeping System
Information is recorded using Double Entry
Book-Keeping
Sales Ledger
Purchases Ledger
General (Nominal) Ledger

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The Book-Keeping System
A summary of all the accounts is compiled on a
Trial Balance
This is a mathematical check that the double
entries have been recorded accurately
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The Book-Keeping System
Information from the Trial Balance is analysed to
prepare the Final Accounts
Profit and Loss Account
Balance Sheet
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The Book-Keeping System
Source Documents
(Level 2)
Primary Accounting Records
(Level 2)
(Level 2)
Double Entry Book-keeping
(Level 2)
Trial Balance
Final Accounts
(Level 3)
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The Accounting Equation
Assets - Liabilities Capital
The vast majority of a businesss transactions
will affect the assets and liabilities of that
business.
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Activity

• In your groups think about the following
  scenario.
• You would like to start up a pizza home delivery
  business
• Think about what you would need? Money to start
  the business? Where from? Would customers need
  receipts? What bills would you need to pay?
• You have ten minutes to come up with as many
  ideas as you can think of