Learn bookkeeping to improve your working knowledge or to build a strong foundation of information for beginners.
A thorough foundational course that will equip you with the knowledge and abilities to:
- returning to the office.
- having your own business or managing one.
- updating and modernising your current knowledge and skills.
- enhancing your capacity for work in the accounts or administration areas.
- enhancing your resume by adding new talents and demonstrating your continued academic pursuits.
- updated and altered frequently (at least once a year) to retain their universal relevance.
- Globally applicable: This course is based on current international standards and many nations participate in standardised bookkeeping principles and practises.
Lesson Structure
There are 13 lessons in this course:
- Introduction – Nature, Scope and Function of Bookkeeping
- What is bookkeeping
- Difference between accountants and bookkeepers
- History of bookkeeping
- Bookkeeping Terminology
- Understanding language
- Why do we need bookkeeping
- Bookkeeping as a management tool
- Business structures
- Business structures vary internationally
- Financial information
- Accounting conventions and doctrines
- Accounting standards
- Australian accounting standards
- UK accounting standards
- International cooperation on standards
- The Balance Sheet
- What is a balance sheet
- Assets and liabilities
- Components of a balance sheet
- What items do not appear on the balance sheet
- Example of a Balance Sheet
- Tracking business performance
- T format balance sheet
- Balance sheet allocations
- What is working capital
- Analysing and Designing Accounting Systems
- What is an accounting system
- Understanding the flow of information in bookkeeping
- Other business documents -statements, order forms, quotations
- Steps in the bookkeeping process
- Designing the System
- Analyzing business needs
- Designing the accounting system
- Designing the chart of accounts
- Writing a chart of accounts
- Designing the type of journals needed
- The Double Entry Recording Process
- Ledgers
- Opening up the general ledger
- Ledger accounts/ sub ledger
- The general ledger
- Entries resulting from transactions
- Recording transactions
- Different types of accounts
- A trial balance
- Ledger accounts and double entry bookkeeping
- Recording entries
- Rules to follow
- Analysis chart
- Footing ledger accounts
- Balancing ledger accounts
- The trial balance
- Accounting for drawings
- Revision of definitions and processes
- The Cash Receipts and Cash Payments Journal
- Recording cash transactions in journals
- Multi column receipts journal
- Cash payments journal
- Multi column cash payment journal
- What discounts are allowed
- Accounting discounts allowed and received
- The Credit Fees and Purchases Journal
- Credit sales and credit purchases
- Credit sales journal
- Debtors subsidiary journal and control account
- Using a debtors schedule
- The credit purchases journal
- Creating a creditors Subsidiary Ledger and schedule
- The cash payments journal and creditors control account
- The General Journal
- Recording non standard transactions
- Designing the general journal
- Posting to a general journal
- General journal entries and ledgers
- Anomalies
- Recording credit purchases of non current assets
- Recording owners contributions or withdrawals
- Recording debts that are written off
- Recording contra entries
- Recording purchase returns
- Other uses for a journal
- Closing the Ledger
- Closing at the end of the accounting period
- Preparing for the new accounting period
- Transferring balance day closing entries
- Profit and loss account
- Determining gross profit
- Simple profit and loss account
- Balance sheet
- Businesses making a loss rather than profit
- Owner withdrawing revenue
- The end results
- The Profit and Loss Statement
- Introduction
- The balance sheet and how it relates to Profit and Loss Statement
- Using net profit figure to evaluate business performance
- What is profitability?
- Gross Profit
- Net Profit
- Cash flow margin
- Return on assets margin
- Gearing ratio and how it relates to cash flow
- Return on owners equity margin
- Informative profit and loss presentation
- Segmentation
- Functional classification- Grouping expenses
- Showing extraordinary expenses and revenue
- Accounting for unused materials or stock
- Why do we need to calculate the cost of materials used
- Depreciation on Non-current Assets
- Intangible assets
- Depreciation methods
- Depreciation calculation methods
- Calculating depreciation with the straight line method
- What if there is no residual value
- How to enter depreciation into the books
- Declining balance method of depreciation
- Calculating percentage rate of depreciation
- Production units method of depreciation
- What about intangible assets
- Keeping track of assets and depreciation
- Asset register
- End of Useful life for assets
- Loss disposal of asset account
- Profit Determination and Balance Day Adjustments
- Cash and accrual accounting
- Cash accounting
- Accruals accounting
- Balance day adjustments to final accounts
- How to record prepaid expenses
- Showing in the general ledger
- What about if we actually owe unpaid expenses on balance day
- Receiving income in advance
- Other balance day adjustments –stock, bad debts, depreciation, discounts
- A more comprehensive treatment of trial balance
- Partnerships
- Companies
- Clubs and non profit organisations
- Using a ten column worksheet or spreadsheet
- Cash Control: Bank Reconciliation and Petty Cash
- Ways of handling money
- Outgoing monies (payments)
- Methods of controlling cash
- Recording cash transactions
- The cash book
- Bank transactions and the cash book
- Bank reconciliation statements
- The cash cycle –cash flow and liquidity
- Account receivable turnover ratio
- Operating cash flow ratio
- Inventory turnover ratio
- Professional journals
- Cash Control: Budgeting
- Introduction
- Budget types
- The cash budget
- Factoring in safety margins
- Variable costs
- Budget reviews
- Taxes and budgets
- GST or VAT taxes
- Tax input credits
- Taxable supplies
Each lesson culminates in an assignment which is submitted to the school, marked by the school’s tutors and returned to you with any relevant suggestions, comments, and if necessary, extra reading.
Aims
- Describe the purposes of financial data, accounting norms and practises, and the fundamentals of bookkeeping for service-based enterprises.
- Explain how balance sheets are used and what they do.
- Describe how to set up a bookkeeping system, how to utilise it, how information flows, and how to use other business documents.
- Provide guidelines for establishing a double entry bookkeeping system.
- Describe the purposes and particular applications of “special journals.”
- Describe the procedures for setting up credit purchases and credit sales diaries.
- Describe how to create a generic journal and how to utilise it.
- Tell us how ledger accounts are closed at the end of an accounting period.
- Explain the procedures for creating a profit and loss statement.
- Explain how to depreciate non-current assets using the appropriate methodologies.
- Describe the matching process, the foundations of accrual and cash accounting, and the requirement for balance day adjustments.
- Explain the cash cycle, the value of cash management, and the several approaches used to achieve it, such as petty cash systems and bank reconciliation procedures.
- Describe the purpose of budgets and the value they have to businesses.
How You Plan to Act
- Explain the functions of the service industry.
- What distinguishes a theory from an accounting convention?
- How does the accounting period convention affect how choices are made in the corporate world?
- What are some possible business applications for the accounting entity convention?
- What is the “Materiality Doctrine”?
- Make a list of the differences and similarities between Australia’s system and the goods and services tax system you looked into.
- Provide an explanation of the balance sheet equation.
- Explain the components of a balance sheet. Recognize the locations of items on the balance sheet.
- Name three different balance sheet formats.
- Explain the significance of distinguishing current liabilities from long-term/deferred liabilities and current assets from fixed current assets on the balance sheet.
- Construct a balance sheet.
- Display the formulas used to calculate a company’s working capital.
- Provide an explanation of the distinction between a ledger and a journal.
- Describe the sources.
- Draw a chart of accounts; describe a chart of accounts and its usage.
- Name the accounting system’s journals.
- Explain what a statement of account is and how it is used.
- What is double entry accounting?
- Explain ledger accounts and the distinction between footing and balancing ledger accounts.
- Describe a trial balance and create one.
- Enter transactions into a ledger account; balance a ledger account. Compare three-column ledger accounts to T-form ledger accounts.
- Explain how a drawing account is used and how it is categorised in the balance sheet.
- Provide an example using transactions to display A, L, and OE while describing the purposes of an analysis chart.
- Create a balance sheet on a T form.
- Explain the functions of a Cash Receipts and Cash Payments diary as well as its sources.
- Explain the differences between a special journal and a regular ledger.
- Describe the advantages of both a multi-column and a simple format cash journal.
- Create a cash receipts and a cash payments notebook. Provide an explanation of the purposes of providing references and other columns. Add items to a journal for cash payments and receipts.
- What constitutes a “discount received” vs a “discount allowed”?
- Indicate the source papers and explain the distinction between a credit sale and a credit buy. Create credit purchases and fees/sales journals, as well as a number of other pertinent postings.
- Explain a subsidiary ledger’s function and value.
- Describe the function and advantages of a “Debtors Control” account.
- Display the two entries for the credit-purchased items.
- Tell us about a control account.
- Identify the purpose of a general journal and its main components. A general journal should be adjusted to include a subsidiary ledger. In a general ledger account, fix mistakes.
- Why is bad debt a bad thing? You should enter a poor debt in the general journal. Recognize the “cents in the dollar” offer in terms of a problematic debt. Eliminate bad debts. Create an all-purpose journal.
- Enter information in a general journal. Understand how to prepare closing entries by using the general journal. Create a broad journal. Put an end to a broad journal.
- What are “Contra Entries” and how do you use them?
- Keep a purchase journal for non-current assets.
- Understanding the distinction between balancing and closing a general ledger account
- The ledgers that are closed off at the conclusion of the accounting period should be identified.
- Provide an explanation of a profit and loss statement and how to calculate a net profit or loss. Identify the account to which the net profit or loss is transferred.
- Explain the relationship between a profit and loss statement and the balance sheet.
- learn why profit and loss reporting involve functional classification and segmentation.
- Explain unusual costs, their inclusion in the profit and loss statement, and the rationale behind them.
- Provide an explanation of “Materials on Hand” calculation. Describe how the profit and loss statement will reflect them. A profit and loss statement should be prepared.
- Explain the variations between accrual and cash accounting.
- Provide an explanation of Balance Day Adjustments and the role they play in bookkeeping.
- Provide an explanation of pre-paid expenses and the differences between the asset and expense techniques to recording them.
- Explain the value of reversing entries and how to achieve it.
- Recognize a variety of standard balance day modifications.
- For a company with shares and balance day modifications, create a trail balance. Make adjusting entries in a general journal; post the adjustments to the appropriate general ledger accounts. The accounts for profit and loss should be closed. New trial balance, profit and loss statement, and balance sheet should all be prepared.
- For the new accounting period, make reversing entries.
- Describe the benefits of a worksheet with 10 columns.
- Prepare a reconciliation statement and enter transactions in a cash book.
- Make a petty cash book and use it.
- Explain the use of bank reconciliation statements.
- Explain cash management techniques and the relationship between liquidity and cash flow.
- Explain the turnover ratios for operating cash flows, accounts receivables, and inventory.
- Describe the spectrum of budgets and their importance to businesses.
- What does the word “safety margin” mean?
- Explain the concept of a “cash budget” and how debtors and creditors are taken into account.
- Provide examples of various budget deviations.
- Explain why budget reviews are important.
Accounting Simplifies Business Management a Lot
In order to gather, prepare, and record financial data that may be used to derive information for informed decision-making, implementation, and evaluation, bookkeeping provides a framework.
The bookkeeping system can be modified to meet the requirements of any person, nonprofit organisation, small business, or enterprise. The needs of small businesses will be the focus of this course. A business is an economic entity established with the aim of producing profits through the sale of goods and/or services in order to increase the wealth of its owner or owners. Small businesses are those where one, two, or a few people—typically the owners—are responsible for all significant decisions.
Via its bookkeeping system, a business can help manage its future financial situation. Financial transaction information can be used to create budgets and identify long-term financial objectives. Companies require this information to respond to a variety of inquiries, including:
- Will the company have enough money to cover its expenses?
- How much are the company’s assets worth?
- Can the company afford to take out a loan?
- Is the company financially sound enough to grow?
- Must the asking price be altered?
Using Accounting as a Management Tool
A manager can utilise well-kept records as a planning tool for the future of the company and to help them make informed decisions quickly. They can quickly determine whether the company is profitable or losing money, as well as how much is owed to creditors and how much is owed to the business by debtors. Decisions can then be based on whether everything is proceeding according to plan, which can be ascertained using this information. For instance, should prices be reduced if sales are down? Can the salary bill be covered? Is downsizing a possibility worth exploring? In contrast, decisions on business expansion may need to be taken into account if sales are increasing. How much would expanding cost? How much additional funding would be required to meet growth expenses? so forth.
Accounting practises are influenced by accounting conventions (accounting standards) and doctrines (principles). Understanding accounting conventions, or the fundamental norms and principles, will help you better comprehend why financial statements are prepared the way they are.
Accounting standards were generally accepted accounting procedures, many of which have since been made into laws that accountants are now required to abide by.
Accounting standards, or the rules that govern how accounts are kept and reports are presented, have become standardized—that is, they can be clearly recognised across many countries by similarities in method and presentation—thanks to international cooperation (covering decades of work).
Using Accounting as a Management Tool
There are numerous conventions (rules) that use established accounting techniques to address a variety of circumstances (conventions). The following are among the most significant tools used by bookkeepers:
the traditional cost system
This rule, like all basic accounting principles, focuses on the past (within a business). That may be the most typical accounting convention. Asset transactions within the company must be documented at the asset’s original cost, which is the purchase price less depreciation (if applicable). With a few exceptions, such as land, which frequently (but not always) increases in value over time, an asset’s value cannot grow, i.e., inflation or the potential sale price of an item are not taken into account. This may have the effect of inflating a company’s genuine value on the balance sheet. For instance, a company may purchase a warehouse for $150,000. The business owner can receive a $300,000 bid for the same facility ten years later. Yet, it must continue to show up on the balance sheet at its original cost. This is due to the nebulous nature of values, which makes it difficult to anticipate what something will be worth in the future. It is therefore thought to be more prudent to record past value rather than attempting to estimate a market value. Nonetheless, assets may occasionally be revalued in order to reflect their current value and show up on the balance sheet with the new value (noted on the balance sheet).
The convention for commercial entities
In accounting terminology, this distinguishes the owner of the business (of any form of business entities) from the company. So, any business-related transactions are between the firm and not the owner. For instance, when a business owner invests money in the company, that investment is recorded as a debt owed by the company to the owner. The owner’s purchases of cash or products (or the taking of those goods home) are not recorded as business expenses. The proprietor cannot deduct the cost of things purchased for personal use from business expenses. This regulation makes sure that owners’ personal and professional affairs are never mixed.
The going-concern standard
This is based on the idea that the company will carry on its operations indefinitely and will be able to fulfil its present and future obligations. According to this supposition, a company can categorise its assets and liabilities as short-, medium-, or long-term and record them as such on the balance sheet, preventing the write-off of long-term assets’ costs over the course of a single accounting period as opposed to several years. Assets can also be recorded at book value (upon purchase) rather than market value thanks to this standard.
The customary accounting period
We must create accounting reports for a business at appropriate intervals in order to compare historical and current business performance. An accounting period may last for a week, a month, a quarter, or an entire year, but it cannot be longer than that due to taxes regulations. It may be configured to begin and end on specific dates, such as the first of July every year and the last day of June every year, which is referred to as the “financial year.” Please take note that “financial years” can vary by country.
Instead of stating when an account was paid or income was received, a company’s profit and loss account should reflect the expenses or income that relate to the period in which they were incurred or generated. The accruals idea is another name for this system; for a definition, check earlier in this lecture. Because of this, a company’s net profit for a specific time period is more accurate. The process of bookkeeping includes accruals.
Convention for monetary entities
This declares that the currency being used is appropriate for the nation in where the firm is located. In other words, the US dollar is used in the USA, the Australian dollar is used in Australia, the pound is used in the UK, and so on.
Acceptance of the Law
A business’s financial reporting must comply with the law. A business’s financial transactions must be accurately reflected in its reports and books, which must be kept up to date.
Accountancy Principles
Accounting conventions are the foundation of accounting. Here are a few commonly followed accounting principles. They are different from conventions in that adoption is optional, albeit most businesses choose to do so.
Consistency
This states that the presentation of accounting information (for a business) must be consistent across all accounting periods, including those that will come after the current one. Due to less chance of financial information being modified or slanted in favour of the user, performance comparisons are ensured to be fair and legitimate.
Relevance
A company’s financial records and books must only contain transactions that are pertinent to that company.
Materiality
A business’s financial reports must include every item that is significant to it financially. On the other hand, this suggests that minor details with minimal bearing on financial outcomes might be left out. The best method to gauge an item’s importance is to consider how its exclusion would effect the reporting outcome and the reader’s or user’s perception of the real financial health of a company. For instance, leaving off pennies from a financial report would barely affect determining the underlying financial health of a company.
Verifiability standards
A company should always be able to verify its numbers, as should anyone doing an audit of the company. Anybody should be able to analyse the data and draw the same conclusions from looking at the statistics. All paperwork that was used to record transactions in the books, such as receipts, invoices, bank statements, EFT (Electronic Funds Transfer) receipts and payments, and cheque butts, must be produced by the business in order to demonstrate its business transactions.
