Accounting And Bookkeeping Principles And Practice, Association of Accounting Technicians Bookkeeping Book

Accounting And Bookkeeping Principles And Practice, Association of Accounting Technicians Bookkeeping Book
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    www.mhhe.com/au/bookkeepingAssociation of Accounting Technicians& David WillisAccounting and Bookkeeping Principles and Practice provides a complete course for Certifi cate IV Financial Services (Bookkeeping) in the FNS10 Training Package. It covers all the main requirements of the Tax Pract...

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    CHAPTER 1INTRODUCTIONLEARNING OUTCOMETo gain background to accounting and bookkeeping principles and practice.wil77687_ch01_002-023.indd 2wil77687_ch01_002-023.indd 28/25/10 6:22 PM8/25/10 6:22 PMSAMPLE PAGES

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    CHAPTER CONTENTS ■ A brief history of bookkeeping ■ The nature of accounting ■ A definition of accounting ■ The accounting entity, legal entity and reporting entity ■ The reporting period and the balance date ■ Revenue and expenses ■ The operating cycle ■ The five groups of accoun...

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    ■ Balance date—the final date of the accounting period (for example 30 June) ■ Balance Sheet—a statement of what a business owns: its assets; what the business owes: its liabilities; with the difference between assets and liabilities being the Equity of the owner in the business. ■ Cap...

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    5CHAPTER 1: INTRODUCTIONA brief history of bookkeepingAs soon as records could be documented, thousands of years ago, wealth and taxes were recorded. Early writing on papyrus or stone showed the amount that tenants of wealthy landholders paid as taxes for living on the owner’s land. Governments...

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    6ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICEBusiness organisationsExamples of business ownership include: ■ A sole trader (a single proprietor)—ownership is vested in one party only. The sole trader is liable under law and is responsible for all of the business debts and usually has co...

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    7CHAPTER 1: INTRODUCTION ■ Manufacturing—these businesses convert material and labour into finished products that are then sold to trading businesses.NoteThis book is mainly concerned with the activities of a sole trader buying and selling and goods or providing services.Basic accounting prin...

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    8ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICEReporting entityReporting entities are generally large businesses such as public companies, superannuation funds and government organisations that need to report their activities to a wide group of people; for example, to shareholders, to superan...

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    9CHAPTER 1: INTRODUCTIONTUTORIAL •Goods are sold on 30 April and paid for on 31 May. On what date is the revenue recognised?BOperating cycleA satisfactory cash flow is the lifeblood of any business. Items of trading stock (inventories) need to be purchased and converted into sales to generate c...

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    10ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICENote that the acquisition of some items may include more than one of the five groups. As an example, when a motor vehicle (an asset) is purchased for the business there is a capital cost, the price of the vehicle, and some associated costs that ...

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    11CHAPTER 1: INTRODUCTIONChart of AccountsA Chart of Accounts is an index to the accounts in the general and subsidiary ledgers.Ledger accounts are classified into the five groups of accounts. A Chart of Accounts is an index to place these five groups into an order, to assist in locating ledger a...

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    12ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICE• TUTORIALIn a large department store, for 100 employees, that sells women’s wear, men’s wear and electrical appliances, there is only one account for salaries and wages.List or discuss the separate type of salaries and wages accounts that...

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    13CHAPTER 1: INTRODUCTION 2. If the next step was to purchase a computer from Computer Supplies for $3000 payable in 30 days, then assets are increased and a new liability has been created:A 31 000 − L 3000 = EQ 28 000 (The amount of Equity is unchanged from step 1). 3. Shop fittings were purch...

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    14ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICE• TUTORIALEquity of the owner is $10 000 and assets are twice as much as liabilities.What is the value of the assets?DEffect of profitThe profit factor will not be considered in detail until later in this book, but at this stage a simple intro...

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    15CHAPTER 1: INTRODUCTIONExtended Accounting Equation to include revenue and expensesOnce a business commences it will start earning revenue, primarily from the sale of trading stock or services, and incur expenses, for the purpose of earning revenue, such as purchases of trading stock, rent and ...

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    16ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICEThe concepts of a Balance Sheet are only briefly introduced at this stage. More detailed information is contained in Chapter 15.DiscountsDiscounts are mentioned in the Exercises. They are associated with the payment of creditors’ accounts by t...

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    17CHAPTER 1: INTRODUCTIONThe sales of trading stock on credit, for example, are counted as revenue at the time of the sale, even though the account may not be paid until 30 or more days later.Chapter 3 introduces the ‘credit’ journals, and in Chapter 6, sales and purchases on credit are inclu...

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    18ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICE ■ production reports and reviews ■ asset registers and controls ■ reviews of Debtors and Creditors balances.Financial statementsThe ‘Income Statement’, also known as the ‘Revenue Statement’, is a summary of inventory, revenue and ...

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    19CHAPTER 1: INTRODUCTION ■ the location—whether the business is all in one place or has branches ■ whether the business is a sole trader, partnership, club or company ■ the information required by the owner or owners ■ the information required by outsiders (for example, banks, accounta...

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    20ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICEFigure 1.2 Flowchart of transactions into accounting recordsJournalsGeneralledgerCreditorssubsidiary ledgerDebtorssubsidiary ledgerTrial balanceRevenuestatements (for profits)BalancesheetSourcedocumentsANSWERS • TUTORIALS A The accounting per...

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    TEST YOUR LEARNINGCHAPTER 1: INTRODUCTION21Insert your answers into the workbook. Multiple choice questions1 Olive started a business with cash of $30 000. She purchased inventories on credit for $15 000 and for cash $5000. She purchased a computer with a bank loan for $4000.What is the value of ...

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    22ACCOUNTING AND BOOKKEEPING PRINCIPLES AND PRACTICE ExercisesExercise 1.1State three advantages and three disadvantages of being a sole trader compared with a partnership of two or more persons.Exercise 1.2For a sole trader, briefly explain the difference between a business being an accounting e...

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    CHAPTER 1: INTRODUCTION23Exercise 1.9The Accounting Equation at the start is Assets $30 000 − Liabilities $15 000 = Equity $15 000.Using the abbreviation A − L = EQ, show in the workbook the amended Accounting Equation and the cash balance after each transaction.Exercise 1.10Arrange the follo...