Note the following salient points:
UNDERSTAND WHAT IS DEPRECIATION & JUSTIFICATIONS OR REASONS FOR DEPRECIATION:
Depreciation is the permanent and continuing diminution in the quality, quantity or value of an asset.
Simply, depreciation is the loss of value due to fixed assets being consumed in order to earn a profit.
Therefore depreciation figure is merely the DIFFERENCE BETWEEN COST [...]
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From earlier articles, we understand that every transaction is recorded in a book of original entry from a source document.
Append below the various book of original entry, the transactions being recorded and the related source document(s) being used.
Book Of Original Entry:
(A) GENERAL JOURNAL
Transaction(s) recorded :
Opening entries
Closing entries
Adjusting entries
Correction of errors
Transactions not [...]
The recording process is the process of which we record the business transactions by using an accounting procedure. Recording process starts with recording in:
Journals
Ledger and then
Trial Balance
Accounting transactions are recorded by using an accounting system.
Accounting systems are designed to show the increases and decreases in accounts in the financial statements.
There are five major accounts in financial statements:
Assets
Liabilities
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Remember the following accounting concepts:
Accounting entity concept/economic entity,business entity concept- the business is a separate entity from its owners.
Accrual concept-revenue is recognized when it is earned and expenses when they are incurred.
Accounting period concept-the indefinite life of a busiess entity is divided into accounting periods for the purpose of preparing financial reports.
Consistency concept-states that accounting [...]
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The accounting equation is based on the business entity concept which assumes that the business, as a unit by itself, acquires its own assets through funds supplied by the owner or by external sources.
The accounting equation =Assets=Owner’s Equity + Liabilities
Assets are items of value owned by the business
Liabilities are amounts owed by a business to [...]
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Source document – a written document that provides details of a transaction and the evidence that the transaction has taken place. All accounting entries are based on information derived from these source documents.
Journal is referred to as the book of original entry
Significant contributons of journal to the recording process
it discloses in one place the complete effects of a transaction
An account has a debit balance when its debit total exceeds its credit total
An account has a credit balance when its credit total exceeds its debit total
Assets, expenses and drawings accounts have debit balances
The Petty Cash Book records all payments made from the petty cash fund
The petty cash voucher is a source document for all petty cash payments
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