INTRODUCTION TO ACCOUNTING Course Name – Introduction to Accounting Course Author ‐ Jacqueline Peters‐Richardson, Ministry of Education, Trinidad and Tobago Commonwealth of Learning Edition 1.0 ____________________ Commonwealth of Learning ©September 2011 Any part of this document may be reproduced without permission but with attribution to the Commonwealth of Learning using the CC‐BY‐SA (share alike with attribution). http://creativecommons.org/licenses/by‐sa/4.0 Commonwealth of Learning 4710 Kingsway, Suite 2500 Burnaby, British Columbia Canada V5H 4M2 Telephone: +1 604 775 8200 Fax: +1 604 775 8210 Web: www.col.org E‐mail: [email protected] ACKNOWLEDGEMENTS The Commonwealth of Learning wishes to acknowledge the contributions of the course authors and the support of the University of Lesotho in the creation of this course. TABLE OF CONTENTS COURSE OVERVIEW....................................................................................................................................... 1 Introduction .............................................................................................................................................. 1 Course Goals ............................................................................................................................................. 1 Course Structure ....................................................................................................................................... 2 Required Readings .................................................................................................................................... 2 Assignments and Projects ......................................................................................................................... 3 Assessment Methods ................................................................................................................................ 3 Time Required ........................................................................................................................................... 3 Course Schedule ........................................................................................................................................ 3 STUDENT SUPPORT ....................................................................................................................................... 4 Academic Support ..................................................................................................................................... 4 How to Submit Assignments ..................................................................................................................... 4 Technical Support ..................................................................................................................................... 4 UNIT ONE – INTRODUCTION TO ACCOUNTING ............................................................................................ 5 Unit Introduction ...................................................................................................................................... 5 Unit Objectives .......................................................................................................................................... 5 Unit Readings ............................................................................................................................................ 5 Assignments and Activities ....................................................................................................................... 5 Topic 1.1 Definition Of Accounting And Accounting Terms ...................................................................... 6 Topic Summary ....................................................................................................................................... 12 Topic 1.2 The Accounting Cycle .............................................................................................................. 13 Topic 1.3 Business Accounting Process And Procedures ........................................................................ 17 Topic 1.4 The Accounting Equation And Balance Sheet ......................................................................... 21 Unit References ....................................................................................................................................... 27 Unit Summary ......................................................................................................................................... 28 Unit 1 Suggested Answers ...................................................................................................................... 30 UNIT TWO – DOUBLE ENTRY SYSTEM OF ACOUNTING .............................................................................. 32 Introduction ............................................................................................................................................ 32 Introduction to Business Accounting Page | i Objectives................................................................................................................................................ 32 Unit Readings .......................................................................................................................................... 32 Assignments and Activities ..................................................................................................................... 32 Topic 2.1 Books Of Original Entry ........................................................................................................... 33 Unit Assignment ...................................................................................................................................... 52 Topic 2.2 Recording Business Financial Transactions ............................................................................. 53 Unit Assignment ...................................................................................................................................... 70 topic Summary ........................................................................................................................................ 70 Topic 2.3 Balancing Off Accounts ............................................................................................................ 71 Topic 2.4 Trial Balance ............................................................................................................................ 76 Unit Summary ......................................................................................................................................... 78 UNIT THREE – FINANCIAL ACCOUNTING AND ADJUSTMENTS ................................................................... 80 Unit Readings .......................................................................................................................................... 80 Assignments and Activities ..................................................................................................................... 80 Topic 3.1 Depreciation And Disposal Of Assets ...................................................................................... 81 Topic 3.2 Adjustments For Financial Reporting ...................................................................................... 92 Topic 3.3 Bad Debts And Provision For Bad Debts.................................................................................. 97 Topic 3.4 Inventory Accounting ............................................................................................................ 104 Topic 3.5 Final Accounts for Sole Trader .............................................................................................. 108 Unit Summary ....................................................................................................................................... 117 UNIT FOUR – ANALYSING/INTERPRETING FINANCIAL STATEMENTS AND CONTROL SYSTEMS ............... 118 Introduction .......................................................................................................................................... 118 Objectives.............................................................................................................................................. 118 Unit Readings ........................................................................................................................................ 118 Assignments and Activities ................................................................................................................... 118 Topic 4.1 Accounting Ratios .................................................................................................................. 119 Topic 4.2 Correction of Errors ............................................................................................................... 125 Topic 4.3 Payroll .................................................................................................................................... 132 Topic 4.4 Bank Reconciliation Statement ............................................................................................. 139 Topic 4.5 Petty Cash Book And The Imprest System ............................................................................ 145 Topic 4.6 Control Accounts ................................................................................................................... 150 Unit Summary ......................................................................................................................................