Accounting
AS 1
Theory








Pg 1

Contents

Definitions............................ ........................................................................... Pg 1
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Reasons.............................. ........................................................................... Pg 2
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Stakeholders........................ ........................................................................... Pg 2
....... ...................

Accounting ........................................................................... Pg 3
Process..................... ...................

Trial........................................................................... Pg 4
Balance................................ ...................

Control ........................................................................... Pg 5
Accounts......................... ...................

Bank Reconciliation Statements...... ........................................................................... Pg 6
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Dealing with Bad ........................................................................... Pg 7
Debt................ ...................…

Definitions

Accrued Expenses
A liability for services that have already been `used but have not yet been paid' (1) by
the business at the end of the accounting period (1) will increase expenses in the
income statement (1) and increase current liabilities in the balance sheet (1)

Current Asset
Resources…

To record what has happened in the past (1) to enable the owner to produce an
income statement (1) and balance sheet (1).

Based on what has happened in the past, it will enable the owner to forecast for the
future (1) and produce forecast income statements and balance sheets…

The Accounting Process





Stage 1 Sales invoices Purchases invoices Purchases credit no
Source Documents






Stage 2 Sales day book Purchases day book Purchases returns
Subsidiary books book





Stage 3 Dr customer account Dr Purchases account ­ Dr Supplier acco
Ledger Account ­ (trade receivable) ­ General ledger Purchases ledger
Double…

The Trial Balance

The trial balance only proves the arithmetical accuracy of the records (1) it does not
prove that amounts have been posted to the correct accounts (1).


Errors Revealed by the Trial Balance

Error of Omission (1) ­ where both sides of the transaction have been omitted from…

Control Accounts



Benefits of Using Control Accounts

Verifies the balances in the ledger (1). The balance on the control account should
agree with the totals of the individual accounts in the sales ledger (1). If these do
not agree it indicates an error in either the sales ledger (1) or…

Bank Reconciliation Statements


Key Definitions

Outstanding Lodgement
Funds (that have been debited) in the cash book (1) that have not yet been
processed by the bank (1) and therefore not shown on the bank statement (1).

Unpresented Cheque
A cheque drawn (and credited) in the cash book (1) that has…

Dealing with Bad Debt


In the Ledger Accounts

The full amount should be treated as a bad debt (1) and be debited to bad debts
account
(1) and transferred to the profit and loss account (1) and credited to the debtors
control account (1).

The profit will reduce (1) by…