The aim of this module is to introduce the basic concepts of accounting. The Course begins with the definition of accounting, types of accounting, various steps in the double-entry system, preparation of journal entries, trial balances, and financial statements. The concept of capital and revenue expenditure, calculation of depreciation, and related accounting concepts will be discussed in this Course.

LEARNING OUTCOMES

• Understand the process of Double Entry System
• Prepare the Journal Entries
• Prepare the Trial Balance
• Prepare the Statement of Profit or Loss and Statement of Financial Position
• Accounting for Year-End Adjustments
• Differentiate the Capital Expenditure and Revenue Expenditure
• Calculate the various Accounting Ratios and Interpret the Financial Statements

Question 
“There are definitely errors in the accounts if the Trial Balance is not balanced. However, a balanced Trial Balance does not necessarily mean that there are no errors.”

Question
“Ratio analysis reveals hidden facts” – Comment on this statement highlighting the merits and demerits of ratio analysis.

Question

From the following information, you are required to classify the type of account whether it is an asset or an expense, and justify your classification with appropriation reasons:

• Tires and mirrors purchased for motor vehicles
• Cost of additions and alternations to the office building
• Legal costs incurred for the purchase of the building
• Purchases of goods for resale
• Sales promotion expenses to promote a new product
• Carriage inwards to bring the goods inside the factory
• Grading and Levelling costs incurred on land meant for construction
• Enhancement of configuration to increase computer disc capacity
• Thumb drive for storage of accounting information
• Stamp duty for the purchase of new office premises