Introduction and basic terms

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Introduction and basic terms

So what is this accounting thing? Image credit stageandcinema.com

So what is this accounting thing? Image credit stageandcinema.com

ZIMSEC O Level Principles of Accounts Notes: Introduction and basic terms

  • Accounting is a system comprising the following elements: In summary Accounting is the process of identifying, measuring and communicating business information to assist users in making informed, useful decisions.
  • Only monetary transactions are recorded in accounting using the historical and monetary principles.
  • This simply means that only transactions that can be recorded in monetary terms are recorded and this is done on a historical basis i.e. we only record those amounts that we actually expended or received.
  • Capital-any resources; monetary or otherwise used by the business to start a business.

Assets

  • In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.
  • There are two classes of assets namely:
  • Non Current assets-these are assets held by a business for more than one accounting period e.g. motor vehicles, buildings. Non-current assets are sometimes known as Fixed Assets.
  • Current assets-assets-held by a business for less than one accounting period .They can easily be converted into cash e.g cash ,bank,debtors and inventory.
  • At times a business may have assets that may be classified as intangible assets for example goodwill. These assets and their nature will be examined in the relevant topic.

Liabilities

  • Present obligations resulting from past events, the settlement of which leads to decreases in economic benefits. Liabilities,therefore represent amounts that the entity/business owes to outside parties or debts of the business which it has to settle at some future point in time.
  • There are two classes of liabilities namely:
  • Current liabilities– these are liabilities which have a repayment date of less than one year.e.g creditors
  • Non current liabilities-these are liabilities which have a repayment date of more than one accounting period.e.g loans and debentures. Usually an accounting period lasts for one year although companies have different policies so customarily non current liabilities are those that have a payment date of more than one year.

Other important accounting terms and their definitions

  • Purchases-goods bought for resale.
  • Sales-goods sold by a business which were originally bought with the intention of reselling them.
  • Drawings-Goods or money taken out of the business by the owner for private purposes.
  • Returns inwards/Sales Returns-goods returned to the business by its customers.
  • Returns outwards/purchases returns-goods returned by the business to its suppliers.

NB You will learn more accounting terms as you progress with the course and each term will be defined when it is introduced for the first time.

To access more topics please go to the Principles of Accounts Notes page.

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By | 2017-01-17T11:21:50+00:00 June 17th, 2015|Notes, Ordinary Level Notes, Principles of Accounts Notes|6 Comments

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.

6 Comments

  1. ethel September 30, 2015 at 2:24 pm - Reply

    thank you a lot for this info. am also looking for maths online revisions any idea how i may find them here on this revision website

    • Garikai Dzoma October 1, 2015 at 5:10 am - Reply

      I am afraid we do not yet support Maths but it is our hope that we will eventually do so in the near future but not probably this year.

  2. Simon chengahomwe July 16, 2016 at 1:34 am - Reply

    Wow that’s great staff you have it’s helping me a lot am an accounts,comm and business studies teacher,but how can obtain pdf sources of these notes

    • Garikai Dzoma July 16, 2016 at 1:49 pm - Reply

      Hi, Mr Chengahomwe. We will be launching an App in August (it is currently under development) and it will allow people to read the notes even without internet.

  3. walter February 15, 2017 at 5:42 pm - Reply

    Comment…do you now have the app

    • Garikai Dzoma February 16, 2017 at 5:50 am - Reply

      We do but we are working on adding Visa Card and Paypal support at the moment. It will be relaunched once these are added.

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