Accounting Workbook For Dummies, UK Edition

Jane Kelly, John A. Tracy

• Publisher: For Dummies
• Year: 2009
• Print ISBN:
  9780470747162
• eBook ISBN:
  9780470663561
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Contabilidad

Want to become an accountant? Own a small business but need help balancing your books? Worried about managing your finances under the cloud of the recession?

This hands-on workbook gets you up to speed with the basics of business accounting, including reading financial reports, establishing budgets, controlling cash flow, and making wise financial decisions. The question and answer sections encourage you to find your own solutions to challenging accounting problems - and there's plenty of space to scribble your workings out! Accounting Workbook For Dummies is the only book that makes truly light work of the financial fundamentals that many businesspeople try to bluff their way through every day.

Accounting Workbook For Dummies, UK Edition covers:

Part I: Business Accounting Basics
Chapter 1: Elements of Business Accounting
Chapter 2: Financial Effects of Transactions
Chapter 3: Getting Started in the Bookkeeping Cycle 
Chapter 4: The Bookkeeping Cycle: Adjusting and Closing Entries

Part II: Preparing Financial Statements
Chapter 5: The Effects and Reporting of Profit
Chapter 6: Reporting Financial Condition in the Balance Sheet
Chapter 7: Coupling the Profit & Loss Statement and Balance Sheet
Chapter 8: Reporting Cash Flows and Changes in Owners' Equity
Chapter 9: Choosing Accounting Methods

Part III: Managerial, Manufacturing, and Capital Accounting
Chapter 10: Analysing Profit Behavior
Chapter 11: Manufacturing Cost Accounting
Chapter 12: Figuring Out Interest and Return on Investment

Part IV: The Part of Tens
Chapter 13: Ten Things You Should Know About Business Financial Statements
Chapter 14: A Ten-Point Checklist for Management Accountants

Main changes in the UK edition include:

• UK Accounting practice
• Currency
• UK institutions - Inland Revenue and Customs and Excise etc
• National Insurance, PAYE
• UK taxation and VAT
• Partnerships and Limited company information
• UK legal practice
• UK specific forms
• UK specific case studies

Part I

Business Accounting Basics

In this part . . .

Accountants are the scorekeepers of business. Without accounting, a business couldn’t function; it wouldn’t know whether it’s making a profit; and it wouldn’t know its financial condition. Bookkeeping – the recording-keeping part of accounting – must be done well to make sure that all the financial information needed to run the business is complete, accurate and reliable. This part of the book walks you through the basic bookkeeping cycle – from making original entries through adjusting entries, to financial statements. Before jumping into the mechanics of bookkeeping, however, we explain the financial effects and the manifold effects of sales and expenses on assets and liabilities.

Chapter 1

Elements of Business Accounting

In This Chapter

Working with the accounting equation

Understanding the differences between cash- and accrual-based accounting

Examining the three primary business financial statements

Seeing the effects of crooked accounting on financial statements

The starting point in accounting is to identify the entity that you’re accounting for. A business entity can be legally organised as a partnership, limited company (Ltd) or a public limited company (PLC). Alternatively, a business entity simply may consist of the business activities of an individual, in which case it’s called a sole proprietorship. Regardless of how the business entity is legally established, it’s treated as a separate entity or distinct person for accounting purposes.

Keeping the Accounting Equation in Balance

The accounting equation (Assets = Liabilities + Owners’ capital) says a lot in very few words. This equation is like the visible part of an iceberg – loads of important points are hidden under the water.

Notice the two sides to the equation: assets on one side of the equals sign and claims against the assets on the other side. These claims arise from credit extended to the business (liabilities) and capital invested by owners in the business (owners’ capital). (The claims of liabilities are significantly different to the claims of owners; liabilities have seniority and priority for payment over the claims of owners.)

Suppose that a business has £10 million total assets. These assets didn’t fall down like manna from heaven (as one of the authors’ old accounting professor was fond of saying). The money for the assets came from somewhere. The business’s creditors (to whom the firm owes its liabilities) may have supplied, say, £4 million of its total assets. Therefore, the owners’ capital sources provided the other £6 million.

Business accounting is based on the two-sided nature of the accounting equation. Both assets and sources of assets are accounted for, which leads, quite naturally, to double entry accounting. Double entry, in essence, means two-sided, and is based on the general economic exchange model, as follows: in economic transactions, something is given and something is received in exchange. For example, we recently bought an iPod from Apple Computer. Apple gave us the iPod and received our money. Another example involves a business that borrows money from its bank. The business signs a loan agreement promising to return the money at...

Table of contents

• Cover
• Table of Contents
• Title Page
• Introduction
• Part I: Business Accounting Basics
• Part II: Preparing Financial Statements
• Part III: Managerial, Manufacturing and Capital Accounting
• Part IV: The Part of Tens