Accounting

ACCOUNTING: is the process of identifying, recording, communicating economic events to

users
• Economic events: any event with money value, ex: dollars, pounds.
- Users of Accounting Data ‫مستخدمو معلومات المحاسبة‬
- Internal Users: individuals who Work inside the company, ex: manager, employee.
‫هم أفراد يعملون داخل الشركة‬
- External Users: are individuals and organizations outside a company who want financial
information about the company.
‫هم أفراد ومؤسسات من خارج الشركة يريدون معلومات مالية عن الشركة‬
•ex. tax, government, banks.

Basic Principles of Financial Accounting

Generally Accepted Accounting Principles (GAAP): set of rules that the accountant recognizes
as a general guide,

The main 4 rules are the following:

1. Cost principle: assets are recorded at their historical cost.
2. Monetary unit: records should include only money values.
3. Fiscal year: records should be prepared every 12 months.
4. Economic entity: records of the company must be separated from the records of the owner.

indicate whether ( true) or ( false) and why:

1. Accountant report asset higher than cost because of market value. (false)
Violates: cost principle.
2. Accountant record events in dollar and kilograms. ( false )
Violates: monetary unit.
3. Accountant prepares records every 16 month. (false)
Violates: fiscal year.
4. Accountant record owner bills as bills for the company. ( false)
Violates: economic entity.

First:Identifying
It is the first step in accounting; usually we have a lot of event every day, we only records
economic events, which are the events with money value only.

Ex: the company purchased 10 computers.

It is non economic event, because it has no money value, so it won't be recorded.

Ex: the company purchased 10 computers for 10000 pound.

It is economic event, because it has money value, so it will be recorded.

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 1
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting
 We only record economic events, these events will be transferred to step two "recording".

Ex: owner car maintenance cost is 10000 and want the company to pay.
Although it’s an economic event because it contain money value, but it won't be recorded
because of economic entity concept, the company isn’t responsible for the owner expense

Ex: owner withdraws 10000 cash for his car maintenance.

It is an economic event and should be recorded although owner cost shouldn’t be recorded, but
the owner already took cash from the company so we have to record it.

Ex: owner invested land costing 10000.

Although it’s an economic event because it contain money value, but it won't be recorded
because of economic entity concept, the company isn’t responsible for the owner expense

•We have many methods for recording economic events; the most important is "Accounting
equation".
Assets=liabilities + ownerequity

• The left side "assets" must equal right side "liabilities and owner equity".

• Assets: anything owned by the company, ex: cash, land, and building.

• Liabilities: anything company borrows and should pay.

• Owner equity: the owner of the company.

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 2
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting
 CHART OF ACCOUNTS

Assets Liabilities Owners’ equity

Fixed assets Accounts payable ‫ الدائنون‬Capital Drawings
Land ‫االراضي‬ ‫رأس المال‬ ‫المسحوبات‬
Notes payable ‫كمبياالت‬
Building ‫المباني‬
Equipment ‫المعدات‬ Interest payable ‫ فوائد مستحقة‬Revenue Expenses
‫االرباح‬ ‫المصروفات‬
Machines ‫االالت‬ Taxes payable ‫ضرائب مستحقة‬
Cars ‫السيارات‬
Salaries payable ‫مرتبات مستحقة‬
Vehicles ‫المركبات‬
Trucks ‫الشاحنات‬ Loans ‫قروض‬
furniture ‫االثاث‬ Bank overdraft
‫بنك سحب على المكشوف‬
current assets
cash ‫النقود‬
accounts receivable ‫المدينون‬
notes receivable ‫كمبياالت‬
goods ‫البضاعة‬
merchandise
inventory ‫البضاعة‬
supplies ‫االدوات المكتبية‬

The Basic Accounting Equation

Assets = Liabilities + Owner’s Equity
Assets = Liabilities + Owner’s Capital - Owner’s Drawing + Revenues – Expenses

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 3
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting
 Ex.1 Neal starts a smart phone app development company which he name Softbyte.
1.Ray Neal invests $15,000 cash in the name of business
2. company purchases equipment for $1,600 on account.
3. company paid the previous debt.
4. company purchased car for $10,000 cash.
5. company purchased inventory for 40000 on account
6. company sold inventory for 50000 cash
7. company performed services to customer for 20000 cash
8. company performed services to customer for 10000 on account
9. owner withdraw 10000 cash for personal expense
10. company paid electricity bill for 1000 cash.
11. company purchased inventory for 50000 cash
12. company sold half inventory for 30000 cash
Required:
Summarizes the September transactions of Softbyte to show their cumulative effect on the
basic accounting equation

Assets = liab. + owner equity =

89000 = 40000 + 49000

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 4
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting
 Ex.2 Neal starts a smart phone app development company which he name Softbyte.
1. Ray invests 15,000 cash in the business
2. Soft byte purchased equipment for 7,000
3. Soft byte purchased 1,600 supplies from ABC Company, ABC allow soft byte to pay this bill
on October
4. Soft byte received 1,200 cash for services performed to a customer
5. Soft byte received a bill for 250 from daily news for advertising expense, the bill will be paid
in later day
6. Soft byte provides programming services 3,500 for a customer; the company receives 1,500
cash and the balance 2,000 on account
7. Soft byte pays the following expenses store rent 600, salaries 900, utilities 200
8. Soft byte pays its 250 to daily news in cash
9. Soft byte receives 600 in cash from customer who had been billed for services (in transaction 6)
10. Ray Neal withdraws 1,300 in cash from the business
Required:
Summarizes the September transactions of Softbyte to show their cumulative effect on the
basic accounting equation

Assets = Liabilities+ Owner’s equity

Accounts Account
cash supplies Equipment +Capital -drawings + revenues -expenses
Receivable payable
1
2
3
4
5
6
7
8
9
10
T
Bal

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 5
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting
 Assets = Liabilities+ Owner’s equity
Accounts Account
cash supplies Equipment +Capital -drawings + revenues -expenses
Receivable payable
1 +15000 +15,000
2 -7,000 +7,000
3 +1,600 +1,600
4 +1,200 +1,200
5 +250 -250

6 +1,500 +2,000 +3,500

-600 -600
7 -900 -900
-200 -200
8 -250 -250
9 +600 -600
10 -1300 -1300
T +8,050 +1,400 +1,600 +7,000 +1,600 +15,000 -1300 +4,700 -1950

Bal 18,050 18,050

‫ــــــــــــــــــــــــــــــــــــــــــــــــــ‬ CH.1
st
ℳ𝓇. 𝒲ℯ𝓈𝓈𝒶𝓂 1 grade 6
✆𝟶𝟷𝟶𝟿𝟺𝟾𝟼𝟾𝟼𝟺𝟿 #Top_El_Accounting Principles of accounting