Study Unit 1-4 Slides For The Class
Study Unit 1-4 Slides For The Class
Study Unit 1-4 Slides For The Class
Motlhatlhana Mokgokone
FAC1502 – Study unit 1- 4
Basic Accounting Equation (BAE) and Double
Entry System
Purpose of this lecture:
Understand elements of financial statements.
Understand components of financial statements.
Understand BAE.
Understand the behavior of each element in the BAE and in
general ledger (T-account).
Understand how income and expenses affect equity in the
BAE.
Understand each element of financial statements definition,
recognition and example of items that fall under each element.
Do class exercise
Components of financial statements
Dr.
_ Liabilities
+ Cr.
_
+
Dr. Expenses Cr. Decrease Increase
Increase
Decrease
_ +
Dr. Income Cr.
Decrease Increase
Understand how income and expenses affect equity in
the BAE.
Dr. Equity Cr.
_ +
Decrease Increase
Dr. Expenses
_ Cr. Dr.
_ Income
+ Cr.
+
Increase Decrease Increase
Decrease
Definition and recognition of each element in the
financial statements
1. Assets
A resource controlled by the entity as a result of past events,
from which future economic benefits are expected to flow to
the entity.
Examples of assets includes:
Trading inventories
Consumable stores on hand
Debtors/trade receivables
Accrued income (it an asset)
Prepaid expenses (it an asset)
Bank (favourable balance)
Cash float
Petty cash
Definition and recognition of each element in the
financial statements Continue….
Examples of assets includes:
Land
Buildings
Vehicles
Furniture
Equipment
Machinery