Course Content
INTRODUCTION TO ACCOUNTING
Nature and Purpose of Accounting The objective of Financial Accounting The Elements of Financial Statements The Accounting Equation The Users of Accounting Information
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THE ACCOUNTING PROCESS AND SYSTEMS
The Source documents such as receipts and invoices The Books of Prime entry/Original Entry from the journals, cashbooks, Petty cash books and registers The Ledger and the concept of double entry The Trial Balance The Financial Statements
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REGULATIONS AND OTHER PRINCIPLES GUIDING THE ACCOUNTING PROFESSION
The legal sources of regulation The professional sources of regulation (local and international bodies) and ethical requirements Accounting Standards Common accounting principles/concepts Qualities of useful financial information
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CPA 001: Financial Accounting
About Lesson
  • A business activity or event that results in a measurable change in the accounting equation is an accounting transaction.
  • A transaction is, for example, the exchange of money for goods.

The specific types of accounts that business activities fall into include:

  1. Assets: What the business owns
  2. Liabilities: What the business owes to others
  3. Equity: The difference between Assets and Liabilities
  • These are the fundamental components of the accounting equation.

The accounting formula is as follows:-

LIABILITIES + EQUITY = ASSETS

Example

A Company owes Kshs. 12,000 in debt, and the owner invested Kshs. 100,000 in the company.
The assets owned by the company will be calculated as follows:

Kshs. 12,000 (the amount owed) + Kshs. 100,000 (the amount invested) = Kshs. 112,000 (what the company has in assets)

Liabilities + Equity = Assets        that is,    12,000+ 100,000 = 112,000

  • Because every transaction impacting a corporate entity must be recorded in accounting records based on a detailed account, assessing a transaction before recording it is an important aspect of financial accounting.
  • Financial statements could be erroneous as a result of a transaction analysis inaccuracy.
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