Introduction And Understanding Key Concepts

Week 1
Topic: Overview of financial accounting and the accounting equation

Because this was the first week, we began with an introduction to accounting. Some of the things we covered during this entire week are; Definition of accounting, distinction between financial accounting and management accounting, the two main financial statements that is income statements and balance sheets, the five different types of organisations, that is, sole traders, partnerships, private limited companies, public limited companies and not for profit organisations, the concepts and characteristics of assets, concepts and characteristics of liabilities and capital, the accounting equation and the concept of borrowings. During this week I got to learn that the whole concept of financial accounting is based on a simple idea that CAPITAL = ASSETS – LIABILITIES. This equation is usually presented in a financial report called the statement of financial position (Balance sheet). I was able to learn the basics of preparing balance sheets. Through practice, I completely understood how to differentiate assets from liabilities. I further learned that while financial accounting involves the presentation of information in financial statements during and even at the end of accounting periods, management accounting involves the interpretation of information which is usually used internally to facilitate the use of resources that is appropriate.

Accounting is usually a system of recording information about a business which usually involves recording, analysing and summarising an entities transactions so as to provide information that is suitable for making decisions. It is possible to determine the worth of a business by adding up what is said by the accounting records and subtracting what the records say the business owes. These introductory topics also provided some insight into the users of financial information who include governments, investors, suppliers, customers, employees, financial institutions and internal users like managers and the owners of businesses.

Week 2
Topic: Double entry bookkeeping

By the end of this topic, I got to understand and was also able to produce simple sets of accounts up to the trial balance stage. During this week we covered, bookkeeping, basic accounting principles, business accounting principles, business documentation, different types of ledger accounts, the layout of ledger accounts, making entries into ledger accounts, balancing ledger accounts and preparing the trial balance. By the end of the topic, I was able to keep track of any monies coming in and out of a business. I learned how to keep chronology ordered records in account books of all transactions, including debit and credit transactions, and also recording the values of assets, incomes, liabilities, sales and expenses. I also got to know about the flow of transactions from the point where the initial transactions are made, then they are recorded into the books of prime entries,

Some of the areas that would help me in improving my bookkeeping skills include improving the way I organise records, being more attentive to details, being disciplined, increasing my interest in bookkeeping, and improving my communication skills. Good communication skills will be very helpful in the future especially if I will get employed in a company and this is because there I will be required to work with people and even people from other departments and as such good communication will definitely make work easier.

Week 3
Topic: Balancing off and trial balance

During this week, I got to gain knowledge and understanding of the fundamental principles that underpin accounting and bookkeeping. I got to learn the time-honoured rules of bookkeeping and also learned how to prepare trial balances. At the end of the week, I was comfortable with applying the essential numerical skills necessary for accounting and bookkeeping. I was also able to comfortable balance off ledger accounts at the end of accounting periods and also prepare a trial balance sheet comfortably. Other skills that I acquired in this course are balancing off of personal accounts for creditors and debtors. The topic put me in a better position to distinguish between credit balances and debit balances and drawing up of trial balances from given sets of accounts. At the end of all accounting periods, it is always necessary to find the balance on each ledger account so that a trial balance can be extracted as part of the accounting cycle. This is the process referred to as balancing off accounts. This topic enabled me to appreciate that even though it is possible for errors to be made, the balances of the trial balance will always be equal.

A trial balance is usually a document that is normally prepared in each and every critical stage of the accounting cycle so as to determine whether the general ledger is in balance. Maintenance of financial records that are accurate is very important for any company. I got to learn that the trial balance of a company helps accountants in identifying different types of errors that may have occurred in the accounts of a company during a cycle of accounting.

Week 4
Topic: The financial statements of sole traders.

During this course, I got to understand the format of final accounts for sole traders, learned how to prepare final accounts for sole trader businesses from the trial balance of a bookkeeper, and understood the link between final accounts and double-entry book-keeping. I also got to know how to distinguish between revenue expenditure and capital expenditure. During this course, preparing trading profit and loss account income statements were covered and with this, my financial reporting skills developed widely. Some of the key terms in preparing profit and loss statements are sales revenue, cost of goods sold, gross profit, expenses, net profit and other incomes. The cost of goods sold is usually arrived at by adding purchases to opening inventory and subsequently subtracting the closing inventory. Points worth noting are that expenses are usually included in the profit and loss account in the period in which they were incurred, even though payments may not be made until the period's end and that they cover selling, distribution, administration and all other costs that are not included in the cost of sales.

I got to learn that in preparing income statements, it is always necessary to start by setting out expenses from revenue items. To do this, one should always dig into the transactional data of a company in a bid to unearth each and everything that relates to investment gains, sales and vendor rebates.

Week 5
Topic: Statement of financial position

Getting into this course, I was eager to know the requirements for presentation of statements of financial position and I also really wanted to gain enough knowledge to be able to classify liabilities and assets as either current or non-current. The statement of financial position sets out assets book values, liabilities and capital at specific time periods. During the course, I got to learn that the statement of financial position usually includes cash and cash equivalents, trade and other receivables, financial assets, inventories, property, plant and equipment’s, investment property, intangible assets, biological assets, financial liabilities, deferred tax liabilities and many other line items. I got to learn how to categorise liabilities and assets as either current or non-current and at the end I was able to prepare statements of financial positions for different companies and through this, I developed my analytical skills. In the future, in preparing statements of the financial position I will work on improving my eye for details. I will with no doubt also need to become an innate problem solver so as to be able to handle different kinds of situations that may come by.

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I got to learn that a balance sheet is usually the picture of the net worth of a company at any one given time, for example, like during the end of a year. The balance sheet is normally reflective of the equity of the owner of a company, liabilities and assets. I learned that in order to track a business's growth, it is very important to create and review this financial statement from time to time. Further, I also got to understand that in most companies, assets are normally carried at the company`s books at historical cost. This implies that a company books the cost that was paid for the asset by the company.

Week 6: Class lecture question

We were provided with questions which we were required to solve. This questions equipped us with skills in dealing with practical life situations and put us in a better position to record business transactions. The questions required us to prepare journal entries with explanations of all the transactions, prepare T-Accounts, prepare the trial balance and also prepare balance sheets and income statements. By tackling this question, I got to understand that whenever there is a single error, the balance sheet can never balance. To accurately tackle these kinds of questions in the future, I will seek to be more attentive to detail so as to avoid making any types of errors. In the preparation of a balance sheet, I discovered that one of the most common mistakes is the incorrect classification of plant, property and equipment intended for the needs of core business and investment activities. This error and other common errors I got to observe are always as a result of negligence, the reason why someone should always be keen when preparing financial statements.