In this topic we are learning about the basics of accounting.
Our focus will be on understanding two fundamental financial statements
The statement of financial position (formally called the balance sheet)
The income statement
The statement of financial position tells you about the wealth of the organization at a single point in time.
The income statement usually tells the success (in financial terms) of the organization over the last 12 months
The topic will introduce basic accounting concepts, standards and terms. As the text book is American you may encounter different accounting terms for the same concept. For example inventory (US) is the same as stock (AUS) and stock (US) is called shares (AU).
After studying this topic students will be able to:
Define accounting and explain the purpose of an accounting system;
Define some of the main terms used in accounting and financial management;
Identify the different roles and uses of accounting information;
Explain the ‘accounting equation’, and develop therefrom an understanding of the principles of double-entry accounting;
Understand the structure of two of the main financial statements.
