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Activity 2 (5 minutes) Before you look through the solution, can you state the formula for the business equation? 55 Part A: Basic Accounting NOTES Solution There are a number of different transactions to account for here. This solution deals with them one at a time in chronological order. ) (a) (i) The addition of Courtney's extra capital and Uncle Felix's loan An investment analyst might define the loan of Uncle Felix as a capital investment on the grounds that it will probably be for the long term.

The details on the invoice should match up with the details on the purchase order. The invoice is primarily a demand for payment, but it is used for other purposes as well, as we shall see. Because it has several uses, an invoice is often produced on multi-part stationery, or photocopied, or carbon-copied. The top copy will go to the customer and other copies will be used by various people within the business. 1 What does an invoice show? Most invoices are numbered, so that the business can keep track of all the invoices it sends out.

The accounting equation Why do we need ledger accounts? The nominal ledger Accounting fundamentals: ledger accounts and double entry The petty cash imprest system Day book analysis Double entry bookkeeping The journal Definition Ledger accounts are a summary of the books of prime entry. A business is continually making transactions (eg buying and selling) and it is common sense that it should keep a record of the transactions that it makes, the assets it acquires and liabilities it incurs. When the time comes to prepare a profit and loss account and a balance sheet, the relevant information can be taken from those records.

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