Grade 7 Combined Business: Unit 2. Basic Financial Accounting

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Section 2.1: The Role of Accounting
Accounting involves classifying and interpreting financial data, whereas book-keeping focuses on the detailed recording of transactions. These processes provide vital information to internal users, like managers and employees, and external users, such as banks, government authorities, and prospective investors.
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Section 2.2: The Double Entry System of Book-keeping
The double-entry system records the dual effects of every transaction. Using T-accounts, every entry involves a debit to the receiving account and a credit to the giving account, ensuring accuracy across assets, liabilities, capital, expenses, incomes, drawings, and carriage costs.
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Section 2.3: Documentary Records
Source documents like invoices, debit notes, and credit notes serve as evidence for business transactions. These are first recorded in books of prime entry, including specialized journals and the cash book, which manages both cash and bank transactions effectively.
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Section 2.4: Sole Trader Financial Statements
Sole traders prepare financial statements to measure success. The Income Statement, consisting of the Trading and Profit and Loss accounts, calculates gross and net profit. The Balance Sheet presents a snapshot of assets, liabilities, and capital at a specific date.
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