Fundamentals of Accounting
Full Learning Module
This module provides an in-depth introduction to the principles, concepts, and practices of
accounting. It is designed for beginners and those seeking to strengthen their foundational
knowledge in accounting.
Lesson 1: Introduction to Accounting
Accounting is the process of recording, classifying, summarizing, and interpreting financial
information for decision-making. Definition (AICPA): The art of recording, classifying, and
summarizing in a significant manner and in terms of money, transactions and events which are, in
part at least, of financial character, and interpreting the results thereof. Purpose of Accounting: -
Provide financial information to stakeholders - Assist in decision-making - Keep records of business
transactions - Ensure compliance with laws and regulations Users of Accounting Information: -
Internal: Owners, managers, employees - External: Investors, creditors, government, customers
Lesson 2: Basic Accounting Concepts & Principles
Accounting Concepts: 1. Business Entity Concept – Business is separate from owner 2. Going
Concern Concept – Business will continue operating indefinitely 3. Monetary Unit Concept –
Transactions are measured in currency 4. Time Period Concept – Activities are divided into time
periods Accounting Principles: 1. Historical Cost Principle – Record assets at cost 2. Revenue
Recognition Principle – Recognize revenue when earned 3. Matching Principle – Match expenses
with related revenues 4. Full Disclosure Principle – Present all necessary information in reports
Lesson 3: The Accounting Equation
Formula: Assets = Liabilities + Owner’s Equity Assets: Resources owned (Cash, Accounts
Receivable, Equipment) Liabilities: Debts owed (Loans, Accounts Payable) Owner’s Equity:
Owner’s investment + Net Income – Drawings Example: 1. Owner invests ■100,000 cash 2. Buys
equipment worth ■30,000 (cash) 3. Borrows ■20,000 from bank
Lesson 4: Double-Entry Bookkeeping
Rules of Debit and Credit: - Assets: Debit ↑ / Credit ↓ - Liabilities: Debit ↓ / Credit ↑ - Owner’s
Equity: Debit ↓ / Credit ↑ - Revenue: Debit ↓ / Credit ↑ - Expenses: Debit ↑ / Credit ↓ Example
Journal Entries: 1. Invest ■50,000 in business: Cash (Dr) 50,000 Capital (Cr) 50,000 2. Buy
supplies ■5,000 on credit: Supplies (Dr) 5,000 Accounts Payable (Cr) 5,000
Lesson 5: The Accounting Cycle
Steps: 1. Identify transactions 2. Record in Journal 3. Post to Ledger 4. Prepare Trial Balance 5.
Adjusting Entries 6. Prepare Adjusted Trial Balance 7. Prepare Financial Statements 8. Closing
Entries 9. Post-Closing Trial Balance
Lesson 6: Financial Statements
1. Income Statement – Shows revenues & expenses 2. Statement of Owner’s Equity – Changes in
equity 3. Balance Sheet – Assets, liabilities, equity at a given date 4. Cash Flow Statement – Cash
inflows and outflows
Lesson 7: Sample Problem
Given: - Capital: ■200,000 - Revenue: ■75,000 - Expenses: ■50,000 - Withdrawals: ■10,000
Solution: Net Income = ■75,000 – ■50,000 = ■25,000 Ending Capital = ■200,000 + ■25,000 –
■10,000 = ■215,000
Lesson 8: Practice Exercises
Exercise 1: Classify as Asset, Liability, or Equity: 1. Cash 2. Accounts Payable 3. Service Revenue
4. Owner’s Capital Exercise 2: Journalize: 1. Paid ■8,000 rent 2. Received ■15,000 for services
rendered
Summary
- Accounting = language of business - Follows concepts & principles - Uses accounting equation -
Double-entry bookkeeping ensures balance - Produces financial statements for decision-making
