A-Level Accounting — Financial & Management

The accounting equation

• Assets = Capital + Liabilities - every transaction keeps this in balance. Assets (what the business owns/is owed), liabilities (what it owes), capital (the owner's stake).

Double entry

• Every transaction has two effects: a debit and a credit of equal value. The rule: debit the receiver / what comes in / expenses and assets; credit the giver / what goes out / income, liabilities and capital (DEAD CLIC - Debits: Expenses, Assets, Drawings; Credits: Liabilities, Income, Capital).
• Recorded in ledger accounts (T-accounts): debit entries on the left, credit on the right; the balance c/d and b/d carries the balance to the next period.

Books of prime entry

• Transactions are first recorded in day books (sales, purchases, returns), the cash book and the journal, then posted to the ledgers (sales/receivables, purchases/payables, and general/nominal ledger).
• Source documents (invoices, credit notes, receipts) provide the evidence.

Discounts and VAT

• Trade vs cash (settlement) discount; recording VAT (output vs input tax) in the ledgers.

Master the debit/credit rule and always check the two entries balance - it underpins every financial statement you will prepare.

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