Week 02a [5] [CORE]: The Accounting Equation & the Elements of Accounting
The Accounting Equation
The statement of financial position [i.e. balance sheet] reflects what is widely known as ‘the accounting equation‘.
The accounting equation states that, for an entity, its total assets of a business minus its total liabilities will equal its equity or capital
i.e. A – L = E.
This concept is essentially quite simple. If someone purchases a building costing £400,000 partly financed by a £320,000 mortgage, the owner’s equity in the building is £80,000. Equity is sometimes called capital. All statements of financial position will analyse and show totals for assets, liabilities and capital.
Like any equation, the accounting equation can be rearranged, for example:
- Assets = Liabilities + Equity
- Non current assets + Current Assets = Non current liabilities + Current Liabilities + Equity
- and so on
Follow the link below to access an elearning resource which will take you through the accounting equation and the elements of accounting.
Link to learning materials (elearning resource on the accounting equation).
There is addtional reference material on the International Accounting Standards Board website at https://www.iasplus.com/en-gb/standards/other/framework – scroll down to the section on ‘The elements of financial statements’. This is authoritative material.
CLASS EXERCISE
Ward Hadaway publishes an annual list of the top 50 companies in the North East based on growth. IFor 2023 the list was headed by RE:GEN North East Limited.
Things to do:
Task 1: What does the company do?
Task 2: Find its website and explore … Does the company publish its financial results on its website? Hint: it doesn’t … why do you think that is so?
Task 3: Locate the company’s record at Companies House. Explore the legal information available about the company.
Task 4: Explore the latest filed financial statements. Locate the balance sheet (statement of financial position) and explore how the statement reflects the accounting equation.
Task 5: Fastest growing? Locate some measures of size, which are the best?
Directed Private Study
- Start preparing for your first seminar session: see separate post. The seminar tasks are concerned with helping you deepen your understanding of the material covered in Lecture Two.
- Remember the purposes of the seminar sessions is to help you with any problems you are having with the lecture and directed private study sessions.
Week 1/ [4] [CORE]: Business transactions
Overview of material to be covered in Week One
This week we will start looking at the financial statements of a business, this week – transactions and the financial position of a business
Business transactions
As an introduction to financial statements we’ll start by looking at how some typical transactions entered into when setting up a small business. We’ll look at an imaginary business being set up in the UK by an individual entrepreneur – Morag Shalini. We’ll look at how transactions impact on the business’s financial position, performance and cash flows. These will demonstrate the duality of business transactions.
There are two elearning resources we’ll use.
Morag Shalini – elearning 1
The first is here. This will introduce to the Statement of Financial Position of a business, This shows the assets, liabilities and capital of a business as at a point in time.
Morag Shalini – elearning 2
The second is here. This second looks at the differences between the Statement of Financial Position of the business as an unincorporated business with what it might have looked like if it had been incorporated as a limited liability company.
There are some great quizzes in both these resources to give you formative feedback on your progress.
Alternative presentations
If you want to work through Shalini offline the list of transactions is at http://ecourse.co.uk/materials/moragtrans.pdf
and the matrix of transaction effects is at http://ecourse.co.uk/materials/moragtable.pdf
and there is a blank matrix if you want to work through the transactions yourself at http://ecourse.co.uk/materials/moragtableblank.pdf.
Introduction to your teacher
Here’s an introduction to your teacher for this module. This includes closed captions.
Introduction to NBS8135
Welcome to teaching week 1 of NBS8135!
INTRODUCTIONS
Induction material
Induction material is available as
*try downloading the Articulate Mobile Player from https://apps.apple.com/us/app/articulate-mobile-player/id505546381
Lectures
Lectures and seminars will be delivered by
Donald Halliday [email: donald.halliday@newcastle.ac.uk]
Syllabus
The module syllabus can be accessed at: http://www.ncl.ac.uk/module-catalogue/module.php?code=NBS8135 or using the link in the menu.
Timetable
The module timetable can be accessed via http://www.ncl.ac.uk/timetable/ or using the link in the menu – you’ll have to log in with your user name and password to access the timetable.
Administration
- How to use Canvas and the Blog
- Publication schedule for teaching materials
- The Module Handbook
Blog posts
CORE – essential material that must be covered
ADD – additional supportive material, useful but not essential
ADMIN – administrative material