Week 3: Double-entry accounting
As you learned in Week 1, accounting is a process that involves:
- the systematic recording of all relevant financial transactions and events
- classifying, interpreting, summarising and reporting such bookkeeping data
- the production of useful information from that data and its presentation to stakeholders of a business such as owners, lenders and the tax office.
In today’s electronically enabled business world most organisations produce their financial accounts using a computer program known as an accounting package. Such accounting software produces, at the click of a button, all the reports needed from the initial recording of transactions. Understanding and using these accounting packages properly requires a deep understanding of all the accounting knowledge studied in this course. Accountants do not just accept what the computer produces; they have to understand what these packages are telling them. Therefore, as students of accounting, you have to understand the rules of double-entry accounting that will be explained this week. Before learning these rules, you need to understand the fundamental accounting concepts that support the activity of double-entry accounting. Gaining knowledge of such fundamental concepts is the first aim of your learning this week.