Accounting, Finance, and Business Mathematics
Accounting foundations
The accounting equation, Assets = Liabilities + Equity, anchors double-entry accounting. Debits increase assets and expenses; credits increase liabilities, equity, and revenue. Transactions flow from journal to ledger to trial balance to financial statements. Candidates must distinguish accrual accounting (revenue when earned, expenses when incurred) from cash accounting, and current from noncurrent items. Core statements are the income statement, balance sheet, and statement of cash flows; retained earnings links income to equity.
Finance and math
Finance covers time value of money, risk and return, working capital, and capital budgeting. Business mathematics includes percentages, ratios, markup and margin, simple and compound interest, and break-even. Traps: treating a debit as always an increase; confusing gross profit with net income; mixing markup on cost with margin on price; using simple interest when compounding is stated; and ignoring the difference between APR and effective annual rate.
Worked example
A retailer buys an item for $40 and applies a 25% markup on cost. Price = 40 × 1.25 = $50. Gross margin percent = (50 − 40) ÷ 50 = 20%, not 25%. Rule of thumb: markup is based on cost; margin is based on selling price. To convert markup on cost to margin, divide markup by (1 + markup): 0.25 ÷ 1.25 = 0.20.