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Textile Costing · Lecture 01
Financial Accounting – Introduction
The accounting equation, recording transactions and the trial balance, followed step by step with Ahmed’s canteen.
Accounting equationTransactionsTrial balance
Why accounting comes first in a costing course
Accounting is the process of recording, sorting and summarising the data that results from business transactions. Before a textile engineer can cost a yarn, a fabric or a garment, he must be able to read the records in which money, property and obligations are written down — and those records all rest on one identity:
Liabilities + Capital = Assets
- Property (assets)
- Buildings, equipment, cash, supplies — everything the business owns.
- Right to property
- Who has a claim on the assets: the owners (capital) and the creditors (liabilities).
- Business transaction
- An event that transfers goods or renders services and must be recorded.
Ahmed Inc. — nine transactions, one equation
Ahmed starts a canteen. Each transaction below changes two or more items, yet the equation always balances. Edit any blue amount and watch the balances follow.
| A | B | C | D | E | F | G | H | |
|---|---|---|---|---|---|---|---|---|
| 1 | # | Transaction | Cash | Supplies | Equipment | Acc. Dep. | Creditors | Capital |
| 2 | a | Ahmed deposits capital in the bank | 19,000 | |||||
| 3 | b | Buys kitchen equipment for cash | (17,400) | |||||
| 4 | c | Buys food supplies on credit | 650 | |||||
| 5 | d | Pays part of the creditors | 300 | |||||
| 6 | e | Sales for the month (cash) | 2,000 | |||||
| 7 | f | Wages 550, rent 50, utilities 25, misc 75 | (700) | (700) | ||||
| 8 | wages / rent / utilities / misc | |||||||
| 9 | g | Supplies used (650 bought, 250 left) | (400) | (400) | ||||
| 10 | supplies left at month end | |||||||
| 11 | h | Depreciation of equipment | (200) | |||||
| 12 | i | Ahmed withdraws cash (drawings) | (500) | |||||
| 13 | Balances | 2,700 | 250 | 17,400 | (200) | 350 | 19,200 | |
| 14 | Assets = Cash + Supplies + Equipment − Acc. Dep. | 20,150 | Liabilities + Capital | 19,550 |
blue = input (edit me)grey = formula (click to see it)
Notice how expenses, supplies used, depreciation and drawings all reduce capital, while sales increase it. That is the whole logic of the profit and loss account, which Lecture 2 builds from these same figures.
Trial balance (basic form)
At month end the balances are listed with assets on one side and the rights to property on the other. Both columns must agree — if they do not, a transaction was recorded on one side only.
| A | B | C | D | E | |
|---|---|---|---|---|---|
| 1 | Liabilities & capital accounts | Rs | Asset accounts | Rs | |
| 2 | Ahmed, Capital | Cash | |||
| 3 | Drawings | Supplies | |||
| 4 | Trade Creditors | Equipment | |||
| 5 | Sales | Accumulated Depreciation | |||
| 6 | Depreciation Expense | ||||
| 7 | Supplies Expense | ||||
| 8 | Wages Expense | ||||
| 9 | Rent Expense | ||||
| 10 | Utilities Expense | ||||
| 11 | Misc Expense | ||||
| 12 | Total | 19,550 | Total | 19,550 |
blue = input (edit me)grey = formula (click to see it)
Course plan — Textile Costing (15 weeks)
| Week | 1st lecture | 2nd lecture |
|---|---|---|
| 1 | Financial Accounting – Introduction | Financial Statements |
| 2 | Current Assets & Liabilities | Fixed Assets |
| 3 | Managerial Accounting – Introduction | Unit Costing |
| 4 | Cost-Volume-Profit Relationship | CVP in Textiles |
| 5 | Costing Systems I (Job costing) | Costing Systems II (Process costing) |
| 6 | Advanced Costing Systems (ABC) | ABC Uses in Textiles |
| 7 | Budgets & Variances | Budgeting in Textiles |
| 8 | Mid Term | Review of Spinning Calculations |
| 9 | Simple Yarn Costing | Optimal Yarn Mix |
| 10 | Review of Weaving Calculations | Simple Fabric Costing |
| 11 | Costs in Dyeing | Concept of Routes |
| 12 | Simple Dyed Fabric Costing | Simple Printed Fabric Costing |
| 13 | Stitching Costing | Accounting Concepts |
| 14 | Cost Allocation I | Cost Allocation II |
| 15 | Spoilage, Rework & Scrap | Overview |