LESSON ONE
Introduction:
Accounting is often said to be the language of businessmen. It is used in transactions entered into by all kinds of organizations.
During the business operations, several transactions take place but they cannot be entrusted to the memory of a businessman hence the need for proper records.
It will be a big task of remembering everything and all the details concerning the business e.g. You can easily forget those who owe you money, or how much they owe you and vice versa, the many assets you own and their values, the people employed and those to whom you well and buy from on credit. Thus it becomes necessary that you record down all these things to overcome the problem of forgetting.
Book keeping
Is a carefully recording of business transaction. It’s an art of recording financial transactions of a business or individuals in terms of money in a set of books in order to obtain information when required.
Therefore Book keeping is;
An art and not a science.
Recording financial and not any types of transactions.
Transactions must be recorded in money terms and not in quantity terms.
The objective is to provide information about the conduct and status of the business.
What is Accounting
This is a study of recording, summarizing, analyzing and interpreting financial records of a business.
Whereas Bookkeeping involves the record-making phase, accounting goes beyond and involves the analysis and interpretation of the transaction so record.
The Purpose/Need for book keeping/Accounting.
It provides information on which judgment is made on whether the business is making profit or losses.
It helps the Government in tax assessment.
The information is also needed b the owners (managers or shareholders) and outsider like creditors, investors, Government.
Accounts acts as the proof of a financial position from the books of accounts better planning decision.
Accounts help to deal with creditors and Debtors with the use of accounts the management of creditors and debtors is made simple. Credit and debts are well recorded and cleared on schedule.
It helps in comparing the past, present and determining the future for the business thus assisting in planning.
Common Terms used in Accounts
The following common terms frequent used in accounts.
Transaction
This is any dealing between two or more parties involving physical transfer of goods and services from one person to another in exchange for consideration.
Can be classified as follows:
Cash transaction
When goods or service purchased and sold on cash basis.
Credit transactions
Are those transactions where payments for goods/services are postponed until a taken date in future time.
Debtors
Are those persons or organizations from whom goods are sold on credits basis.
Creditors
Are those persons/organizations from whom goods are purchased on credit basis.
Goods/Merchandize
Are tangible items that satisfy human wants they are bough for resale in business in order to get profit.
Trader is a person a organization who buys goods in order to sell them and get profits.
Asset: These a property and possessions owned by the business
Liabilities: These are debts payable by the business
Capital: This is the original fund, which is invested to start a business by the proprietor.
Purchases: These are goods bought for resale by the business.
Sales: These are goods disposed off (Sold) by the business at a profit.
Expenses: These are the costs incurred in the course of operating business e.g. Rent, Salary, Stationery.
Ledger: This is the principle book in accounts where all defauls of business transactions are recorded in classified manner.
Cash Receipt: Is a document issued when goods are ought or sold on cash basis.
LESSON TWO
Important Books used in Accounting:
The main books used in accounting are subdivided into two major divisions namely;
The Principal Books
The Subsidiary Books (Books of original entry).
The Principal books
These are the main books and those in which the double entry system of the bookkeeping is kept. They are also subdivided into two namely
The Ledger Book
The Cash Book
The ledger Book
This is a principal book where all the details of business account twice as they occur. i.e. All transactions affect two accounts. It is from this book that the final accounts are extracted for the preparation of the financial statement for ascertaining the financial standing of a business.
Sub Division of the Ledger.
The Purchases or bought or creditors Ledger
Contains the accounts (persons or firm) from whom the business has received or bought goods on credit.
Sale or sold or Debtors Ledger
Contains the accounts (person or firm) to whom the business has (Sold) supplied goods on credit.
Impersonal or General ledger
Contains nominal, accounts (expenses and income accounts such as wages, rent etc. and real accounts (Asset Accounts).
Private Leger
It records private accounts of a business. It contains capital and drawing account of the business owner or of each partner, it also contains the trading and profit and loss account and the Balance sheet for the year.
The Cash Book
This is Book which records all the cash transactions of a business “Those with the Bank are also inclusive
Single column
Two column
Three column
Subsidiary Books/Books of Original Entry
The entries in the ledger accounts are first recorded in the books called subsidiary books or books of original entry. Thus they are books in which accounting records are first recorded before they are recorded in the principal books. They reduce the bulk of work in the ledger;
The cash book
Is also a prime book of accounts entry because information form cash receipts are payments is first recorded in the cash Book. So it doubles as a book of original entry.
The Petty Cash Book
Records small cash receipts or payments.
Journal Proper
Is that Book in which we can record the details of any transactions that can not be recorded in any other subsidiary book.
Purchase Day Book or Journal
This book records the details and amounts of all goods purchased on credit.
Sales Day Book or Journal
This Book records the details and amount of all good sold on credit.
Purchases Return Book or Return Outwards Journal
This Book records the details and amounts of goods returned to the creditors.
Sales Return Book or Return Inward Journal
This book records the details and amounts of goods returned by Debtors.
LESSON THREE
SYSTEMS USED FOR RECORDING BUSINESS TRANSACTIONS
Theoretically there are two systems for recording transaction namely:
Single entry system
Double entry system
But in practice, the universally employed system is the Double entry system.
An account (Ledger Account)
Is a summarized form of record originally kept in the ledger or it is a statement in the ledger indicating the dealings with a particular person or dealings in a particular items. A page should be taken for each account, which is divided into two equal sides.
One side is the Debit (DR)
Another is the Credit side (CR)
Features of an Accounts;
Date column – Records the date of transaction
Details column – Records details of transactions
Folio column – Record the page references
Amount column – Record amount of the transaction.
Heading of the Account.
Debit side – Record receiver of value
Credit side – Record of given of value
Principal any accounting information has to be supported by documentary evidence. The documents which provide evidence for accounting information are called source documents
Types of Source documents;
The cash Receipt
Is a document issued when goods are bought or sold on cash basis. It evidence a transaction, even if the payment is made by cheque such as receipt will be issued.
Incoming cash sreceipt
These are issued to the business by the suppliers when goods are bought on cash or payment of bills.
Outgoing cash receipt
These are issued by the business to its customers when goods are sold on cas hor receipt of any income
Note:
The book of original entry prepared from the incoming and outgoing cash receipts is a cashbook.
The Invoice
This is a document issued when goods are bought or sold on credit basis. It is more detailed statement contain the name and address of the supplier and customer , the quality, quantity, unit price, the net amount due, may be of two kinds.
Incoming invoices
These are issued when goods are b ought on credit from suppliers (Creditors)
Outgoing invoices
These are issued when goods are sold on credit to customer (Debtors)
Note
The purchase day book is written from the incoming invoices and the sales day book from the outgoing invoices. The entries made in the purchase and sale day books are posted in
Credit Note
This is document issued to correct an overcharge or original invoice. It is issued when part of goods sold or purchased are returned, price over charged is reduced at a later stages or when goods damaged in transit or wrong order supplied
Kind of credit note
Incoming credit notes which
Set by creditors to t he business
Outgoing credit Notes
Sent to the debtors by the business
Debit Note
This a document sent by the seller to the buyer to corrent for an under charge on the original invoice. It is issued because its better to issue another invoice then making alterations.
Kinds:
Incoming debit note – It is received from creditors
Outgoing Debit Note – It is sent to the debtors.
STATEMENT OF ACCOUNT
The statement of account is sent by the seller to the buyer at the end of every month and it indicates the amount due from the buyer. This statement is sent to remind to the buyer for the payment of its outstanding amount.
BANK STATEMENT
Is a document that shows the firms or customers amount as it stands at the Bank. Holders of a current accounts in banks are served with monthly statements which summarize transaction of the business and the bank. It records money paid into and out of the firm/organization.
LESSON SIX
THE PETTY CASH AND COLUMAR SYUSTEM OF BOOK KEEPING
Petty Cash
Is a book in which small expenses in the business are recorded by a specific person who is the petty cashier.
System used
A petty acashier is given a specific sum of money by the General cashier. The cash or cheque given (issued) is credited to the general cash book and debited to the pettyh cash book. The expenditure of the petty cas hbook is b alanced off on weekly or monthly basis and the total of different expenses in the petty cash book is balanced off on weekly or monthly basis and the total of different balances are posted to the general ledger.
Introduction:
Accounting is often said to be the language of businessmen. It is used in transactions entered into by all kinds of organizations.
During the business operations, several transactions take place but they cannot be entrusted to the memory of a businessman hence the need for proper records.
It will be a big task of remembering everything and all the details concerning the business e.g. You can easily forget those who owe you money, or how much they owe you and vice versa, the many assets you own and their values, the people employed and those to whom you well and buy from on credit. Thus it becomes necessary that you record down all these things to overcome the problem of forgetting.
Book keeping
Is a carefully recording of business transaction. It’s an art of recording financial transactions of a business or individuals in terms of money in a set of books in order to obtain information when required.
Therefore Book keeping is;
An art and not a science.
Recording financial and not any types of transactions.
Transactions must be recorded in money terms and not in quantity terms.
The objective is to provide information about the conduct and status of the business.
What is Accounting
This is a study of recording, summarizing, analyzing and interpreting financial records of a business.
Whereas Bookkeeping involves the record-making phase, accounting goes beyond and involves the analysis and interpretation of the transaction so record.
The Purpose/Need for book keeping/Accounting.
It provides information on which judgment is made on whether the business is making profit or losses.
It helps the Government in tax assessment.
The information is also needed b the owners (managers or shareholders) and outsider like creditors, investors, Government.
Accounts acts as the proof of a financial position from the books of accounts better planning decision.
Accounts help to deal with creditors and Debtors with the use of accounts the management of creditors and debtors is made simple. Credit and debts are well recorded and cleared on schedule.
It helps in comparing the past, present and determining the future for the business thus assisting in planning.
Common Terms used in Accounts
The following common terms frequent used in accounts.
Transaction
This is any dealing between two or more parties involving physical transfer of goods and services from one person to another in exchange for consideration.
Can be classified as follows:
Cash transaction
When goods or service purchased and sold on cash basis.
Credit transactions
Are those transactions where payments for goods/services are postponed until a taken date in future time.
Debtors
Are those persons or organizations from whom goods are sold on credits basis.
Creditors
Are those persons/organizations from whom goods are purchased on credit basis.
Goods/Merchandize
Are tangible items that satisfy human wants they are bough for resale in business in order to get profit.
Trader is a person a organization who buys goods in order to sell them and get profits.
Asset: These a property and possessions owned by the business
Liabilities: These are debts payable by the business
Capital: This is the original fund, which is invested to start a business by the proprietor.
Purchases: These are goods bought for resale by the business.
Sales: These are goods disposed off (Sold) by the business at a profit.
Expenses: These are the costs incurred in the course of operating business e.g. Rent, Salary, Stationery.
Ledger: This is the principle book in accounts where all defauls of business transactions are recorded in classified manner.
Cash Receipt: Is a document issued when goods are ought or sold on cash basis.
LESSON TWO
Important Books used in Accounting:
The main books used in accounting are subdivided into two major divisions namely;
The Principal Books
The Subsidiary Books (Books of original entry).
The Principal books
These are the main books and those in which the double entry system of the bookkeeping is kept. They are also subdivided into two namely
The Ledger Book
The Cash Book
The ledger Book
This is a principal book where all the details of business account twice as they occur. i.e. All transactions affect two accounts. It is from this book that the final accounts are extracted for the preparation of the financial statement for ascertaining the financial standing of a business.
Sub Division of the Ledger.
The Purchases or bought or creditors Ledger
Contains the accounts (persons or firm) from whom the business has received or bought goods on credit.
Sale or sold or Debtors Ledger
Contains the accounts (person or firm) to whom the business has (Sold) supplied goods on credit.
Impersonal or General ledger
Contains nominal, accounts (expenses and income accounts such as wages, rent etc. and real accounts (Asset Accounts).
Private Leger
It records private accounts of a business. It contains capital and drawing account of the business owner or of each partner, it also contains the trading and profit and loss account and the Balance sheet for the year.
The Cash Book
This is Book which records all the cash transactions of a business “Those with the Bank are also inclusive
Single column
Two column
Three column
Subsidiary Books/Books of Original Entry
The entries in the ledger accounts are first recorded in the books called subsidiary books or books of original entry. Thus they are books in which accounting records are first recorded before they are recorded in the principal books. They reduce the bulk of work in the ledger;
The cash book
Is also a prime book of accounts entry because information form cash receipts are payments is first recorded in the cash Book. So it doubles as a book of original entry.
The Petty Cash Book
Records small cash receipts or payments.
Journal Proper
Is that Book in which we can record the details of any transactions that can not be recorded in any other subsidiary book.
Purchase Day Book or Journal
This book records the details and amounts of all goods purchased on credit.
Sales Day Book or Journal
This Book records the details and amount of all good sold on credit.
Purchases Return Book or Return Outwards Journal
This Book records the details and amounts of goods returned to the creditors.
Sales Return Book or Return Inward Journal
This book records the details and amounts of goods returned by Debtors.
LESSON THREE
SYSTEMS USED FOR RECORDING BUSINESS TRANSACTIONS
Theoretically there are two systems for recording transaction namely:
Single entry system
Double entry system
But in practice, the universally employed system is the Double entry system.
An account (Ledger Account)
Is a summarized form of record originally kept in the ledger or it is a statement in the ledger indicating the dealings with a particular person or dealings in a particular items. A page should be taken for each account, which is divided into two equal sides.
One side is the Debit (DR)
Another is the Credit side (CR)
Features of an Accounts;
Date column – Records the date of transaction
Details column – Records details of transactions
Folio column – Record the page references
Amount column – Record amount of the transaction.
Heading of the Account.
Debit side – Record receiver of value
Credit side – Record of given of value
Principal any accounting information has to be supported by documentary evidence. The documents which provide evidence for accounting information are called source documents
Types of Source documents;
The cash Receipt
Is a document issued when goods are bought or sold on cash basis. It evidence a transaction, even if the payment is made by cheque such as receipt will be issued.
Incoming cash sreceipt
These are issued to the business by the suppliers when goods are bought on cash or payment of bills.
Outgoing cash receipt
These are issued by the business to its customers when goods are sold on cas hor receipt of any income
Note:
The book of original entry prepared from the incoming and outgoing cash receipts is a cashbook.
The Invoice
This is a document issued when goods are bought or sold on credit basis. It is more detailed statement contain the name and address of the supplier and customer , the quality, quantity, unit price, the net amount due, may be of two kinds.
Incoming invoices
These are issued when goods are b ought on credit from suppliers (Creditors)
Outgoing invoices
These are issued when goods are sold on credit to customer (Debtors)
Note
The purchase day book is written from the incoming invoices and the sales day book from the outgoing invoices. The entries made in the purchase and sale day books are posted in
Credit Note
This is document issued to correct an overcharge or original invoice. It is issued when part of goods sold or purchased are returned, price over charged is reduced at a later stages or when goods damaged in transit or wrong order supplied
Kind of credit note
Incoming credit notes which
Set by creditors to t he business
Outgoing credit Notes
Sent to the debtors by the business
Debit Note
This a document sent by the seller to the buyer to corrent for an under charge on the original invoice. It is issued because its better to issue another invoice then making alterations.
Kinds:
Incoming debit note – It is received from creditors
Outgoing Debit Note – It is sent to the debtors.
STATEMENT OF ACCOUNT
The statement of account is sent by the seller to the buyer at the end of every month and it indicates the amount due from the buyer. This statement is sent to remind to the buyer for the payment of its outstanding amount.
BANK STATEMENT
Is a document that shows the firms or customers amount as it stands at the Bank. Holders of a current accounts in banks are served with monthly statements which summarize transaction of the business and the bank. It records money paid into and out of the firm/organization.
LESSON SIX
THE PETTY CASH AND COLUMAR SYUSTEM OF BOOK KEEPING
Petty Cash
Is a book in which small expenses in the business are recorded by a specific person who is the petty cashier.
System used
A petty acashier is given a specific sum of money by the General cashier. The cash or cheque given (issued) is credited to the general cash book and debited to the pettyh cash book. The expenditure of the petty cas hbook is b alanced off on weekly or monthly basis and the total of different expenses in the petty cash book is balanced off on weekly or monthly basis and the total of different balances are posted to the general ledger.
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