INFORMATION COMMUNICATIONS

UNIVERSITY
SCHOOL OF HUMANITIES

DEPARTMENT OF ECONOMICS

STUDENT NAME : ANGELA MULENGA

SIN : 1702370611

COURSE : FINANCIAL ACCOUNTING

PROGRAM : BACHELOR OF SOCIAL WORK PRACTICE AND

DEVELOPMENT

LECTURER : MR. KAPUTULA

DUE DATE : 5TH APRIL,2021

ASSIGNMENT # :1

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QUESTION 1

Describe each of the following with clear examples

i) Business Entity

The business entity concept (also known as separate entity and economic entity concept)
states that transactions related to a business must be recorded separately from those of the
owners and any other business.

For example: Debit withdrawal or advance to owner and credit cash or bank base on the
method of transactions from the accounting point of view using a business entity
concept. Owner assets and liabilities are considered separately from his/her entity. E.g. If
the owner of the entity borrows from the bank.

ii) Consistence Concept

The concept of consistency means that if the business entity follows the straight line
method of depreciation and after some time law changes which states that every entity is
required to follow the written down value method of depreciation retrospectively.

For Example: Company A’s Financial Statements Report base on IFRS its accounting
policies for depreciation is using a straight- line basis in 2019 and 2020. It uses a straight-
line but the company subsequently went to change its accounting policies from a straight-
line to declining balance.

Iii) Matching Concept

The matching concept is an accounting practice whereby firms recognize revenues and

their related expenses in the same accounting period. Firms report "revenues," that is,
along with the "expenses" that brought them. The purpose of the matching concept is to
avoid misstating  earnings for a period. Reporting revenues for a period without stating all
the expenses that brought them could result in overstated profits. Applying the matching
concept requires accrual accounting, by which companies recognize revenues when they

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 earn them and expenses in the period they incur them. Actual cash flows from these
transactions may occur at other times, even in different periods. For example, if a
business pays a 10% commission to sales representatives at the end of each month. If the
company has K50, 000 in sales in the month of March, the company will pay the
commission of K5, 000 next April.

iv) Dual aspect Concept

The dual aspect concept of accounting relates to the idea of double-entry bookkeeping.

Every transaction affects the business in at least two aspects. These two aspects are equal
and opposite in nature. It is also known as the accounting equivalence concept. The dual
aspect concept states that every business transaction requires recordation in two
different accounts. This concept is the basis of double entry accounting, which is
required by all accounting frameworks in order to produce reliable financial
statements. The concept is derived from the accounting equation, which states that:
Assets = Liabilities + Equity. The accounting equation is made visible in the balance
sheet, where the total amount of assets listed must equal the total of all liabilities and
equity. One part of most business transactions will have an impact in some way on
the balance sheet, so at least one part of every transaction will involve either assets,
liabilities, or equity.

v) Prudence Concept

Prudence Concept is a policy of anticipating possible future losses but not future gains.
In accounting, it states that when choosing between two solutions, the one that will be
least likely to overstate assets and income should be selected. This policy tends to
understate rather than overstate net assets and net income, and therefore lead companies
to "play safe". When given a choice between several outcomes where the probabilities of
occurrence are equally likely, you should recognize that transaction resulting in the lower
amount of profit, or at least the deferral of a profit. The conservatism principle is the

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 foundation for the lower of cost or market rule, which states that you should record
inventory at the lower of either its acquisition cost or its current market value.
Conservatism plays an important role in a number of accounting rules, including the
allowance for doubtful debts and the lower of cost or market rule.

QUESTION 2

Three-column cash book of an Office Supply Shop for the month ended June,2020
Receipt side Payment side
DR CR
Date Description Discount Cash Bank Date Description Cas Bank Discount
Allowed h Received
June, June
2020 2020

1 Balance b/f 420 4940.00 5 Rent 340

2 S. Braga 41 779 6 M. Peters 360 9

2 L Pine 16 304 ‘’ G. Graham 960 24

2 G. Todd 22 418 ‘’ F. Bell 400 10

2 Mi Rae 52 988 8 Cash ( c) 400

3 Sales 740 14 Wages 540

8 Bank(C) 400 16 R. Todd 263.50 46.5

10 Sales 1260 “ F. Duly 362.56 49.44

12. B. Age 11.2 268 20 Fixtures 4320

29 A. Line 324 24 Lorry 14,300

30 Sales 980 30 Stationery 56

30 Bal c/d 2,12 12,561.26

4.00
142.2 936.00 21,323.06 936 21,323.06 138.94

1 jul Bal b/d 2124.00 12,323.06

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 Ledger Accounts for Office Supply Shop

DATE DETAILS F DR CR

BANK A/C 740

Jun 3 Sales 400

Jun 8 Sales c/d

Jun 30 Balance 1,140

1,140 1,140

Jun 30 Balance b/d 1,140

Creditors a/c

June 2 Cheque S. 820

Braga
320
L. pine
440
G. had
1040
M. rae

Cheque, Rrodd
June 16 310
F. durry
280
Balance B.age
June 31 c/d 3622 412

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June 31 Balance b/d 3,622 3,622

SALES A/C

June 10 Cash: sales 1,260

June 30 Cash: sales 980

June 30 Balance c/d 2240

2,240 2240

June Balance b/d 2,240

Question 3

Updated Cash Book for Fisonga for December,2020

DATE DESCRIPTION DR DATE DESCRIPTION CR

Dec,2020 Dec,2020
6 P. Pan 230 Balance c/d 1,900
20 B. Hook 265 10 J. lamb 304
31 W.Brittan 325 19 P. Willson 261
31 F. Ray Traders 102 29 K. Coal 37
30 Standing Tax 94
31 Bank Charges 72
31 Balance c/d 1746
2,688 2,688
Jan 1 Balance b/d 1746

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(b) Fisonga Bank Reconciliation statement as on 31 December 2020.

DESCRIPTION DR CR
Balance as per cash Book 1746
Add: unpresented Cheques K. Coull 37
Tax 94
Standing Order
Bank Charges 72
203
1949
Less: Uncredited Cheques W. Britten (325)
Balance as per Bank Statement 1624

QUESTION 4

Trial balance for the Partnership

DETAILS DR CR
Capital Accounts: Willie 100,000
Mutaba 50,000
Cash drawings for the year: 15,000
Willie
Mutaba 10,000.0
Free hold premises at cost 50000
Purchases 380000
Stock 75000
Fixtures and fittings 15000
Purchases returns 12000
Bank 31,600
Sales 508,000
Sales returns 6000
Trade debtors 52400

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Trade creditors 33,300
Carriage inwards 21500
Carriage outwards 3000
Staff salaries 42000
VAT 8700
Office expenses 75000
Debts 2000
Advertising 5000
Discount allowed 1200
Discount received 1000
Bad debts 1400
Rent and Business rates 2800
Accumulated provision for 3000
depreciation of Fixtures
fittings
718,000 718,000.00

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