THE OR IE S

Role of accounting:Provides accounting information for stake holders to

make Informed decisions regarding the managementof resources
& performance of business.

Role ofaccountant: To prepare & provide

accounting information for decision

making. Accountants up
set an
accounting information system (Als) & become

stewards business.
of

PRO FESS 10 NAL E TH IC S

ethical accountant andis objective.

has
integrity
·
an

integrity:Straightforward & honestin all professional relationships.

objective:will notletbias, conflictofinterestor undue influence of others
override their professional judgement.

ACCOUNTING THE ORIES

accounting entity:activities of a business are separate from the actions of the

owner. All transactions are recorded from 400 of business.

accounting period:life of business is divided into regular time intervals.

TB, FS

consistency:once an accounting method is chosen, itshould be applied to all

NCA
<depreciations future accounting periods to enable meaningful comparison.

going concern:business is assumed to have indefinite economic life unless

TB, FS
there is a credible evidence thatmay close itdown.

historical cost:transactions shouldbe recorded atoriginal cost.

matching concept:expenses incurred mustbe matched againstincome earned

expenses
in the same period to determine profitof the period.
TR
A CC0 UNT, NG H50R
+
I ES

materiality concept:transaction is considered material ifitmakes a difference to

NCA(capital & revenue
expenditure)
decision-making process.

monetary:only business transactions thatcan be measured in monetary terms can be

recorded.

objectivity:Accounting information recorded must be supportedby reliable & verifiable

evidence so FS will be free from opinions & biases.

prudence concept:accounting treatmentchosen shouldbe the one that leastoverstates

inventory,
& leastunderstates liabilities & losses.
TR assets & profits

* accural basis of
accounting:
income, expense

* revenue recognition:
income

CASH US CREDIT TRANSACTIONS

is made
Cash: Payment atthe same time or immediately during a cash
sale I purchase.

credit: paymentis delayed or postponed during creditsale/purchase.

difference in the timing payment.

of
IS
A

accounting information system (AIS) is a system bussiness uses to collect, store,

& process accounting data. All has been computerised

source document:provides proof thattransactions have occurred.

b
journal:provide info to record in a journal.
↳ like a diary, daily record transactions organised by

↳
of

transaction dates.

ledger:posted individual
to ledgers accounts.

↳ consolidation ofall transactions relating to a specific ALICEitem.

trial balance:summary of ending balances of each ledger account

↳notrecorded/wrongly recorded will be adjusted by additional
journal entries which will be posted to
the ledger.

SF Performance:Provides reporton income, expenses & profit/loss

SFPosition:provides on
report assets, liabilities & equity.

SOURCEDOCUMENTS

Receipt:Acknowledges paymentreceived from customers immediately

after business sold goods/provided services.

Remittance:Informs creditsupplier payment

by cheque has been made

advice for a specif invoice.

Invoice:Informs creditcustomers of amount owed after the business sold

goods or provided services on credit.

credit note: Reduces amountowed creditcustomers

by who were previously
overcharged or have returned goods.
DebitNote:Increases amountowed by creditcustomers who were previously
under charged.

Paymentvoucher:processes paymentto creditsuppliers -> approved by authorised personnel

or
supportedby original
Supplier'sinvoice.
Bank Statement:Checks & tallies againstthe business records of its cab
account.
ACCO UNTING ELEMENTS

assets:resources a business owns or controls thatare expected to

provide future benefits.

liabilities:Obligations swed by business to others. Expected to be settled in

the future.

equity:claim by owner on of business.

the netassets

income:amounts earned through activities of business. (Revenue & other

incomel

expenses: costs incurred in operation of business to earn income.

accounting equ: Assets Liabilities Equity

+
-

expanded equ:assets Liabilities

: + (capital + (income -

expenses -

drawings)

double entry
each transaction will affectatleast 2 accounts.

atleastone will be debited

atleastone will be credited

DIS COUNTS

Trade disc: reduction to listprice

encourages cust to buy in bulk, their patronage & loyalty.

Cash diss:reduction to invoiced price

encourages creditcust to pay early within specifiedtime.

↳ discountallowed/discountreceived.
Revenue expenditure:

capital expenditure:

INTERNAL CONTROLS

0 F C A S H

segregation of duties:septrate cash handling & recording duties

among differentemployees so thatno

single person has
control over the entire cash process.

-receive & deposit

cash

-authorist invoices for & processes

payment payment to suppliers

-write authorise creants

custody ofcash:secure cash & cheques in a locked storage

-Limit
access of cash to authorised personnel
-provide combinations, passwords or other access codes to

authorised personnel
-
Deposit can daily into bank to minimise amount of cash

kept overnight business location.

at

Authorisation:obtain approvals for all payments from authorised

personnel
-Require atleast
two persons & approve all
to review
payments
Require valid supporting documents for all
payments
-

Bank reconciliation:Compare business' records with the bank's

records to identify items thatcaused the

differences between the ending balances in the

business cash & bank acc &I bank statement.

-

directdeposits -dishonoured cheques

-
direct
payments -errors made by business
-cheques yet
not presented or bank.
-

deposits in transit