Chapter No.

01
Business Organisation and
Accounting
The functions and Activities of an Office
Every organisation may have its own procedures, rules
and systems but same type of work is done is all of
them. The following are the main activities:
Information is gathered, acted on and recorded
The organisation’s products or services are marketed
and sold
Telephone enquiries are dealt with
Goods are bought
Staff are appointed, managed and paid
Visitors are received
Bills are paid
Payments from customers are banked and received
Purchasing raw materials, goods or services
Promoting goods or services by advertising and market
research on customers
Delivering goods or services to customers
Controlling costs and inventories and other activities of
the organisation
Providing, receiving and processing information for
internal and external use.
Storing papers and documents safely for future reference
purpose.
Administrative Assistant or Clerical Workers
Their job is to :
Record information by preparing documents
Arrange information by sorting and filing
Supply and communicate information by passing it on
to relevant personnel
Keep accounts by checking the accuracy of all
information that needs to be recorded within the
organisation.
 A centralised administration department as many
administrative tasks as possible being carried out at a single
location such as head office
A central general office means that a specialist section will
be responsible for clerical services throughout the
organisation.
The person responsible for this department will be
responsible for:
 Advising and assisting departmental managers in planning of
clerical activities including equipment, methods of work,
supplies, personnel required and layout of office.
 Maintaining the general office services such as mailing,
telephone and post services, filing activities, duplicating
section and stationery storage.
 Reviewing office machinery and equipment with a view to its
maintenance and replacement.
Systems and procedures are standardised throughout the
organisation facilitating control.
Specialised staff can be hired and trained
Expensive machinery and equipment can be purchased and
used economically.
There is less likelyhood of a backlog of work during busy
periods.
Consultation and communication are easier and personnel
contact is possible.
It is usually more economically in terms of space and cost
 Local officeshave to wait for head office.
Office system that suits one department may not suit
another
There is less scope for job enrichment and the lack of
variety may mean that staff become bored
Regid procedures may cause difficulties in coping with
emergency jobs.
There may be increased paper work and form filling
 Due to head office system may be hold up.
Decentralisation
It is a system where each department or operating
division would have their own office, with all of them
working, to some extent, independently of each other.
The greater the geographical distance from the center,
the greater the necessity for decentralised office.
Advantages of Decentralised Office
Clerical work is better done near to practical work to
which it relates.
Better service is given to department management.
Where promptness of decisions
Disadvantages of Decentralised
Office
Duplication of services
Extra information processing
Structure of a Typical Office
The internal arrangement in an organisation depend
on many factors as:
 The size of enterprise:
 A small organisation may have only few employees but in a
technically complex organisation need more specialisation of
functions.
 The type of work it does
 The number of employees
 Whether it is involved in exporting
The layout of an organisation is usually shown on a
diagram called Organisation Chart.
Organisation
 Chart
It is a diagram of formal relationships and communication flows
between positions within the organisation.
 It defines not only main parts of the enterprise, but also:
 Name of individuals in specific key roles
 Line structure
 Levels of authority and responsibility
 Supervisory structure
 Line of essential communication.
 It can be used for:
 More efficient communication
 Accurate delivery of mail
 The prompt transfer of phone calls to the right person
 Effective handling of queries
 Example: Organisation Chart
Managing Director

Marketing Finance Production R&D Personnel Admin

Computer
Manager Manager manager Manager Manager Manager
Services
manager
Advertising Machine
Sales Assembly
manager Room
Manager Manager
Manager

Export
Home
Sales
Sales
Manager
Manager
Departments of Organisation
Marketing Department:
 It is responsible for maintaining customer’s record, market
research, advertising, sale promotion, public relations,
warehousing and distribution of goods, preparation of sales
documents.
 The staff under the supervision of the manager of this
department may be:
 Sales manager
 Advertising manager
 Distribution manager
 Order assistant
 Shipping assistant
 Sales representatives
 Transport assistants
Finance Department:
 This department is managed by finance manager
 The staff under supervision of finance manager are:
 Financial accountant
 Cost accountant

 Management accountant

 Chief cashier

 Assistant positions for wages, costing, ledgers and credit control.

 The work done in this department include:

 Issuing invoices, credit notes and statements
 Recording money received and paid through cheque or cash.

 Producing company accounts, costing and management

information of financial nature.

Production Department:
 This department is managed by production manager
 Under the supervision of this manager are:
 Works manager
 Engineers

 Draughtsman

 production planners

 Supervisors

 Stores staff

 Factory operatives

 Despatch assistants

 This department is responsible for:

 Production of goods
 Mainateance of equipment, quality control, inventory control

 Work study, production planning, and control, stores control and

despatch.
 Research and Development Department:
 It has over all responsibility for:
 The design, development and testing of new products
 Improvement of existing products.
 This department is managed by Research and Development
Manager.
 The staff may include:
 Designers and engineers
 Researchers
 Human Resource Department:
 It is managed by Human Resource Manger.
 It has responsibility for:
 Recruitment, selection and induction of staff
 Personnel record keeping
 Staff appraisal
 Salary grading schemes
 Dismissal and redundancies
 Training
 Welfare
 Industrial relations and trade unions
 The type of staff include training officers, welfare officers, security
staff, nurses and canteen staff.
Administration Department:
 It is managed by administrative manager or company
secretary or chief administrative officer.
 This department will responsible for:
 All legal affairs of company
 Insurance, dealing with shareholders, organising company

meeting, office planning, office systems and services

 Staff may include caretakers and cleaners

Computer Service Department:

 It is managed by Computer Service Manager
 It is responsible for:
 Designing computer systems for existing operations and
identifying new areas and future needs for computerisation.
 Provide computer services on day to day basis and assist

management decision making.

 The type of staff include:
 System analysts, programmers and data preparation operators
Office Site
There must be enough space for employees and
equipment and also for expansion in future.
The organisation must decide whether to locate office
services near to normal manufacturing or sales
departments or near to customers for convenience.
Layout of Office
Large open spaces are deemed to be better than series of
small rooms
Natural light should be used where possible
The layout should facilitate the flow of work
Noisy machines may distract and should be kept out of
general office if possible.
Colours should be used in such a way that influence the
morale and efficiency.
Statutory requirements must be met for temperature,
space per worker, lighting, washing, fencing of machinery,
first aid and fire precautions.
Design of Office
The design of office fall in to three main categories:
Open plan
Landscape offices
Corridor
Open Offices:
 It is where a large number of employees are together one large
office.
 The advantages of this design include:
 Layout and location of individual members can be made easily.
 Communication is easier as all offices exist in one building.

 Efficient supervision and distribution of work is possible

 Cheaper maintenance and cleaning costs

 The disadvantages of this design include:

 Management can become involved in routine matters
 Absence of own office status may lower staff morale

 Noise can be created and create problem

 Discussion between employees may disturb others

 There will be lack of privacy

Landscaped Offices:
This type of office has a high standard of equipment and
furnishings.
The desks are placed in a rather random fashion and the
use of acoustic screens, filling cabnets and plants
breakup the floor area.
Status is served by allocating more space and better
furnishings to certain staff.
Noise and distractions are greatly reduced by the
arrangement of equipment.
Corridors
These are found in older buildings and are separate
offices leading to off a corridor.
They are generally partitioned off with walls but
variations do exists.
The major advantage of this of this office is privacy
and quite.
The main disadvantage is that it does not promote
team working and supervision of staff become more
difficult.
Organisational Information
Organisation chart
Personnel files
Internal telephone list
Staff planning chart
Holiday rota
Notice board
Company magazine
Company handbook
Manual of best practices
Purpose of the Manual of Best Practices and
Procedures
Procedures represent the summation of a series of
operations necessary to perform task associated with
the receipts, recording, arrangement, storage, security
and communication of information.
The establishment of systems and procedures will
ensure that organisational objectives are met and help
to ensure effective control over transactions.
Principles for setting Procedures
There should be smooth flow of work with no
bottlenecks.
Movement of staff should be kept minimum
Duplication of work should be avoided
The best and most effective use of resources
There must be simplicity in the system and
procedures
Human effort should be aided by machine where
necessary
A system must be cost effective.
Control over Transactions
Placing orders with suppliers:
 This transaction creates a legally binding agreement,
therefore it is important procedures for selection of suppliers
are documented and authorised persons are allowed to place
orders.
 One way to ensure this is to have all orders raised using
prenumbered order forms.
 Blank form should be kept safe and in custody of authorised
staff.
 Out going forms should be signed by a supervisor in the
buying department who can check the order.
Supplying goods and services to a customer on credit:
 Appropriate procedures must be followed in checking the
customer’s credit worthiness.
 New customers might be checked by requesting references
from existing suppliers and their bank.
 Customers’ financial statements can be reviewed to check the
financial position of customer.
Receiving goods into store from supplier:
 Procedures should be established for receipt of goods and to
ensure that suppliers are paid for delivery.
 Incoming goods should be recorded in a prenumbered goods
received note by staff.
 GRN should be passed to the accounts department to
compare account payable staff to compare the quantities
stated on the supplier’s invoice.
Payment of suppliers:
Only authorised people should be able to pay money to
suppliers.
Procedures of auhtorisation should be clearly
documented.
There should be separation of duties for recording
payments and authorising payments,
Payment to Employees:
Staff should be paid at the correct hourly or monthly
rates.
A personnel department which should be independent
of payroll department keeping staff records along with
pay grades of each individual employee
It is the type of book keeping in
which double aspect of each
transactions. The one aspect is
called Debit and other is Credit.
 Assets

 Liabilities
 Capital
 Revenues
 Expenses
Account Debit Credit
Assets Increases Decreases
Expenses Increases Decreases
Laibilities Decreases Increases
Capital Decreases Increases
Revenues Decreases Increases
Books of Prime Entry
Purchase day book: in which only credit purchases are
recorded.
Purchases returns day book: in which credit purchases
returns are recorded.
Sales day book: in which credit sales are recorded.
Sales returns day book: in which credit sales returns are
recorded.
Cash book: in which all cash receipts and payments are
recorded.
Wages and salaries book: in which we record the details of
wages and salaries
Journal: in which all adjustments are recorded.
It is the types of ledger in which only cost accounts
are maintained. In this ledger following accounts are
maintained:
• Raw Material Account
• Work in Process Account
• Finished goods Account
• Payroll Account
• Overhead Account
• Selling and Administrative Expenses Account.
• Costing profit and loss account
• Sales Day book
• Sales returns day book
• Purchase returns day book
• Purchase day book
• Cash received book
• Cash payment book
• Integrated System: In this system
both financial and cost accounting
system are maintained in same ledger.
Interlocking System: In this system
financial accounts are kept in separate
ledger and cost accounts are maintained
in the separate ledger.
•Purchase of materials
Debit: Materials Control
Credit: Cost Ledger Control a/c (CLCA)
•Payment of wages
Debit: Wages control a/c
Credit: Cost Ledger Control a/c (CLCA)
• Payment of expenses
• Dr: WIP Control a/c
• Dr: Production overhead
• Dr: Selling overhead
• Dr: Administration overhead
• Cr: CLCA
Issue of materials:
Dr: Work in progress –direct materials
Dr: Production overhead – indirect materials
Cr: Materials a/c

Classification of wages and salaries:

Dr: WIP Control a/c – direct labour
Dr: Production overhead – indirect labour
Dr: Selling overhead – Sales salaries
Dr: Administration overhead- Admin Salaries
Cr: Wages control account
• GeneralLedger: For assets, liabilities,
incomes and expenses.
• Sales Ledger: For each customer.
• Purchase Ledger: for each suppliers
• Cash Books : for receipts and
payments
Effects of Computerised Accounting System
Routine processing:
Processing of routine transactions can done in a bigger
volumes, at greater speed and with greater accuracy.
Paperless office:
It will reduce the need to use paper and store paper.
Information access:
Managers are likely to have access to more accurate,
reliable and up to date information.
Control:
 The need of reconciliation will be minimised and much of
desirable reconciliations can be fully automated.
Decision making:
 Decision making support system and sensitivity models can
be used for decision making.
Communication and supporting of information:
 This can be supported by networking locally and by allowing
local and head office access to localised data.
Motivation:
 It takes away most of work and allows employees on analysing
and using the information.
• Data is collected and made available for
processing.
• Data is processed into information by
summarising, classifying and analyzing it.
• Files are updated to incorporate the
processed data.
• Data is communicated through customer
statement and management reports.
• Field: A field is an item of data relating to a record. For
example a customer record would include a field for the
customers.
• Records: It is made up of several fields.
• File: It consists of several records.
• Master File:A master file is a file which contains
reference data such as customer names and addresses,
reference number and amount currently owed.
• Transaction File: It is a file containing records that
relate to individual transactions. e.g. sales day entry book
are called transaction files.
It involves transactions being
grouped and stored before being
processed at regular intervals such as
daily, weekly, or monthly.
1. Sales invoices are hand written and at the end of day
invoices are clipped together and a bath control slip is
attached and a batch number is issued.
2. The batch of invoices transferred to Account
Department.
3. Relevant account codes are written on the invoices
and control slips. Codes are checked and the batch is
keyed into computerised sales ledger system.
4. The clerk reconcile the total on batch with the total
on entered data.
5. Ledger update program is run to post data into
relevant accounts.
6. A report is printed showing the total of invoices
posted.
7. All rejected transactions are carefully investigated.
Real time, on line processing involves
transactions being input and processed
immediately in real time. It is appropriate
where immediate processing is required. The
example includes:
• In banking and credit card system.
• Travel agents, air lines and theatre tickets.
• Point of sales terminals.
 Inventory reports
 Aged receivable listings
 Trial balance, income statement and balance
sheet.
 Inventory valuation reports
 Payroll analysis
Integrated Computerised
Accounting
In this system a single entry will update the all
accounts. For example for payment made to suppliers a
single entry will update:
The supplier’s individual account in the purchase ledger
The bank account in the nominal ledger
The payable control account in the nominal ledger
Advantages of integrated system are:
Data needs to be entered only once to update all the
relevant records.
The system is more efficient because there is no need to
quit one application to access another.
Errors are reduced
The system is easy for use
Information can be more accurate and up to date by
integrating the all departments.