ACCOUNTANCY As LEVEL(FORM FIVE) NOTES – THE NATURE AND CONTEXT OF ACCOUNTANCY(1)

Early references to the subject of accounting may be found in the works of certain ancient oriental writers. However, the systematic approach to double entry system of book keeping and accounting as we know today has dated back to the late thirteenth century. In 1494, Luca Pacioli a Franciscan Monk living in Italy, published his well known work, Summa de Arithmetical, Geometric, Proportion, Promortionalita. It was Primary a study of mathematics but it also included a section on bookkeeping procedures.

The Meaning of the term “Accounting”:

What is accounting?

Is the art of recording, classifying and summarizing in a significant manner in terms of money transaction which are financial character and interpreting the results.

Branches / fields of Accounting:-

There are three major fields of Accounting which are:-

1. Financial Accounting.

2. Management Accounting.

3. Government Accounting.

1.Financial Accounting:-

This is an accounting field which concern with the provision of financial information about the business firm mainly to external users.

2. Management Accounting:-

This is an accounting field which concern w
ith the provision of accounting information to internal users, which is the management of the firm. The kinds of financial reports and data which management accounting offers are aimed to help management in planning and controlling business operations and in decision making.

3. Government Accounting:-

This is an accounting field counter parting for the government sector. There are however, basic differences between the two which explain why government accounting has come to be considered as a separate area of accounting.

ILLUSTRATION

In July 2009 a Rajabu started a tailoring shop. The following are his transactions for the first week.

July 1: He opened the shop with invested capital consisting of sewing machine of 50,000/= and 3,000/= in cash

July 2: He bought tread, needles and other sewing supplies costing 500/=

July 3: He completed a shirt for a customer and received 400/= for his Services.

July 4: His neighbor Mr. Jumanne asked him to repair 2 pairs of trousers which he has done. He was promised to be paid 300/= at the end of the month.

July5: He sewed a baby’s and was paid 200/= by the baby’s mother.

July 6: He bought chairs for his shop from Mwenye Furniture for 2,000/= on credit.

POINT TO NOTE:-

1. We DR: What comes in

CR: What goes out

2. We DR: received

CR: giver

Requirement:

1. Journalise

2. Open relevant ledger a/c

3. Draw a trial balance

ANSWER

JOURNAL ENTRIES

LEDGERS

DR. SEWING MACHINE A/C CR

July 1: Capital	50,000	July 31st: Bal. C/d	50,000
	50,000	50,000
August 1: Bal b/d	50,000

DR CASH A/C CR

July 1: Capital	3,000	July 2nd Sewing equipment	500
3rd July Sales	400
5th July Sales	200	31st July 2009 Balance c/d	3,100
	3600		3,600
August 1: Bal b/d	3,100

DR CAPITAL A/C CR

31st July Balance c/d	53,000	1st July Sewing machine	50,000
		1st July Cash	3,000
	53,000		53,000
		1st August Balance b/d	53,000

DR SEWING SUPPLIES A/C CR

2nd July: Cash	500	July 31st Bal. C/d	500
	500		500
1 st August Balance b/d	500

DR. SALES A/C CR

31st July 2009 Shirt Bal c/d	900	3rd July Cash	400
		4th July Debtors	300
		5th July	200
	900		900
		1/1/2010Balance b/d	900

TRIAL BALANCE AS AT 31ST DECEMBER 2009

DETAILS	DEBIT	CREDIT
Cash Sales Capital Sewing equipments Debtors Chairs Sewing machine Mwenge Furniture	3,100 500 300 2,000 50,000 55900	900 53,000 2,000 55900

DR. TRADING, PROFIT AND LOSS A/C FOR THE YEAR ENDED 31ST DEC 2009 CR

Purchases	500	Sales	900
Gross profit c/d	400
	900		900
Net profit	400	Gross profit b/d	400

BALANCE SHEET (EXTRACT)

Capital	53,000	Fixed Assets:-
Add: Net profit	400	Machine	50,000
	53,400	Chairs	2,000
Liabilities:-	Current Assets:
Trade creditors	2,000	Debtors	300
		Cash	3,100
	55,400		55,400

EXAMPLE

Record the following transaction in journal entries,open ledgers,close ledgers,prepare trial balance :-
1. Purchase of Tshs. 100,000/= of goods on credit.
2. Withdrawal of Tshs. 10,000 cash by the owner for his birthday party.
3. Collection of Tshs. 10,000/= from Imamu Jones who is a credit customer of the firm.
4. Return of 10,000/= of goods to a supplier because there are faulty. The original purchase was on credit terms
5. Payment of Tshs. 150,000/= by the business to a supplier or account of an amount due to the supplier.
6. Purchase of machinery for Tshs. 300,000/= on credit
7. Additional cash of Tshs. 100,000 invested in the business by the proprietor
8. Payment of Tshs. 120,000/= in cash for goods supplied
9. Got a loan of Tshs.1,000,000/= from NBC through a bank account at Ubungo branch.

JOURNAL ENTRY

LEDGERS

DR CASH A/C CR

July 1st Imamu Jones	10,000	July 2Drawing	10,000
July 7Capital	100,000	July 5 Creditor	150,000
July 9 Loan(NBC)	1000,000	July 8 Purchases	120,000
		July 31 Balance c/d	830,000
	1,110,000	1,110,000
Aug 1 Balance b/d	830,000	Balance b/d

DR PURCHASES A/C CR

Creditors	100,000	Also Read: ACCOUNTANCY ACCOUNTANCY As LEVEL(FORM FIVE) NOTES - CORRECTION OF ACCOUNTING ERRORS ACCOUNTANCY As LEVEL(FORM FIVE) NOTES - RESERVES AND PROVISIONS (3)
Cash	120,000	Balance c/d	220,000
	220,000		220,000
Balance b/d	220,000

DR CREDITORS A/C CR

Returns	10,000		100,000
Cash	150,000	Machinery	300,000
Balance c/d	250,000	Cash	10,000
	410,000		410,000
		Balance b/d	250,000

TRIAL BALANCE EXTRACT

DETAILS	DEBIT	CREDIT
Cash	830,000
Purchases	220,000
Creditors		250,000
Loan (NBC)		1,000,000
Machinery	300,000
Return outward	10,000
Capital		100,000
Drawings		10,000
	1,360,000	1,360,000

EXERCISE

Daktari Jaribu , DDS , her own dental practice . Her books had the followings accounts and balances as of 1st October.

Cash Tshs. 341,200/=, Debtors Sh. 597,500/=, office supplies Tshs. 39,000/=, Equipment Tshs. 3,012,500/=, Surgery supplies Tshs. 155,000/=, Creditors Tshs. 96,500/=, Capital Tshs. 4,048,700.

Following are the transactions in the practice of her profession during October.

Oct. 1: Paid office rent for October Tshs. 80,000/=

2: Purchased equipment on credit Tshs. 290,000/=

3: Purchased X – ray film and other surgery supplies on credit Tshs. 25,000/=

5: Received cash on account from patients Tshs, 472,500/=

9: Paid cash to creditors Tshs. 175,000/=

14: Paid cash for renewal of insurance policy Tshs. 51,000/=

17: Paid from the business bank account Tshs. 170,000/= being personal and family expenses.

20: Paid invoices for laboratory analyses Tshs. 31,500/=

22: Cash received from cash paying patients Tshs 295,000/=

24: Paid miscellaneous expenses Tshs. 11,200

26: Paid electricity bills Tshs. 32,500/=