AS LEVEL ACCOUNTING

COURSE OUTLINE:
FINANCIAL ACCOUNTING:

CH:1: Basics of financial accounting.

CH:2: Errors and suspense a/c
CH:3: income statement and statement of financial position
CH:4: Control accounts
CH:5: Bank reconciliation
CH:6: Bad debts
CH:7: Accounting for non-current assets-Depreciation
CH:8: Accruals & prepayments
CH:9: Inventory valuation
CH:10: Sole trader
CH:11: Partnership accounting
CH:12: Company accounts
CH:13: Single entry & incomplete records
CH:14: Ratios
CH: 15: Accounting concepts and principles
CH:16: Users of financial accounting

2. COST ACCOUNTING:

CH:1: Overheads
CH:2: Breakeven analysis and decision making
CH:3: Absorption & Marginal costing

CH:1 BASICS OF ACCOUNTING

HEAD OF ACCOUNTS:
In accounting we have 5 head of accounts:
1. Assets
2. Liabilities
3. Capital
4. Expenses
5. Income
ASSETS: Resources OWNED & controlled by an entity are referred
as assets. it is further classified as:
I. Current asset: assets which are to be used in less than a year
and which are easily convertible into cash are current assets. it
includes; inventory, accounts receivable/ debtors, cash at bank,
cash in hand, prepaid expense, income receivable. ACCRUED INCOME
II. Non current assets: assets which are to be utilized in more
than one year and are bought with the intention of use in business.
it includes; land, building, computer etc.
LIABILITIES: Resources OWED by an entity. these are debts for
which the company is liable. it is further classified as:
I. Current liabilities: liabilities which are to be paid in less than a
year. it includes; bank overdraft, trade payables, prepaid income,
expense payable. ACCRUED EXPENSE
II. Non current liabilities: liabilities which are to be paid in more
than a year. it includes; bank loan.
CAPITAL: investment by owner into the business. it can be
categorized as:
I. Start-up capital: the amount which is initially invested by
owner into the business.
II. additional investment: the amount which is subsequently
invested by owner into the business.
EXPENSE: costs incurred to run a business.
INCOME: money earned from operations. it is classified as:

I. Business income: money earned from selling of goods.

II. Other income: money earned other than selling goods. e.g.;
commission, rent received etc.

ACCOUNTING EQUATION:

ASSETS = LIABILITIES + CAPITAL

OR
CAPITAL = ASSETS - LIABILITIES
OR
LIABILITIES = ASSETS - CAPITAL

RULES OF DEBIT AND CREDIT:

ASSETS: increase -- debit

decrease-- credit
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LIABILITIES: increase-- credit
decrease-- debit

INCOME: increase-- credit

decrease-- debit

EXPENSE: increase-- debit

decrease-- credit

CAPITAL: increase--credit
decrease-- DRAWINGS -- debit

EXAMPLE QUESTION: ASSETS = LIABILITIES + CAPITAL

Assets of the business are $12750 12750= 2500 + ?
10250
liabilities are $2500
calculate the amount of capital?
38100
51600
EXAMPLE 2: 104100
Q. CALCULATE THE MISSING VALUES:

ASSETS LIABILITIES CAPITAL

$ $ $
1. 55000 16900 ?
2. ? 17200 34400
3. 119500 15400 ?

BUSINESS TRANSACTIONS:
Business transactions should be recorded in double entry system.
Double entry system is where each transaction has two aspects or
sides DEBIT & CREDIT, which must equal to each other.

ACCOUNTING CYCLE
TRANSACTIONS
ENTRIES: GENERAL LEDGER
TRIAL BALANCE
1. Mr. A invested $10000 cash in business INCOME STATEMENT/
2. Deposited $2000 cash in bank TRADING PROFIT &LOSS
ACCOUNT
3. Withdrew cash from bank $1000 STATEMENT OF FINANCIAL
POSITION/ BALANCE SHEET
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 4. Purchased vehicle on cash $1500
5. Sold machine on cash $2000
6. Bought goods on cash $500
7. Sold goods by cheque $100
8. Paid rent by cheque $50
9. Received commission by cash $2000
10. Sold goods to Mr. B on credit $500
11. Mr. B returned goods worth $100
12. Bought goods on credit from Mr. C $300
13. Returned goods to Mr. C $150
14. Mr. B paid cash $400
15. Paid $150 to Mr. C

FORMAT OF GENERAL JOURNAL:

DATE PARTICULARS DEBIT CREDIT

$ $
CASH 10000
1
CAPITAL 10000

GENERAL LEDGERS:
Also known as t accounts. Posting of entries into individual
accounts. The main purpose of ledger is to access the transaction
occurred in each account and identify its net balance.
Debit and credit balances of accounts in ledgers are identified by
general entries debit entry is recorded on debit side credit entry on
credit side with same amount. However, when it comes to name of
account in ledger we mention the opposite account name of journal
entry.
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FORMAT:
Name of account

debit credit
side side

TRIAL BALANCE:
Trial balance check the accuracy of general ledgers.
It is a list of balances on a particular date.
Debit & credit in trial balance is identifies by brought down balance
in t account. If ledger has b/d balance on debit side, it means in trial
balance we must record it on debit side and vice versa.
account debit credit

EXAMPLE:
1. STARTED BUSINESSS WITH $11000 IN BANK & $1600 CASH
2. BOUGHTGOODS ON CREDIT FROM MR. A $830 MR. B $610, MR. C $590
3. BOUGHT GOODS FOR CASH $370
4. PAID RENT IN CASH $75
5. BOUGHT STATIONERY PAYING BY CHEQUE $62
6. SOLD GOODS ON CREDIT TO MR. D $370, MR. E $290, MR. F $410
7. PAID WAGES IN CASH $160
8. WE RETURNED GOODS TO MR. B $195
9. PAID RENT IN CASH$75
10. MR. E RETURNED GOODS $35
11. SOLD GOODS ON CREDIT TO MR. G $205, MR. H $280, MR. I $426
12. PAID BUSINESS RATES BY CHEQUE $970
13. PAID INSURANCE IN CASH $280
14. PAID RENT BY CHEQUE $75
15. BOUGHT VAN ON CREDIT FROM MR. J $6100
16. PAID MOTOR EXPENSES IN CASH $24
17. PAID WAGES IN CASH $170
5 18. RECEIVED PART OF AMOUNT OWING FROM MR. F BY CHEQUE $250
19. RECEIVED REFUND OF BUSINESS RATES $45 BY CHEQUE
20. PAID BY CHEQUE MR. A $380, MR. B $415, MR. J $6100
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BOOKS OF PRIME ENTRIES
1. SALES JOURNAL:
Transactions- credit sales
Source documents- sales invoice/ invoice to
-credit note sent
-credit note received
2. SALES RETURN JOURNAL/ RETURN INWARDS JOURNAL:
Transactions-sales return/ return inwards
Source documents- credit note sent
3. PURCHASE JOURNAL/ PURCHASE DAY BOOK:
Transactions- credit purchases
Source documents- purchase invoice/ invoice from
-credit note received
-credit note sent
4. PURCHASE RETURN JOURNAL/ PURCHASE OUTWARD
JOURNAL:
Transactions- purchase returns/ return outwards

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 Source documents- credit note received
5. CASH BOOK:
Transactions- cash transactions only
Source documents- receipt voucher (when cash is
received)
- payment voucher (when cash is
paid)
-deposit slip/ pay-in-slip (when cash
is deposited into bank)
6. GENERAL JOURNAL:
Transactions- non routine transactions
- all those transactions which do not fit n
above BOPE. (e.g. Investments)
Source documents- Journal voucher
Examples- investments
- purchase of NCA
-adjustments of errors
-accruals & prepayments (adjustments)
-depreciation exp
- bad debts expense