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Ugbs 001 Lecture Material

This document provides an overview of a course on financial accounting for a diploma program at the University of Ghana. The 3-session course aims to teach students the basic concepts and methods of recording financial transactions and preparing elementary financial statements for a sole proprietor form of business organization. By introducing fundamental accounting concepts and terminology in an easy to understand way, the course aims to help students grasp the language of business. Upon completion, students will be able to explain accounting as the language of businesses, describe how financial data is gathered, discuss key accounting principles, analyze transactions, and prepare basic financial statements. The course is divided into 8 sessions covering topics such as the introduction to financial accounting, accounting principles, recognition of financial statement elements, transaction

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azimehdelight
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
116 views135 pages

Ugbs 001 Lecture Material

This document provides an overview of a course on financial accounting for a diploma program at the University of Ghana. The 3-session course aims to teach students the basic concepts and methods of recording financial transactions and preparing elementary financial statements for a sole proprietor form of business organization. By introducing fundamental accounting concepts and terminology in an easy to understand way, the course aims to help students grasp the language of business. Upon completion, students will be able to explain accounting as the language of businesses, describe how financial data is gathered, discuss key accounting principles, analyze transactions, and prepare basic financial statements. The course is divided into 8 sessions covering topics such as the introduction to financial accounting, accounting principles, recognition of financial statement elements, transaction

Uploaded by

azimehdelight
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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UNI

VERSI
TYOFGHANA

SCHOOLOFCONTI
NUI
NGANDDI
STANCEEDUCATI
ON

UGBS001

FI
NANCI
ALACCOUNTI
NGI

FORDI
PLOMAI
NACCOUNTI
NG

BY

AUGUSTI
NEDONKOR

COURSEOVERVI
EW
1|Page
Account
ing i
sabusi
nessl
anguage.So i
nthi
scour
se,wear
egoi
ng t
olear
nthel
anguageof

busi
nesses.Asar
esul
t,t
hecour
sewi
l
lfocusont
heel
ement
aryknowl
edgeofbookkeepi
ngand

f
inanci
alaccount
ing.

St
udent
swi
l
lbei
ntr
oducedt
otheconceptofbookkeepi
ng,busi
nesst
ransact
ionsandhow such

t
ransact
ionshav
eimpl
i
cat
ionsonor
gani
sat
ions’f
inanci
alst
andi
ngsandt
heappl
i
cabl
eaccount
ing

st
andar
dsi
nGhana.

St
udent
sint
hiscour
sewi
l
lacqui
ref
undament
alconcept
sandbasi
cmet
hodsofr
ecor
dingf
inanci
al

t
ransact
ionsi
nthev
ari
ousbooksofaccount
sandt
hepr
epar
ati
onofel
ement
aryf
inanci
alst
atement

f
orasol
epr
opr
iet
orf
orm ofbusi
nessor
gani
sat
ion.

Byi
ntr
oduci
ngt
hecour
seatt
hisl
evel
,gr
eatcar
ehasbeent
akent
oemphasi
seonmi
nut
edet
ail
sto

enabl
est
udent
stogr
aspt
heconceptofaccount
ingwi
thease.Thev
ocabul
aryandt
ermi
nol
ogyused

i
nthet
ext
bookar
einaccor
dancewi
tht
hecompr
ehensi
onandmat
uri
tyl
evel
oft
hest
udent
s.

Thecour
sei
sdi
vi
dedi
ntoEi
ght
(8)sessi
ons

Sessi
on1:
Int
roduct
ionandOv
erv
iewofFi
nanci
alAccount
ing

Sessi
on2:
Gener
all
yAccept
edAccount
ingPr
inci
ples(
GAAP)

Sessi
on3:
Recogni
ti
onandMeasur
ementofEl
ement
sofFi
nanci
alSt
atement
s

Sessi
on4:
Anal
ysesofTr
ansact
ionsi
ntheBooksofAccount

Sessi
on5:
TheCashBook

Sessi
on6:
BankReconci
l
iat
ionSt
atement
s

Sessi
on7:
Cont
rol
Account
s

Sessi
on8:
Prepar
ati
onofEl
ement
aryFi
nanci
alSt
atement

2|
Page
COURSEOBJECTI
VES

Af
terasuccessf
ulcompl
eti
onoft
hiscour
se,
student
swi
l
lbeabl
eto

 Expl
ainAccount
ingast
hel
anguageofbusi
nesses

 Descr
ibehowf
inanci
aldat
aisgat
her
ed

 Di
scusst
heGener
all
yAccept
edAccount
ingPr
inci
plest
hatgui
det
heanal
ysesandr
ecor
dingof

Account
ingdat
a

 Descr
ibeandpr
epar
ebasi
cfi
nanci
alst
atement

SESSI
ONONE

I
NTRODUCTI
ONANDOVERVI
EW OFFI
NANCI
ALACCOUNTI
NG
3|
Page
Ov
erv
iew

Theeconomi
chi
stor
yofanor
gani
sat
ioni
sessent
ialf
ordeci
sionmaki
ng.Account
ingpr
ovi
dest
he

meansf
orr
ecor
ding/
wri
ti
ngt
heeconomi
chi
stor
ywhi
chf
aci
l
itat
est
hedeal
i
ngsbet
weenbusi
ness

ent
erpr
ises.Thus,
ithasbeendescr
ibedast
hecommonl
anguageofbusi
nesses.Thi
ssessi
onseeks

t
oint
roducest
udent
stot
henat
ureandpur
poseofaccount
ing.

LEARNI
NGOBJECTI
VES

• Def
ineandexpl
aint
hemeani
ngandpur
poseofaccount
ing

• I
dent
if
yther
elat
ionshi
pbet
weenbookkeepi
ngandaccount
ing

• Expl
aint
heaccount
ingi
nfor
mat
ionsy
stem

• I
dent
if
ythesub-
fi
eldsofaccount
ingandt
heki
ndofaccount
ingi
nfor
mat
iont
heypr
ovi
de.

• Expl
aint
het
ypesofbusi
nessor
gani
sat
ionsandi
dent
if
ythei
rchar
act
eri
sti
cs

• Expl
aint
heki
ndsoff
inanci
alst
atement
sandt
hei
rpur
pose(
s)

• I
dent
if
ytheuser
sofaccount
ingi
nfor
mat
ionandexpl
aint
hei
rinf
ormat
ional
needs

NEEDANDI
MPORTANCEOFACCOUNTI
NG

Mostbusi
nessor
gani
sat
ionsar
enor
mal
l
yest
abl
i
shedf
orpr
ofi
t-
seeki
ngpur
poses.Money
isear
ned

f
rom sev
eralsour
cesl
i
ket
hesal
eofgoodsandser
vices,i
nter
estonbankdeposi
ts,t
hesal
eofot
her

i
tems,et
c.Money
isal
sospentonsev
eralot
heri
mpor
tanti
ssuesi
nbusi
nessoper
ati
onsl
i
ket
he

pur
chaseofgoodsandser
vices,t
hepay
mentofsal
ari
es,r
ent
,et
c.Theseact
ivi
ti
est
akepl
acedur
ing

t
henor
malcour
seofbusi
ness.I
tisi
mpor
tantt
oknow t
heper
for
manceandpr
ogr
essofone’
s

busi
ness.
Since busi
ness t
ransact
ions ar
e numer
ous,i
tis notpossi
blef
orowner
stor
ecal
l

f
rommemor
yast
ohow t
hemoneyhadbeenear
nedandspent
.Ont
heot
herhand,i
fhehadnot
ed
4|Page
downhi
sincomesandexpendi
tur
es,
hecanr
eadi
l
ygett
her
equi
redi
nfor
mat
ion.Hence,
thedet
ail
sof

t
hebusi
nesst
ransact
ionshav
etober
ecor
dedi
nacl
earandsy
stemat
icmannert
ogetanswer
s

easi
l
yandaccur
atel
yfort
hef
oll
owi
ngquest
ionsatanyt
imehel
i
kes.

a)Whathashappenedt
ohi
sinv
est
ment
?

b)Whati
sther
esul
toft
hebusi
nesst
ransact
ions?

c)Whatar
etheear
ningsandexpenses?

d)Howmuchamounti
srecei
vabl
efr
om cust
omer
stowhom goodshav
ebeensol
doncr
edi
t?

e)Howmuchamounti
spay
abl
etosuppl
i
ersonaccountofcr
edi
tpur
chases?

f
) Whatar
ethenat
ureandv
alueofasset
spossessedbyt
hebusi
nessconcer
n?

g)Whatar
ethenat
ureandv
alueofl
i
abi
l
iti
esoft
hebusi
nessconcer
n?

Theseandsev
eral
otherquest
ionsar
eanswer
edwi
tht
hehel
pofaccount
ing.

WHATI
SACCOUNTI
NG?

Account
ingi
sasy
stemat
icmeansofwr
it
ingt
heeconomi
chi
stor
yofanor
gani
sat
ion.I
tcanal
sobe

def
inedast
hepr
ocessofmeasur
ing,r
ecor
ding,cl
assi
fyi
ngandsummar
isi
ngf
inanci
ali
nfor
mat
ion

t
hati
susedi
nmaki
ngeconomi
cdeci
sions”

I
namor
etechni
calt
erm,
theAmer
icanAccount
ingAssoci
ati
on(
AAA)def
inesaccount
ingast
he

pr
ocessofi
dent
if
ying,
measur
ingandcommuni
cat
ingf
inanci
ali
nfor
mat
ionaboutaneconomi
cent
it
y

t
oper
miti
nfor
medj
udgement
sanddeci
sionsbyuser
soft
hei
nfor
mat
ion.

TheAmer
icanI
nst
it
uteofCer
ti
fi
edPubl
i
cAccount
ant
s(AI
CPA)def
inesaccount
ingast
hear
tof

r
ecor
ding,cl
assi
fyi
ngandsummar
isi
ngi
nasi
gni
fi
cantmannerandi
nter
msofmoney
,tr
ansact
ions

andev
ent
swhi
char
e,i
npar
tatl
east
,ofaf
inanci
alchar
act
er,
andi
nter
pret
ingt
her
esul
tst
her
eof
.
5|Page
THEPURPOSEOFACCOUNTI
NG

Thepur
poseofaccount
ingi
sthepr
ovi
sionofusef
ulf
inanci
ali
nfor
mat
ionabouteconomi
cent
it
iest
o

deci
si
onmaker
s.Thus,
fi
nanci
alaccount
ingseekst
opr
ovi
dei
nfor
mat
ion,
notj
ustanyi
nfor
mat
ionbut

f
inanci
ali
nfor
mat
ionf
orpeopl
e/ent
it
ies(
i.
e.User
sofAccount
ingI
nfor
mat
ion)f
ori
nfor
meddeci
sion

maki
ng.Thef
inanci
ali
nfor
mat
ionaccount
ingpr
ovi
desi
smeantf
ordeci
sionpur
poses.

BOOKKEEPI
NG

Theneedf
orr
ecor
dingbusi
nesst
ransact
ionsi
nacl
earandsy
stemat
icmanneri
sthebasi
sforBook-

keepi
ng.I
tisi
mpor
tantf
orast
udentofaccount
ingt
odi
ff
erent
iat
ebet
weenbookkeepi
ngand

account
ing.

Book-
keepi
ngi
sthesci
enceandar
tofcor
rect
lyr
ecor
dingi
nthebooksofaccountal
lthosebusi
ness

t
ransact
ionst
hatr
esul
tint
het
ransf
erofmoneyormoney
’swor
th”
.Iti
sthemechani
cal
andr
epet
it
ive

pr
ocessofr
ecor
dingf
inanci
alt
ransact
ionsandkeepi
ngf
inanci
alr
ecor
ds.Book-
keepi
ngi
sasmal
l

par
tofaccount
ing.I
tist
hatbr
anchofknowl
edgewhi
cht
ell
sushow t
okeepar
ecor
dofbusi
ness

t
ransact
ions.Theact
ivi
ti
esofbook-
keepi
ngi
ncl
uder
ecor
dingi
nthej
our
nal
,post
ingt
othel
edgerand

bal
anci
ngofaccount
s.

ACCOUNTI
NGASANI
NFORMATI
ONSYSTEM

Ani
nfor
mat
ionsy
stem i
sanysy
stem t
hataccept
sinput
s(dat
a),pr
ocessessuchi
nput
sint
oout
put

(
inf
ormat
ion)
.

Account
ingi
sseenasani
nfor
mat
ionsy
stem becausei
tli
nksbusi
nessact
ivi
ti
esanddeci
sion

maker
s.Thus,account
ingusesdat
a(f
rom busi
nessact
ivi
ti
es-t
ransact
ions)andpr
ocesst
hem i
nto
6|Page
i
nfor
mat
ion (
out
put– f
inanci
alst
atement
s)f
orani
nfor
med deci
sion by user
s ofaccount
ing

i
nfor
mat
ion.

Account
ing measur
es busi
ness act
ivi
ti
es byr
ecor
ding dat
a,pr
ocessest
hem t
o become usef
ul

i
nfor
mat
ionandcommuni
cat
ethem t
hroughr
epor
ts(
fi
nanci
alst
atement
s)t
odeci
sionmaker
sfor

i
nfor
meddeci
si
ons.

Thepr
ocessofaccount
ingaspert
heabov
ecanbedepi
ctedbyt
hef
igur
esbel
ow;

Pr
ocess

I
nput Out
put
Identi
fying
Recor ding
Business Classi
f yi
ng Informati
on
t
ransacti
ons Summar izing toUsers
(
Monet ar
y Anal y
zing (Financi
al
Value) I
nterpreting Statements)
Communi cat i
on

7|
Page
Fi
gur
e:Account
ingasani
nfor
mat
ionsy
stem

SUB-
FIELDSOFACCOUNTI
NG

Li
kesev
eralot
herdi
sci
pli
nesorpr
ofessi
ons,account
inghassev
eralsub-
fi
eldst
hataccount
ant
scan

speci
ali
sei
n.Thesei
ncl
udes;

i
) Fi
nanci
alAccount
ing:Thi
sist
hef
iel
dofaccount
ingt
hatt
hiscour
sei
sabout
.Thi
sist
hef
iel
d

ofaccount
ingt
hatser
vesext
ernaldeci
si
onmaker
sandi
sconcer
nedwi
tht
hepr
epar
ati
onof

f
inanci
alst
atement
s.

i
i
) CostAccount
ing:Thi
sfi
eldofaccount
ingdeal
swi
tht
hecol
l
ect
ion,al
l
ocat
ionandt
hecont
rol

oft
hecostofpr
oduci
ngspeci
fi
cpr
oduct
sorser
vices.

i
i
i) ManagementAccount
ing:Thi
sisconcer
nedwi
tht
hepr
ovi
sionofi
nfor
mat
iont
opeopl
ewi
thi
n

8|
Page
t
heor
gani
sat
iont
ohel
pthem makebet
terdeci
sions.I
thast
odowi
thi
nter
nalr
epor
ti
ngt
o

manager
swhouset
hei
nfor
mat
ionatal
ll
evel
soft
heor
gani
sat
ionf
orpl
anni
ng,
cont
rol
l
ingand

deci
sion-
maki
ng.

i
v) Publ
i
cSect
oror
Gov
ernment
alAccount
ing:Thi
sisconcer
nedwi
tht
hei
dent
if
icat
ionoft
he

sour
cesandusesofr
esour
cesf
orgov
ernment
alent
it
ies.

v
) Audi
ti
ng:Thef
iel
dofaccount
ingt
hati
ndependent
lyexami
nesandpr
ovi
deassur
anceast
othe

t
rue and f
airv
iew off
inanci
alst
atement
s and r
epor
ts orot
herf
inanci
alasser
ti
ons by

managementorsomeot
herbodi
est
oext
ernal
par
ti
es.

v
i) TaxAccount
ing:I
tinv
olv
espr
operaccount
ingf
ort
hei
ncomesandexpendi
tur
esoft
axabl
e

ent
it
iesi
nsuchawayt
hatt
heypayt
othet
axaut
hor
it
iest
hei
rfai
rshar
eoft
axes.I
tinv
olv
est
ax

pl
anni
ng,
comput
ati
on,
pay
mentandf
il
ingoft
axr
etur
ns.

BUSI
NESSORGANI
ZATI
ONS

Abusi
nessi
sanor
gani
sat
ioni
nwhi
chbasi
cresour
ces(
input
s)ar
eassembl
edandpr
ocessedt
o

pr
ovi
degoodsorser
vices(
out
put
s)t
ocust
omer
s.

TYPESOFBUSI
NESSORGANI
ZATI
ONS

Thet
ypesofbusi
nessor
gani
sat
ionswi
l
lbeexami
nedf
rom t
heper
spect
iveof
;

 Busi
nessact
ivi
ti
es,

 Pr
ofi
tmot
ive,
and

 Owner
shi
p.

TYPESOFBUSI
NESSORGANI
ZATI
ONS(
BYACTI
VITI
ES)

9|
Page
Manuf
act
uri
ngBusi
ness-changebasi
cinput
sint
opr
oduct
sthatar
esol
dtocust
omer
s.

Mer
chandi
singBusi
ness-pur
chasespr
oduct
sfr
om ot
herbusi
nessesandsel
ltocust
omer
s(ei
ther

whol
esal
i
ngorr
etai
l
ing)
.

Ser
viceBusi
ness-
prov
ideser
vicer
athert
hanpr
oduct
stocust
omer
s.

TYPESOFBUSI
NESSORGANI
ZATI
ONS(
BYPROFI
TMOTI
VES)

Pr
ofi
tOr
ient
edOr
gani
zat
ions-Busi
nessessetupwi
tht
hesol
eai
m ofmaki
ngpr
ofi
ts.

Gov
ernment
alOr
gani
sat
ions-Publ
i
csect
orent
it
iessetupt
opr
ovi
depubl
i
cgoodsandser
vices.

Non-
Gov
ernment
alOr
gani
zat
ions-Or
gani
zat
ionssetupt
oachi
eveot
herobj
ect
ivesi
nsoci
etyandnot

f
orpr
ofi
t.

TYPESOFBUSI
NESSORGANI
ZATI
ONS(
BYOWNERSHI
P)

Thesear
ei)Sol
epr
opr
iet
orshi
porsol
etr
ader
,

i
i
)Par
tner
shi
p,

i
i
i)Compani
es.

Sol
ePr
opr
iet
orshi
p/Sol
eTr
ader

Af
orm ofbusi
nessor
gani
sat
iont
hati
sownedbyasi
ngl
eindi
vi
dual
.Somechar
act
eri
sti
csofasol
e

pr
opr
iet
orshi
par
e

 Thebusi
nessi
sownedandmost
lyoper
atedbyoneper
son(
sol
etr
ader
)

 Easyf
ormat
ion(
Legal
for
mal
i
tiesf
ori
tsf
ormat
ionar
esi
mpl
ecompar
edt
otheot
her
s)

 Qui
ckdeci
sion-
maki
ng

10|
Page
 Lackper
pet
ual
successi
on(
Dif
fi
cul
tyi
nowner
shi
ptr
ansf
er)

 Li
mit
edsour
cesoff
unds

 Li
abi
l
ityoft
heowneri
sunl
i
mit
ed(
pri
vat
epr
oper
tycoul
dbeusedt
oset
tl
ethebusi
ness’
debt
s

 Al
lbusi
nessdeci
sionsar
etakenbyt
hepr
opr
iet
oral
one

 He/
sheal
oneenj
oysal
lthepr
ofi
tsandbear
sal
lther
isksi
nthebusi
ness

 Lessexpensi
vet
ooper
ate

Par
tner
shi
p

Act
ivi
ti
esofpar
tner
shi
pinGhanaar
eregul
atedbyt
heI
ncor
por
atedPr
ivat
ePar
tner
shi
p(I
PPA)Act

1962,Act152.TheActf
urt
herdef
inespar
tner
shi
pas“
theassoci
ati
onoft
woormor
eindi
vi
dual
s

car
ryi
ngonbusi
nessj
oint
lyf
ort
hepur
poseofmaki
ngpr
ofi
ts”
.

Somechar
act
eri
sti
csofapar
tner
shi
pbusi
nessar
e;

 Thebusi
nessi
sownedand oper
atedbyt
woormor
eper
sons(
par
tner
s)butnotexceedi
ng

20per
sons

 Pool
i
ngofSki
l
lsandResour
ces

 Par
tner
sar
esev
eral
l
yandj
oint
lyl
i
abl
efort
heact
ionsofoneper
son

 Li
abi
l
iti
esofpar
tner
sar
eunl
i
mit
ed (
Thei
rpr
ivat
epr
oper
tycoul
d beused t
o set
tl
ethe

busi
ness’debt
s as t
hei
rli
abi
l
iti
es ar
e unl
i
mit
ed unl
ess t
hey r
egi
ster
ed as a l
i
mit
ed

par
tner
shi
p)

 Li
mit
edsour
cesoff
unds

 Par
tner
scont
ri
but
etopr
ovi
dingcapi
tal
tosetupt
hebusi
nessi
nanagr
eedr
ati
o

 Legal
for
mal
i
tiesf
ori
tsf
ormat
ionar
est
atedi
ntheI
PPA,
Act152.

 Al
lbusi
nessdeci
sionsar
eagr
eedandt
akenbyt
hepar
tner
satt
hei
rmeet
ings.
11|
Page
 Pr
ofi
tsandl
ossesar
eshar
edbyal
lthepar
tner
saccor
dingt
oanagr
eedr
ati
o.

 Thei
rpr
ivat
epr
oper
tycoul
dbeusedt
oset
tl
ethebusi
ness’debt
sast
hei
rli
abi
l
iti
esar
e

unl
i
mit
edunl
esst
heyr
egi
ster
edasal
i
mit
edpar
tner
shi
p.

Company

Compani
esi
nGhanaar
eregul
atedbyt
heCompani
esCode1963,Act179.Somechar
act
eri
sti
csof

compani
esar
e;

 I
tcoul
dbef
ormedbyami
nimum ofoneshar
ehol
der(
Sect
ion8)butmusthav
eal
eastt
wo

di
rect
ors(
Sect
ion180)

 Separ
ati
onofOwner
shi
pfr
om ManagementThebusi
nessi
sownedbyshar
ehol
der
sand

most
lyoper
atedbyaboar
dofdi
rect
orswhomayappoi
ntamanagementt
eam t
orunt
heday

t
odayaf
fai
rsoft
hecompany
.

 Legalsepar
ateent
it
y(t
heact
ivi
ti
esoft
hebusi
nessar
esepar
atef
rom t
hepr
ivat
ebusi
ness

ofi
tsowner
s.Thebusi
nessi
sseenasanar
ti
fi
cial
per
sont
hatcansueandbesued)

 Li
abi
l
iti
esofi
tsowner
sar
eli
mit
ed(
Thel
i
abi
l
ityoft
heshar
ehol
der
scoul
dbel
i
mit
edby

shar
esorguar
ant
eeorev
enbeunl
i
mit
ed(
seeSect
ion9oft
hecode)

 Per
pet
ual
successi
on

 Easei
nowner
shi
ptr
ansf
er

 Wi
deaccesst
orai
singf
unds

 Shar
ehol
der
spr
ovi
det
hecapi
tal
tosetupt
hebusi
nessbybuy
ingshar
esi
nthecompany

 Legal
for
mal
i
tiesf
ori
tsf
ormat
ionar
ecompl
excompar
edt
otheot
her
s

 I
tisf
ormedandoper
atedi
nGhanabyt
hepr
ovi
sionsoft
heCompani
esCode,
1963,
Act179.

 Al
lbusi
nessdeci
sionsar
etakenbyt
heboar
dofdi
rect
orsort
hemanagementt
eam.
12|
Page
 Theshar
ehol
der
senj
oyt
hepr
ofi
tsbywayofdi
vi
dendsdecl
aredandpai
dtot
hem andbear

al
lther
isksi
nthebusi
ness

WHYBUSI
NESSESNEEDACCOUNTI
NGI
NFORMATI
ON

Sol
ePr
opr
iet
orshi
p

• Taxcol
l
ect
ingpur
poses.

• Lendi
ngpur
poses.

• Busi
nessv
aluat
ionpur
poses

Par
tner
shi
p

• Fai
rnessi
nshar
ingofpar
tner
shi
ppr
ofi
ts.

• Taxpur
poses

• Lendi
ng/f
inanci
ngpur
poses

• Thepur
poseofadmi
tt
ingot
herpar
tner
sint
othepar
tner
shi
p.

Compani
es

• Lendi
ngpur
poses.

• Busi
nessv
aluat
ionpur
poses

FI
NANCI
ALSTATEMENTSANDTHEI
RUSERS

Fi
nanci
alst
atement
sar
est
atement
spr
epar
edt
opr
ovi
dei
nfor
mat
ionont
hef
inanci
alper
for
mance,

f
inanci
alposi
ti
onandt
hecashf
lowsofabusi
nessent
it
y

Thecomponentoft
hebasi
cfi
nanci
alst
atement
sar
e;

13|
Page
a)TheSt
atementofFi
nanci
alPosi
ti
on

b)TheI
ncomeSt
atementorSt
atementofCompr
ehensi
veI
ncome

c)TheSt
atementofCashFl
owSt
atement

d)TheSt
atementofChangesi
nEqui
ty

e)Not
est
othef
inanci
alst
atement
s(i
.e.di
scl
osur
es)

St
atementofFi
nanci
alPosi
ti
on:

• Showst
hef
inanci
alposi
ti
onofanent
it
yatapoi
nti
nti
me.

• I
tisaposi
ti
onst
atement
.

• I
tsummar
isest
heasset
s,l
i
abi
l
iti
esandowner
s’equi
tyofanent
it
yatapar
ti
cul
arpoi
nti
nti
me

I
ncomeSt
atementorSt
atementofCompr
ehensi
veI
ncome:

• Showst
hef
inanci
alper
for
manceofanent
it
yov
eraper
iodoft
ime.

• I
tisaper
iodi
cst
atement
.

• I
tsummar
isest
her
evenue(
income)and(
expenses)expendi
tur
eofanent
it
yov
ert
ime.

St
atementofCashf
low:

• Showst
heact
ual
cashi
nfl
owsandout
fl
owsofanent
it
yatapoi
nti
nti
me.

St
atementofChangesi
nEqui
ty:

• Showst
hechangei
nowner
s’equi
tyov
eranaccount
ingper
iod.Thesechangesar
eseeni
n;

 Netpr
ofi
torl
ossf
ort
heper
iodat
tri
but
abl
etoshar
ehol
der
s

14|
Page
 I
ncr
easeordecr
easei
nshar
ecapi
tal
reser
ves

 Di
vi
dendpay
ment
stoshar
ehol
der
s

 Gai
nsandl
ossesr
ecogni
seddi
rect
lyi
nequi
tyet
c…

Not
esandDi
scl
osur
es:

• Not
espr
ovi
desuppl
ement
ali
nfor
mat
ionaboutt
hef
inanci
alcondi
ti
onofacompany
.

• Not
est
oaccount
sar
epr
esent
edi
nthr
eemai
nar
eas.Thesear
e;

 Descr
ipt
ionofaccount
ingr
ulesandpol
i
ciesadopt
edandappl
i
ed.

 Pr
esent
ati
onofaddi
ti
onaldet
ailaboutani
tem ont
hef
inanci
alst
atement
s.Pr
ovi
sionof

addi
ti
onal
inf
ormat
ionaboutani
tem notont
hef
inanci
alst
atement
s.

USERSOFACCOUNTI
NGI
NFORMATI
ON

Ther
ear
etwobr
oadcat
egor
iesofuser
sofaccount
ingi
nfor
mat
ion.

 I
nter
nal
User
sofAccount
ingI
nfor
mat
ion,
and

 Ext
ernal
User
sofAccount
ingI
nfor
mat
ion.

Howev
er,t
heext
ernaluser
scanf
urt
herbegr
oupedi
ntot
wo;Ext
ernaluserwi
thadi
recti
nter
estand

ext
ernal
user
swi
thi
ndi
recti
nter
est
.

Thebr
oadcat
egor
iesofaccount
ingi
nfor
mat
ionuser
sandt
hei
rexampl
esaeshowni
nthef
igur
e

bel
ow.

15|
Page
I
NFORMATI
ONALNEEDSOFUSERS

Shar
ehol
der
s/I
nvest
ors-

• I
nvest
mentDeci
sions

• Assesst
hef
utur
epr
ofi
tabi
l
ityandr
iskoft
hecompany
;cash-
gener
ati
ngabi
l
iti
esoft
hecompany
;

t
hest
ewar
dshi
pofmanagement

Management

• Oper
ati
ngandst
rat
egi
cdeci
sionssuchasf
inanci
ngt
heent
it
y;i
nvest
ingr
esour
cesoft
heent
it
y;

managi
ngempl
oyeeset
c.

Empl
oyees

• Thest
abi
l
ityandpr
ofi
tabi
l
ityoft
hecompany

• The abi
l
ityoft
hecompanyt
opr
ovi
der
emuner
ati
on,wor
king condi
ti
ons,r
eti
rementbenef
it
s,

pensi
onsandj
obsecur
it
y
16|Page
Cr
edi
tor
s/Lender
s

• Assesst
hecompany
’sabi
l
ityt
opayper
iodi
cint
erestandpr
inci
palamount
;ri
skofdef
aul
tandi
ts

consequences;f
utur
e pr
ospect
sfori
nvest
ing and l
endi
ng deci
sions;company
’s need f
or

addi
ti
onal
financi
ng.

Gov
ernment/Regul
ator
yAgenci
es

• Exer
ciseoft
hei
rsuper
visor
yfunct
ions.

• Rev
eal
trendsi
ntheeconomy

• Checkanddet
ermi
nesent
it
ies’
taxl
i
abi
l
iti
es

Suppl
i
ers

• Det
ermi
necr
edi
twor
thi
nessofcompani
esandi
nest
abl
i
shi
ngcr
edi
tter
ms

Cust
omer
s

• Ev
aluat
est
ayi
ngpoweroft
hei
rsuppl
i
ersandsuppl
i
err
elat
ionshi
ps,pr
ice,pr
oductdet
ail
sand

condi
ti
onsofsal
e

ENDOFSESSI
ONONETRYQUESTI
ONS

1.Whati
sbook-
keepi
ng?

2.Whatar
etheobj
ect
ivesofbook-
keepi
ng?

3.Whati
saccount
ing?

4.Whyi
saccount
ingconsi
der
edasani
nfor
mat
ionsy
stem?
17|Page
5.Di
ff
erent
iat
ebet
weenbook-
keepi
ngandaccount
ing?

6.Br
ief
lyexpl
aint
heuser
sofaccount
ingi
nfor
mat
ionandt
hei
rneedf
oraccount
ingi
nfor
mat
ion.

7.Di
sti
ngui
shbet
weent
hef
oll
owi
ng

CostAccount
ingandManagementAccount
ing

Bookkeepi
ngandAccount
ing

8.Whatar
ethei
nfor
mat
ionneedsoft
hef
oll
owi
ngaccount
ingi
nfor
mat
ionuser
s:

Fi
nanci
alAnal
yst
s

Audi
tor
s

Publ
i
c

SESSI
ONTWO

GENERALLYACCEPTEDACCOUNTI
NGPRI
NCI
PLES(
GAAP)

OVERVI
EW

Account
ingi
sthel
anguageofbusi
ness.I
trecor
dsbusi
nesst
ransact
ionst
aki
ngpl
acedur
ingt
he

account
ingper
iod.Account
ingcommuni
cat
est
her
esul
toft
hebusi
nesst
ransact
ionsi
nthef
orm of

f
inalaccount
s.Wi
thav
iew t
omaki
ngt
heaccount
ingr
esul
tsunder
stoodi
nthesamesensebyal
l

i
nter
est
edpar
ti
es,cer
tai
naccount
ingassumpt
ions,concept
sandpr
inci
pleshav
ebeendev
eloped

ov
eracour
seofper
iod.Thi
ssessi
onseekst
oint
roducest
udent
stot
hegener
alconcept
s,pr
inci
ples,

basesandst
andar
dsunder
lyi
ngt
hepr
epar
ati
onoff
inanci
alst
atement
s.

18|
Page
LEARNI
NGOBJECTI
VES

• I
dent
if
ytheneedf
oraconcept
ual
framewor
kofaccount
ing

• Expl
ainandappl
ythef
undament
alconcept
sandpr
inci
plesofaccount
ing

• Expl
aint
hedi
ff
erentbasesofaccount
ingr
ecor
dingandr
epor
ti
ng.

• I
dent
if
yandexpl
aint
hequal
i
tat
ivechar
act
eri
sti
csofaccount
ingi
nfor
mat
ion

CONCEPTUALFRAMEWORK

These ar
ethe st
atementofpr
inci
ples whi
ch pr
ovi
de gener
all
y accept
ed gui
dance f
ort
he

dev
elopmentofnew r
epor
ti
ngpr
act
icesandf
orchal
l
engi
ngandev
aluat
ingt
heexi
sti
ngpr
act
ices.

Thesebasi
cassumpt
ionsofaccount
ingar
eli
ket
hef
oundat
ionpi
l
lar
sonwhi
cht
hest
ruct
ureof

account
ingi
sbased.Theyconst
it
utet
hegr
oundr
ulesort
hef
ramewor
kwi
thi
nwhi
chaccount
ingi
s

pr
act
ised. Theyar
ethe gui
del
i
nes t
othe account
ing pr
ofessi
on i
nthe choi
ce ofaccount
ing

t
echni
quesandt
hepr
epar
ati
onsoff
inanci
alst
atementi
nawayconsi
der
edt
obegoodaccount
ing

pr
act
ice. Theyencompasst
heconv
ent
ions;r
ulesandpr
ocedur
esnecessar
ytodef
ineaccept
ed

account
ingpr
act
iceatapar
ti
cul
art
ime.

Account
ingConcept
s

Theyar
ethebr
oadassumpt
ions,whi
chunder
li
ethepr
epar
ati
onofper
iodi
cfi
nanci
alaccount
sof

busi
nessent
erpr
ises.
Theyar
edev
elopedandaccept
edbyt
heaccount
ancypr
ofessi
onaf
teranumber

ofy
ear
soft
hei
rappl
i
cat
ion.

Account
ingPr
inci
ples

Theyar
e gener
aldeci
sion r
ules der
ived f
rom t
he obj
ect
ives and t
he t
heor
eti
calconcept
s of
19|Page
account
ingt
hatgov
ernt
hedev
elopmentofaccount
ingt
echni
ques.

Account
ingTechni
ques

Theyar
ethespeci
fi
crul
esder
ivedf
rom account
ingpr
inci
plest
hataccountf
orspeci
fi
ctr
ansact
ions

andev
ent
sfacedbyt
hebusi
nessent
it
ye.
g.Pr
ovi
sionf
ordepr
eci
ati
on.

Account
ingBases

Thesear
epar
ti
cul
armet
hodswhi
chhav
eev
olv
ed and hav
ebeendev
eloped f
orexpr
essi
ng or

appl
yi
ngt
heconcept
soft
her
ecor
dingoff
inanci
alt
ransact
ions.
Forexampl
e,depr
eci
ati
onmet
hods

andst
ockv
aluat
ionmet
hods(
suchasFI
FO,
LIFO,
etc.
)

Account
ingPol
i
cies

Thesear
ethespeci
fi
caccount
ingpr
inci
plesandmet
hods(
orbases)ofappl
yi
ngt
hosepr
inci
plest
hat

ar
ejudgedbyt
hemanagementoft
heent
it
ytobet
hemostappr
opr
iat
eint
hei
rci
rcumst
ancest
o

pr
epar
eaf
inanci
alst
atementi
naccor
dancewi
thGAAP.Exampl
e,KLt
d’sdepr
eci
ati
onpol
i
cyi
susi
ng

t
heSt
rai
ghtLi
neMet
hod.

Account
ingSt
andar
ds(
IFRS)

Account
ingst
andar
dspr
ovi
degui
del
i
nesr
elat
ingt
otheaccount
ingt
reat
mentaswel
lasr
epor
ti
ngof

i
mpor
tantaccount
ingi
temswi
thav
iew t
o st
andar
disi
ngt
hedi
ver
seaccount
ingpr
ocedur
esor

pol
i
cies.

I
nter
nat
ionalFi
nanci
alRepor
ti
ngSt
andar
ds(
IFRS)ar
easetofi
nter
nat
ionalaccount
ingst
andar
ds

20|
Page
st
ati
ng how par
ti
cul
art
ypes oft
ransact
ions and ot
herev
ent
s shoul
d be r
epor
ted i
nfi
nanci
al

st
atement
s.I
FRS ar
eissuedbyt
heI
nter
nat
ionalAccount
ingSt
andar
dsBoar
d,andt
heyspeci
fy

exact
lyhowaccount
ant
smustmai
ntai
nandr
epor
tthei
raccount
s.I
FRSwer
eest
abl
i
shedi
nor
dert
o

hav
eacommonaccount
ingl
anguage,sobusi
nessandaccount
scanbeunder
stoodf
rom company

t
ocompanyandcount
ryt
ocount
ry.

APPLI
CABLEACCOUNTI
NGSTANDARDSI
NGHANA

• I
nter
nat
ional
Financi
alRepor
ti
ngSt
andar
ds(
IFRS)

• I
nter
nat
ional
Publ
i
cSect
orAccount
ingSt
andar
ds(
IPSAS)

• I
nter
nat
ional
Standar
dsonAudi
ti
ng

FUNDAMENTALACCOUNTI
NGCONCEPTS

Goi
ngConcer
nConcept

Aspert
hisassumpt
ion,t
hebusi
nesswi
l
lexi
stf
oral
ongper
iodandt
ransact
ionsar
erecor
dedf
rom

t
hispoi
ntofv
iew.Ther
eisnei
thert
hei
ntent
ionnort
henecessi
tyt
owi
ndupt
hebusi
nessi
nthe

f
oreseeabl
efut
ure.Thus,t
heconcepthol
dst
hat
,unl
essev
ent
spoi
ntt
othecont
rar
y,abusi
nesswi
l
l

cont
inuei
noper
ati
onalexi
stencef
ort
hef
oreseeabl
efut
ure,andt
hatt
her
eisnoi
ntent
iont
oputt
he

companyi
ntol
i
qui
dat
ionort
oceasei
tsoper
ati
ons.

Asar
esul
t,t
hev
aluesat
tri
but
abl
etobusi
nessasset
satt
hef
inanci
aly
earendar
enor
mal
l
ybasedon

t
hei
rwor
tht
othebusi
nessasacont
inui
ngent
it
yrat
hert
hant
hei
rimmedi
atesal
esv
alues.

Busi
nessEnt
it
yConcept

Accor
dingt
othi
sassumpt
ion,busi
nessi
str
eat
edasauni
torent
it
yapar
tfr
om i
tsowner
s,cr
edi
tor
s
21|Page
and ot
her
s.I
n ot
herwor
ds,t
hepr
opr
iet
orofa busi
ness concer
nis al
way
s consi
der
ed t
o be

separ
ateanddi
sti
nctf
rom t
hebusi
nesswhi
chhecont
rol
s.Al
lthebusi
nesst
ransact
ionsar
erecor
ded

i
nthebooksofaccount
sfr
om t
hat
viewpoi
ntoft
hebusi
ness.Ev
ent
hepr
opr
iet
ori
str
eat
edasa

cr
edi
tort
otheext
entofhi
scapi
tal
.

MoneyMeasur
ementConcept

I
naccount
ing,
onl
ythosebusi
nesst
ransact
ionsandev
ent
swhi
char
eoff
inanci
alnat
urear
erecor
ded.

Forexampl
e,whenSal
esManager
isnotongoodt
ermswi
thPr
oduct
ionManager
,thebusi
nessi
s

boundt
osuf
fer
.Thi
sfactwi
l
lnotber
ecor
ded,
becausei
tcannotbemeasur
edi
nter
msofmoney
.

Per
iodi
cit
yorTi
meI
nter
val
Concept

Theuser
soff
inanci
alst
atement
sneedper
iodi
calr
epor
tst
oknowt
heoper
ati
onalr
esul
tandt
he

f
inanci
alposi
ti
onoft
hebusi
nessconcer
n.Hencei
tbecomesnecessar
ytocl
oset
heaccount
sat

r
egul
ari
nter
val
s.Usual
l
yaper
iodof365day
sor52weeksor1y
eari
sconsi
der
edast
heaccount
ing

per
iod

Dual
AspectConcept

Dualaspectpr
inci
plei
sthebasi
sforDoubl
eEnt
rySy
stem ofbook-
keepi
ng.Al
lbusi
nesst
ransact
ions

r
ecor
dedi
naccount
shav
etwoaspect
s-r
ecei
vi
ngbenef
itandgi
vi
ngbenef
it
.Forexampl
e,when

abusi
nessacqui
resanasset(
recei
vi
ngofbenef
it
)itmustpaycash(
giv
ingofbenef
it
).

Rev
enueReal
i
sat
ionConcept

Accor
dingt
othi
sconcept
,rev
enuei
sconsi
der
edast
hei
ncomeear
nedont
hedat
ewheni
tisr
eal
i
sed.
22|Page
Unear
nedorunr
eal
i
zedr
evenueshoul
dnotbet
akeni
ntoaccount
.Ther
eal
i
sat
ionconcepti
svi
tal

f
ordet
ermi
ning i
ncome per
tai
ning t
o an account
ing per
iod.I
tav
oids t
hepossi
bil
i
tyofi
nfl
ati
ng

i
ncomesandpr
ofi
ts.

Hi
stor
ical
CostConcept

Undert
hisconcept
,asset
sar
erecor
dedatt
hepr
icepai
dtoacqui
ret
hem andt
hiscosti
sthebasi
s

f
oral
lsubsequentaccount
ingf
ort
heasset
.Thus,
asset
sandexpensesar
eshownatacqui
sit
ioncost

andnotcur
rentmar
ketv
alue(
i.
e.t
hei
ract
ual
costt
othebusi
ness)
.Thehi
stor
ical
oror
igi
nal
cost
sar
e

obj
ect
ivi
tyandv
eri
fi
abi
l
ity
.Forexampl
e,i
fapi
eceofl
andi
spur
chasedf
orGH500,
000andi
tsmar
ket

v
aluei
sGH 800,
000att
het
imeofpr
epar
ingf
inalaccount
sthel
andv
aluei
srecor
dedonl
yfor
GH

500,
000.Thus,
thest
atementoff
inanci
alposi
ti
ondoesnoti
ndi
cat
ethepr
iceatwhi
cht
heassetcoul
d

besol
dfor
.

Mat
chi
ngConcept

Mat
chi
ngt
her
evenuesear
neddur
inganaccount
ingper
iodwi
tht
hecostassoci
atedwi
tht
heper
iodt
o

ascer
tai
nther
esul
toft
hebusi
nessconcer
niscal
l
edt
hemat
chi
ngconcept
.Iti
sthebasi
sforf
indi
ng

accur
atepr
ofi
tforaper
iodwhi
chcanbesaf
elydi
str
ibut
edt
otheowner
s.

Accr
ual
Concept

Theef
fect
soft
ransact
ionsandev
ent
sshoul
dber
ecogni
sedwhent
heyoccurandr
ecor
dedi
nthe

account
ingbooksandr
epor
tedi
nthef
inanci
alst
atement
sint
heper
iodi
nwhi
cht
heyr
elat
e.

23|
Page
Mat
eri
ali
tyConcept

Themat
eri
ali
typr
inci
pler
equi
resal
lrel
ati
vel
yrel
evanti
nfor
mat
ionshoul
dbedi
scl
osedi
nthef
inanci
al

st
atement
s.Uni
mpor
tantandi
mmat
eri
ali
nfor
mat
ionar
eei
therl
eftoutormer
gedwi
thot
heri
tems.

Consi
stencyConcept

Theai
m ofconsi
stencypr
inci
plei
stopr
eser
vet
hecompar
abi
l
ity
off
inanci
alst
atement
s.Ther
ules,

pr
act
ices,concept
sandpr
inci
plesusedi
naccount
ingshoul
dbecont
inuousl
yobser
vedandappl
i
ed

y
ear
aft
ery
ear
.Compar
isonsoff
inanci
alr
esul
tsoft
hebusi
nessamongdi
ff
erentaccount
ingper
iod

canbesi
gni
fi
cantandmeani
ngf
ulonl
ywhenconsi
stentpr
act
iceswer
efol
l
owedi
nascer
tai
ningt
hem.

Forexampl
e,depr
eci
ati
onofasset
scanbepr
ovi
dedunderdi
ff
erentmet
hods,
whi
chev
ermet
hodi
s

f
oll
owed,
itshoul
dbef
oll
owedr
egul
arl
y.

Pr
udence(
Conser
vat
ism)Concept

Pr
udencepr
inci
plet
akesi
ntoconsi
der
ati
onal
lpr
ospect
ivel
ossesbutl
eav
esal
lpr
ospect
ivepr
ofi
ts.

The essence oft


his pr
inci
plei
s“ant
ici
pat
e no pr
ofi
tand pr
ovi
de f
oral
lpossi
blel
osses”
.For

exampl
e,
whi
l
eval
uingst
ocki
ntr
ade,
mar
ketpr
iceorcostpr
icewhi
chev
eri
slessi
sconsi
der
ed.

Subst
anceov
er-
for
m

Thi
spr
inci
plest
atest
hati
ntr
eat
ingbusi
nesst
ransact
ion,
thef
inanci
alr
eal
i
tyshoul
dbegi
venpr
ior
it
y

ov
ert
hel
egalf
orm ofi
t.Forexampl
e,i
nHi
rePur
chaset
ransact
ion,
legal
l
y,t
heowner
shi
poft
hei
tem

r
emai
nswi
tht
hesel
l
erunt
ilt
hel
asti
nst
almenti
spai
d.Buti
naccount
ingf
ort
hei
tem,t
hef
inanci
al

r
eal
i
tyi
sthatt
hecompanyownst
hei
tem andusesi
ttogener
ater
evenueandmustbet
reat
edas

such(
i.
e.asset
soft
hecompany
,thoughf
inal
pay
menthadnotbeenmade)
.

24|
Page
BASESOFACCOUNTI
NGRECORDI
NGANDREPORTI
NG

Ther
ear
etwomai
nbasesofr
ecor
dingandr
epor
ti
ngi
naccount
ing;

CashBasi
s

• Rev
enuesar
erecogni
sedwhencashi
srecei
vedandexpensesar
erecogni
sedwhencashi
s

pai
d.

Accr
ual
Basi
s

• Rev
enuesandexpensesar
erecogni
sedonaneconomi
cbasi
sregar
dlessoft
heact
ualcash

f
low.

QUALI
TIESOFACCOUNTI
NG/
FINANCI
ALI
NFORMATI
ON

Account
ingi
nfor
mat
ionai
msatenabl
i
nguser
stomakei
nfor
medeconomi
cdeci
sions.Account
ing

i
nfor
mat
ionmustt
her
efor
ebeusef
ulf
ordeci
sion.Foraccount
ingi
nfor
mat
iont
obeusef
uli
tmust

possesssomequal
i
ties.Bel
owar
ethef
undament
alqual
i
tiesr
equi
redofaccount
ingi
nfor
mat
ion.

Rel
evant
-itmusthav
etheabi
l
ityt
oinf
luencdeci
sionsandmusthav
epr
edi
cti
vev
alue,conf
ir
mat
ory

v
alueandt
hei
nfor
mat
ionshoul
dbet
imel
y.

Rel
i
abl
e-i
tmustbecompl
eteandf
ait
hful
l
yrepr
esent
ed-neut
ral
andpr
udentandf
reef
rom bi
as.

Compar
abl
e-f
rom oneper
iodt
oanot
heri
tmustbeconsi
stentandf
ull
discl
osur
eadher
edt
o.

Under
standabl
e-shoul
d be compr
ehensi
blet
othe user
s butdepends on t
he user
s’abi
l
ityt
o

under
stand.

ENDOFSESSI
ONTWOTRYQUESTI
ONS

Fi
l
lint
heBl
anks:

1.Theasset
sar
erecor
dedi
nbooksofaccount
sint
hecostofacqui
sit
ioni
sbasedon_
___
___
___
___
25|Page
concept
.

2.Tr
ansact
ions bet
ween ownerand busi
ness ar
erecor
ded separ
atel
y due t
o__
___
___
___
__

assumpt
ion.

3.Busi
ness concer
n mustpr
epar
efi
nanci
alst
atement
s atl
eastonce i
nay
eari
s based on

_
___
___
___
_assumpt
ion.

4._
___
___
___
___pr
inci
pler
equi
rest
hatt
hesameaccount
ingmet
hodsshoul
dbef
oll
owedf
rom one

account
ingper
iodt
othenext
.

Chooset
hecor
rectanswer
:

1.Aspert
hebusi
nessent
it
yassumpt
ion,
thebusi
nessi
sdi
ff
erentf
rom t
he

a)owner
s b)banker c)gov
ernment

2.Goi
ngconcer
nassumpt
iont
ell
ust
hel
i
feoft
hebusi
nessi
s

a)v
eryshor
t b)v
eryl
ong c)none

3.Costi
ncur
redshoul
dbemat
chedwi
tht
her
evenuesoft
hepar
ti
cul
arper
iodi
sbasedon

a)mat
chi
ngconcept b)hi
stor
ical
costconceptc)f
ull
discl
osur
econcept

4.Asperdual
aspect(
doubl
eent
ry)concept
,ev
erybusi
nesst
ransact
ionhas

a)t
hreeaspect
s b)oneaspect c)t
woaspect
s

Ot
herQuest
ions:

1.Whatdoy
oumeanbybusi
nessent
it
yassumpt
ion?

2.Wr
it
eshor
tnot
esont
hef
oll
owi
ngassumpt
ion.

a)Moneymeasur
ement b)Account
ingper
iod
26|
Page
3.Whatdoy
oumeanbygoi
ngconcer
nassumpt
ion?

4.Whatdoy
oumeanbyhi
stor
ical
costconcept
?

5.Descr
ibet
hef
oll
owi
ngconcept
s

a)Mat
chi
ng b)Ful
ldi
scl
osur
e

6.Wr
it
eshor
tnot
eson

a)Pr
udencepr
inci
ple b)Dual
aspectconcept

SESSI
ONTHREE

RECOGNI
TIONANDMEASUREMENTOFELEMENTSOFFI
NANCI
ALSTATEMENTS

OVERVI
EW

Thi
ssessi
onpr
esent
sthev
ari
ousel
ement
soff
inanci
alst
atement
sandhowt
heyar
erecogni
zedand

27|
Page
measur
ed.I
tfur
therexami
neshowt
heel
ement
sinf
inanci
alst
atement
srel
atet
oeachot
her
.

LEARNI
NGOBJECTI
VES

 I
dent
if
ythecomponent
soff
inanci
alst
atement
s

 Di
scusst
heel
ement
soff
inanci
alst
atement
s

 Expl
aint
heaccount
ingequat
ion

 Det
ermi
net
heef
fect
soft
ransact
ionsont
heaccount
ingequat
ion

 Expl
aint
heconceptofdoubl
eent
ryi
naccount
ing

FI
NANCI
ALSTATEMENT

Ast
atementpr
epar
edt
opr
ovi
dei
nfor
mat
ionont
hef
inanci
alper
for
mance,
financi
alposi
ti
onandt
he

cashf
lowsofabusi
nessent
it
y.Thecomponentoff
inanci
alst
atementi
ncl
ude;
thei
ncomest
atement
,

st
atementoff
inanci
alposi
ti
on,st
atementofcashf
low,st
atementofchangesi
nequi
tyandnot
est
o

t
heaccount
s.

ELEMENTSOFFI
NANCI
ALSTATEMENT

Ther
ear
ebasi
cal
l
yfi
ve(
5)el
ement
soff
inanci
alst
atement
s,namel
y;

• I
ncome

• Expenses

• Asset
s

28|
Page
• Li
abi
l
iti
esand

• Shar
ehol
der
s’Equi
ty

Theseel
ement
sar
ethebui
l
dingbl
ocksusedi
nconst
ruct
ingf
inanci
alst
atement
s.

Theseel
ement
soff
inanci
alst
atement
sar
efur
thergr
oupedi
ntot
wo;

1.Thosedi
rect
lyr
elat
edt
oper
for
manceofor
gani
zat
ions

a.I
ncome

b.Expenses

2.Thosedi
rect
lyr
elat
edt
ofi
nanci
alposi
ti
onofor
gani
zat
ions

a.Asset
s

b.Li
abi
l
iti
es

c.Equi
ty(
Capi
tal
)

I
ncome

I
ncomesar
ethei
ncr
easei
neconomi
cbenef
it
swhi
chr
esul
tini
ncr
easei
nequi
ty.Theyoccuri
nthe

f
orm ofi
ncr
easei
nasset
sand/
orr
educt
ioni
nli
abi
l
iti
es.I
ncomear
ecl
assi
fi
edi
ntor
evenuesand

gai
ns

Rev
enuear
eder
ivedf
rom del
i
ver
ingorpr
oduci
nggoods,r
ender
ingser
vices,orot
heract
ivi
ti
est
hat

const
it
utet
he ent
it
y’s ongoi
ng maj
ororcent
raloper
ati
ons.Thus,r
evenue means t
he amount

r
ecei
vabl
eorr
eal
i
zedf
rom sal
eofgoodsandear
ningsf
rom i
nter
est
,di
vi
dend,
commi
ssi
on,
etc.

Gai
nsar
eder
ivedf
rom per
ipher
alori
nci
dent
alt
ransact
ionsofanent
it
y.

Expense

I
tist
heamountspenti
nor
dert
opr
oduceandsel
lgoodsandser
vices.Forexampl
e,pur
chaseofr
aw
29|Page
mat
eri
als,
pay
mentofsal
ari
es,
wages,
etc.
Expensesar
edecr
easesi
neconomi
cbenef
it
sthatr
esul
tin

decr
easesi
nequi
ty.

Asset
s

Asset
sar
ethepr
oper
ti
esofev
erydescr
ipt
ionbel
ongi
ngt
othebusi
ness.Cashi
nhand,pl
ant
and

machi
ner
y,f
urni
tur
eandf
it
ti
ngs,bankbal
ance,account
srecei
vabl
es,bi
l
lsr
ecei
vabl
e,st
ockofgoods

(
inv
ent
ory
),i
nvest
ment
s,goodwi
l
lar
eex
ampl
esofasset
s.Asset
scanbecl
assi
fi
edi
ntot
angi
bleand

i
ntangi
ble.I
ntechni
calt
erms,asset
sar
eresour
cesofanor
gani
sat
ionf
rom whi
chf
utur
eeconomi
c

benef
it
sar
eexpect
edt
ofl
owt
othecompany
.

Cur
rentAsset
s:Asset
sfr
om whi
chf
utur
eeconomi
cbenef
it
sar
eexpect
edt
ofl
owt
otheent
it
yinnot

mor
ethanay
earaf
tert
her
epor
ti
ngper
iod.Ther
eist
hei
ntent
iont
otur
nthem i
ntocashwi
thi
none

y
ear
.Exampl
esar
einv
ent
ori
es,
account
srecei
vabl
espr
epay
ment
s,bankbal
ance,
cashet
c.
30|
Page
Non-
Cur
rentAsset
s:Asset
sfr
om whi
chf
utur
eeconomi
cbenef
it
sar
eexpect
edt
ofl
owt
otheent
it
yin

mor
ethanoney
earaf
tert
her
epor
ti
ngper
iod.Theyar
eacqui
redf
orcont
inui
ngusewi
thi
nthe

busi
nesswi
thav
iewt
oear
ningi
ncomeormaki
ngpr
ofi
tfr
om i
tsuse.Thus,
theyar
enotacqui
redf
or

pur
posesofr
esal
e.Exampl
esar
eLandandbui
l
ding,pl
antandmachi
ner
y,mot
orv
ehi
cles,f
urni
tur
e

andf
it
ti
ngs,
goodwi
l
l,et
c.

Tangi
bleAsset
s:Theseasset
sar
ethosehav
ingphy
sical
exi
stence.I
tcanbeseenandt
ouched.For

exampl
e,pl
ant&machi
ner
y,cash,
etc.

I
ntangi
ble Asset
s:I
ntangi
ble asset
s ar
ethose asset
s hav
ing nophy
sicalexi
stence but t
hei
r

possessi
ongi
vesr
iset
osomer
ight
sandbenef
it
stot
heowner
.Itcannotbeseenandt
ouched.

Goodwi
l
l,
pat
ent
s,t
rademar
ksar
esomeoft
heexampl
es.

Li
abi
l
iti
es

Li
abi
l
iti
esr
efert
othef
inanci
alobl
i
gat
ionsofabusi
ness.Theydenot
etheamount
swhi
chabusi
ness

owes t
o ot
her
s.Exampl
es ar
eloans f
rom banks orot
herper
sons,account
s pay
abl
es,bi
l
ls

pay
abl
e,
out
standi
ngexpenses,
bankov
erdr
aft
,et
c.I
namor
etechni
calt
erml
i
abi
l
iti
esar
eobl
i
gat
ions

(
debt
s)ofanor
gani
sat
ionf
orwhi
chi
tisexpect
edt
hatset
tl
ement(
pay
ment
)wi
l
lresul
tinout
fl
owof

r
esour
cesoft
heent
it
y.

31|
Page
Non-
cur
rentl
i
abi
l
ity
:Thesear
edebt
swhi
char
epay
abl
eaf
termor
ethanoney
ear
.Exampl
esar
eloans,

debent
ures,
etc.

Cur
rentLi
abi
l
ity
:Thesear
edebt
soft
hebusi
nesst
hatmustbepai
dwi
thi
noney
ear
.Exampl
esar
e

t
radepay
abl
e(cr
edi
tor
s),
account
spay
abl
e(accr
ual
s),
bankov
erdr
aft
s,shor
tter
mloans,
etc.

Shar
ehol
der
s’Equi
ty(
Capi
tal
)

Thi
sref
erst
otheowner
s’cont
ri
but
iont
othebusi
nessi
nthef
orm ofasset
s,cashorot
herf
ormsof

cont
ri
but
ion.
Ther
esi
duali
nter
esti
nasset
soft
hebusi
nessaf
terdeduct
ingal
lit
sli
abi
l
iti
es.
Iti
sthe

amounti
nvest
edbyt
hepr
opr
iet
or/
sint
hebusi
ness.Thi
samounti
sincr
easedbyt
heamountof

pr
ofi
tsear
nedandt
heamountofaddi
ti
onalcapi
tali
ntr
oduced.I
tisdecr
easedbyt
heamountof

l
ossesi
ncur
redandt
heamount
swi
thdr
awn.

Recogni
ti
onandMeasur
ementofEl
ement
sinFi
nanci
alSt
atement
s

Recogni
ti
on

Thepr
ocessofi
ncl
udi
ngi
nthef
inanci
alst
atementani
tem t
hatmeet
sthedef
ini
ti
onofanel
ementof

f
inanci
alst
atementandt
hef
undament
alr
ecogni
ti
oncr
it
eri
a.Foranel
ementt
ober
ecogni
zedi
nthe

f
inanci
alst
atement
,itmustmeett
hef
undament
alr
ecogni
ti
oncr
it
eri
a;
32|
Page
Def
ini
ti
ons:
Thei
tem meet
sthedef
ini
ti
onofanel
ementoff
inanci
alst
atement
s.

Measur
abi
l
ity
:Thei
tem hasar
elev
antat
tri
but
emeasur
abl
ewi
thsuf
fi
cientr
eli
abi
l
ity

Rel
evance:
Thei
nfor
mat
ionabouti
tiscapabl
eofmaki
ngadi
ff
erencei
nuserdeci
sions

Rel
i
abi
l
ity
:Thei
nfor
mat
ionabouti
tisr
epr
esent
ati
onal
l
yfai
thf
ul,
ver
if
iabl
e,andneut
ral

Recogni
ti
onofEl
ement
s

Asset

• Pr
obabl
ethatf
utur
eeconomi
cbenef
it
swi
l
lfl
owt
otheent
erpr
ise

• I
tem hascostorv
aluet
hatcanbemeasur
edr
eli
abl
y

Li
abi
l
ity

• Pr
obabl
eout
fl
owofr
esour
cesembody
ingeconomi
cbenef
it
sfr
om t
heset
tl
ementofobl
i
gat
ion

• Amountt
obeset
tl
edcanbemeasur
edr
eli
abl
y

I
ncome

• Wheni
ncr
easei
nfut
ureeconomi
cbenef
it
srel
atedt
oani
ncr
easei
nanassetoradecr
easeofa

l
i
abi
l
ityhasar
isenandcanbemeasur
edr
eli
abl
y

Expense

• Whendecr
easei
nfut
ureeconomi
cbenef
it
srel
atedt
oadecr
easei
nanassetorani
ncr
easeofa

l
i
abi
l
ityhasar
isenandcanbemeasur
edr
eli
abl
y

Measur
ement
33|Page
Put
ti
ngmonet
aryamountonanel
ementoff
inanci
alst
atement

DOUBLEENTRYANDACCOUNTI
NGEQUATI
ON

ACCOUNTI
NGEQUATI
ON

Thi
sist
heequat
iont
hatshowshowt
heasset
s(r
esour
ces)ofabusi
nesshav
ebeenf
inanced,
eit
her

sol
elyf
rom t
heowner(
Capi
tal
)orwi
tht
hecont
ri
but
ionofext
ernal
par
ti
es(
Liabi
l
iti
es)
.

Mat
hemat
ical
l
y,t
heaccount
ingequat
ioni
sdepi
ctedas;

Thi
sequat
ioncanal
sobewr
it
tenasAsset
s=Capi
tal
,whent
heownerhassol
elypr
ovi
dedt
he

f
inancesf
ort
heacqui
sit
ionoft
heasset
s.

AndAsset
s=Li
abi
l
iti
es,whenout
sider
shav
esol
elypr
ovi
dedt
hef
inancesf
ort
heacqui
sit
ionoft
he

asset
s.

34|
Page
Atev
erypoi
nti
nti
met
heequat
ionmustbal
ance.Thus,t
heasset
ssi
demustal
way
sbeequalt
othe

f
inanci
ngsi
de(
capi
tal
andl
i
abi
l
iti
es)
.

Ef
fect
sofTr
ansact
ionsonAccount
ingEquat
ion

Ev
eryt
ransact
ionabusi
nessunder
takesaf
fect
stheaccount
ingequat
ion.Thus,
theposi
ti
onofev
ery

or
gani
zat
ioni
saf
fect
edbybusi
nesst
ransact
ionst
heyunder
take.Youshoul
dbeabl
etodet
ermi
ne

t
heef
fectofev
erybusi
nesst
ransact
ionont
heaccount
ingequat
ion.

Thef
oll
owi
ngst
epswi
l
lgui
dey
oui
ndet
ermi
ningt
heef
fectofev
erybusi
nesst
ransact
ionont
he

account
ingequat
ion.

• I
dent
if
ythei
temsi
nvol
vedi
nthet
ransact
ions

• Det
ermi
newhet
hert
hei
tem i
sanasset
,al
i
abi
l
ityorcapi
tal
(owner
’sequi
ty)

• Det
ermi
newhet
hert
hei
tem hasi
ncr
easedordecr
easedasar
esul
toft
het
ransact
ion

• Expl
aint
heef
fectoft
het
ransact
ionont
heaccount
ingequat
ion.

I
ll
ust
rat
ion1

Tr
ansact
ion1

Jan1–St
art
edBusi
nesswi
thGH¢30,
000i
nbank

St
ep1:
Ther
eisGH¢30,
000att
hebank

35|
Page
Theowneri
ntr
oducedt
heGH¢30,
000

St
ep2:
TheGH¢30,
000att
hebusi
nessbankaccounti
sanAsset

Theowneri
ntr
oduci
ngsuchmounti
ntot
hebusi
nessi
sCapi
tal

St
ep3:
Asset(
Bankbal
ance)hav
eincr
easedbyGH¢30,
000

Capi
tal
hasal
soi
ncr
easedbyGH¢30,
000

St
ep4:
Howhast
het
ransact
ion1abov
eaf
fect
edt
heaccount
ingequat
ion

Asset
s(bankbal
ance)hasi
ncr
easedbyGH¢30,
000whi
l
eCapi
tal
hasal
soi
ncr
easedby

GH¢30,
000.

NB:
Inanswer
ingsuchquest
ions,onl
ythest
ep4i
srequi
red,t
her
estar
eser
vingasagui
deand

t
her
efor
eshoul
dnotber
epr
oducedasananswer
.

Tr
ansact
ion2

Jan5–Boughtst
ockofgoodspay
ingGH¢2,
000cheque

St
ep1:Ther
eisGH¢2,
000wor
thofi
nvent
ory(
stockofgoods)

Thepai
dbycheque(
bank)GH¢2,
000

St
ep2:
TheGH¢2,
000wor
thofi
nvent
oryi
sanAsset

Thepay
mentofGH¢2,
000t
hroughbanki
sanAsset

St
ep3:
Asset(
Inv
ent
ory
)hasi
ncr
easedbyGH¢2,
000

Asset(
Bankbal
ance)hasdecr
easedbyGH¢2,
000

St
ep4:
Howhast
het
ransact
ion2abov
eaf
fect
edt
heaccount
ingequat
ion

Asset(
Inv
ent
ory
)hasi
ncr
easedbyGH¢2,
000whi
l
eAsset(
Bankbal
ance)hasal
so

decr
easedbyGH¢2,
000.

I
n cer
tai
ntr
ansact
ions t
he or
gani
zat
ion may et
hermake a pr
ofi
torl
oses.How does such
36|Page
t
ransact
ionsaf
fectt
heaccount
ingequat
ion?I
nanswer
ingquest
ionsoft
hisnat
ure,onemustnot

l
eav
eoutt
heef
fectoft
hepr
ofi
torl
oss.

DOUBLEENTRY

Doubl
eent
rysy
stem wasi
ntr
oducedt
othebusi
nesswor
ldbyanI
tal
i
anmer
chantnamedLucas

Paci
olii
n1494A.
D.Thought
hesy
stemofr
ecor
dingbusi
nesst
ransact
ionsi
nasy
stemat
icmanner

hasor
igi
nat
edi
nIt
aly
,itwasper
fect
edi
nEngl
andandot
herEur
opeancount
ri
esdur
i he18thcent
ngt ury

onl
yi.
e.,
aft
ert
heI
ndust
ri
alRev
olut
ion.Many
count
ri
eshav
eadopt
edt
hissy
stem t
oday
.

Doubl
eEnt
rySy
stem

Ther
ear
enumer
oust
ransact
ionsi
nev
erybusi
nessor
gani
zat
ion.Eacht
ransact
ion,whencl
osel
y

anal
ysed,
rev
eal
stwoaspect
s(l
i
kewedi
dint
hecaseoft
heaccount
ingequat
ion)
.Oneaspect
wil
lbe

“
recei
vi
ngaspect
”or“
incomi
ngaspect
”or“
expenses/
lossaspect
”.
Thi
sist
ermedast
he“
Debi
t

aspect
”.Theot
heraspectwi
l
lbe“
giv
ingaspect
”or
“out
goi
ngaspect
”or“
income/
gai
naspect
”.Thi
sis

t
ermedast
he“
Credi
taspect
”.
Theset
woaspect
snamel
y“Debi
taspect
”and“
Credi
taspect
”for
mthe

basi
sofDoubl
eEnt
rySy
stem.

Thedoubl
eent
rysy
stem i
ssonamedsi
ncei
trecor
dsbot
htheaspect
sofat
ransact
ion.I
nshor
t,t
he

basi
cpr
inci
pleoft
hissy
stem i
s,f
orev
erydebi
t,t
her
emustbeacor
respondi
ngcr
edi
tofequal
amount

andf
orev
erycr
edi
t,
ther
emustbeacor
respondi
ngdebi
tofequal
amount
.

Ev
erybusi
nesst
ransact
ionhasat
wo-
fol
d ef
fectand t
hati
taf
fect
stwo account
sinopposi
te

di
rect
ionsandi
facompl
eter
ecor
dwer
etobemadeofeachsucht
ransact
ion,i
twoul
dbenecessar
y

t
odebi
toneaccountandcr
edi
tanot
heraccount
.It
ist
hisr
ecor
dingoft
het
wof
oldef
fectofev
ery

tr
ansact
iont
hathasgi
venr
iset
othet
erm Doubl
eEnt
rySy
stem”
.
37|Page
I
nsummar
y

Account
s Tor
ecor
d Ent
ryi
naccount
Asset I
ncrease Debit
Decrease Credi
t
Expense I
ncrease Debit
Decrease Credi
t
Li
abi
l
ity I
ncrease Credi
t
Decrease Debit
Equi
ty I
ncrease Credi
t
Decrease Debit
Rev
enue I
ncrease Credi
t
Decrease Debit

TheAccount
ingCy
cle

Account
ingcy
clei
sthesy
stemat
icandor
der
lypr
ocesst
hroughwhi
chaccount
ant
sgat
herr
elev
ant

account
ingdat
aandpr
ocesst
hem i
ntot
imel
yandr
elev
antf
inanci
alst
atement
sforcommuni
cat
ion

t
oint
erest
eduser
s.

Ther
ear
esi
x(6)di
sti
nctst
agesi
ntheaccount
ingcy
cleandeachoft
hesei
scr
uci
alt
othepr
epar
ati
on

ofr
eli
abl
eandr
elev
antf
inanci
alst
atement
sofeachor
gani
zat
ion.Thesear
e;

St
age1:
Dat
acol
l
ect
ion(
sour
cedocument
sont
ransact
ionsandev
ent
s)

St
age2:
Transact
ionsanal
ysi
s

38|
Page
St
age3:
Jour
nal
i
zing(
chr
onol
ogi
cal
recor
dofeconomi
cimpactoft
ransact
ionsonan

or
gani
sat
ion)

St
age4:
Post
ingt
oledger
s

St
age5:
Det
ermi
nat
ionofaccountbal
ancesandpr
epar
ati
onofTr
ial
Bal
ance,
and

St
age6:
Prepar
ati
onandi
nter
pret
ati
onoff
inal
account
s.

ENDOFSESSI
ONTHREETRYQUESTI
ONS

St
atet
heaccount
ingequat
ionandshow how eachoft
hef
oll
owi
ngt
ransact
ionsunder
takenby

PREKESELTDi
nMay2016canaf
fectt
heequat
ion:

1 Boughtof
fi
cef
urni
tur
ewi
thchequeGH¢10,
500

2 Pur
chasedgoodsf
orr
esal
eoncr
edi
tGH¢250,
000f
rom Adwoa

3 Pai
drentexpensesf
ort
hemont
hofFebr
uar
ywi
thchequeGH¢250

4 Sol
dgoodscost
ingGH¢50,
000oncr
edi
tGH¢90,
000t
oAnas

5 Ret
urnedgoodsGH¢25,
000t
oAdwoaat
radepay
abl
e

6 Sol
dgoodscost
ingGH¢25,
000f
orcashGH¢50,
000

7 At
taOko,t
hesol
eshar
ehol
deroft
hecompanyi
ntr
oducedaddi
ti
onalcapi
talof

GH¢90,
000bydeposi
ti
ngachequei
nthecompany
’sbankaccountf
or1,
000,
000or
dinar
y

shar
es

8 Thebusi
nessr
ecei
vedi
nter
estGH¢500oni
tssav
ingsaccount

9 Pur
chasedpr
epai
del
ect
ri
cit
ycar
dwor
thGH¢1,
000att
hebegi
nni
ngoft
hemont
h

10At
taOkogav
egoodswor
thGH¢3,
000t
oaf
ri
endasabi
rt
hdaygi
fton20thMay

11Pai
dAdwoaat
radepay
abl
eGH¢150,
000

12Anasat
rader
ecei
vabl
eret
urnedgoodsGH¢10,
000t
othebusi
nessf
orpoorpackagi
ng

39|
Page
SESSI
ONFOUR

ANALYSI
SOFTRANSACTI
ONSI
NTHEBOOKSOFACCOUNT

OVERVI
EW

Theaccount
ingpr
ocessbegi
nswi
tht
her
ecor
dingoft
ransact
ions.Howev
er,t
ransact
ionsar
efi
rst

r
ecor
dedchr
onol
ogi
cali
ndet
ail
sint
hebooksofor
igi
nalent
ry(
jour
nal
).Af
teraccount
ingdat
aar
e

r
ecor
dedi
nthebooksofor
igi
nalent
ry,t
heyar
epost
edi
ntol
edger
stobepr
ocessed(
classi
fi
edand

summar
ized)f
ort
hepr
epar
ati
onoff
inanci
alst
atement
swhi
chi
stheout
putoft
heaccount
ing

i
nfor
mat
ionsy
stem.Thi
ssessi
oni
ntr
oducest
udent
stot
hef
ir
stst
ageofr
ecor
dingt
ransact
ionsi
n

t
hebooksofor
igi
nalent
ry,t
hepr
ocessofpost
ingt
ransact
ionst
othev
ari
ousl
edger
sfol
l
owi
ngt
he

doubl
eent
ryandt
heext
ract
ionoft
ri
albal
ancef
rom l
edgerbal
ances.

LEARNI
NGOBJECTI
VES

 I
dent
if
ythebooksofaccount
ingandexpl
aint
hei
rnat
ureandpur
pose

 I
dent
if
ytheki
ndoft
ransact
ionst
ober
ecor
dedi
neacht
ypeofj
our
nal

 Recor
dtr
ansact
ionsi
nthebooksofor
igi
nal
ent
ry

 I
dent
if
yandpostt
ransact
ionsi
ntot
hei
rrespect
iveaccount
sint
hel
edger
s

 I
dent
if
yandexpl
aint
het
ypesofl
edgeraccount
s

 Bal
anceandcl
oseof
fledgeraccount
satanypoi
nti
nti
me
40|
Page
 Ext
ractandpr
epar
eanunadj
ust
edt
ri
albal
ance

BOOKSOFORI
GINALENTRY-JOURNALS

Thebooksi
nwhi
chat
ransact
ioni
srecor
dedf
ort
hef
ir
stt
imef
rom asour
cedocumentar
ecal
l
ed

BooksofOr
igi
nalEnt
ry,Pr
imeEnt
ryorDayBooks.Jour
nali
soneoft
hebooksofor
igi
nalent
ryi
n

whi
cht
ransact
ionsar
eor
igi
nal
l
yrecor
dedi
nachr
onol
ogi
cal(
day
-to-
day
)or
der
.Whenat
ransact
ion

occur
siti
sfi
rstr
ecor
dedi
nther
elev
antj
our
nal
bef
orepost
ingt
other
elev
antl
edgeraccount
s.

Ty
pesofJour
nal
s

1.CashBook(
singl
e,doubl
eort
hreecol
umncashbook)–usedf
orr
ecor
dingt
ransact
ions

i
nvol
vi
ngcashandchequer
ecei
ptsandcashandcheguepay
ment
s.

2.Pet
tyCashBook–usedf
orr
ecor
dingt
ransact
ionsi
nvol
vi
ngr
ecei
ptsandpay
mentofpet
ty

expenses

3.Sal
esDayBook/
Sal
esJour
nal
-usedf
orr
ecor
dingdai
l
ysal
est
ransact
ionsoncr
edi
tbasi
s.

4.Sal
esRet
urnsJour
nal
/Ret
urnsI
nwar
dsDayBook–usedi
nrecor
dingt
ransact
ionsi
nvol
vi
ng

goodsr
etur
nedbycust
omer
s.

5.Pur
chasesDayBook/
Pur
chasesJour
nal-usedf
orr
ecor
dingdai
l
ypur
chasest
ransact
ionson

cr
edi
tbasi
s.

6.Pur
chasesRet
urnsDayBook/Ret
urnsOut
war
dsJour
nal-usedi
nrecor
dingt
ransact
ions

i
nvol
vi
nggoodsr
etur
nedt
osuppl
i
ers.

41|
Page
7.Gener
alJour
nal
/Jour
nal
Proper
-usedf
or;

a.passi
ngopeni
ngent
ri
esf
oracommenci
ngbusi
nessort
obegi
nanew account
ing

per
iod

b.r
ecor
dingacqui
sit
ionanddi
sposal
ofasset
soncr
edi
t

c.passi
ngt
her
elev
antent
ri
est
opostt
ransact
ionsf
rom daybookst
oledgeraccount
s

d.passi
ngent
ri
esi
nrespectoft
ransf
ersbet
weenaccount
s

e.passi
ngcl
osi
ngent
ri
esatendofaccount
ingper
iodort
ocl
oset
hebooksi
nthecaseof

l
i
qui
dat
ion

f
. Anyot
hert
ransact
iont
hatcannotber
ecor
dedi
nanyoft
heot
herday
books

For
matofJour
nal
s

NameofJour
nal
(Sal
es,
Pur
chases,
Ret
urni
nwar
ds/
out
war
ds)

Dat
e Det
ail Ref LF Amt

Gener
alJour
nal

Dat
e Det
ail LF Dr Cr

Nameoft
heaccountt
obedebi
ted

Nameoft
heaccountt
obecr
edi
ted

Thenar
rat
ive

NB:Att
hisl
evelofaccount
ing,wewi
l
lconcent
rat
eont
hegener
alJour
nal
.Thi
simpl
i
est
hatwewi
l
l

42|
Page
uset
heGener
alJour
nalast
heonl
ybookofor
igi
nalent
ry.Aswemov
efur
theri
naccount
ing,t
he

neededcl
assi
fi
cat
ionswi
l
lbedone.

Char
act
eri
sti
csofaJour
nal

 I
tist
hef
ir
stsuccessf
ulst
epoft
hedoubl
eent
rysy
stem.At
ransact
ioni
srecor
dedf
ir
stofal
li
nthe

j
our
nal
.

 At
ransact
ioni
srecor
dedont
hesamedayi
ttakespl
ace.

 Tr
ansact
ionsar
erecor
dedchr
onol
ogi
cal
l
y.

Adv
ant
agesofaJour
nal

 Eacht
ransact
ioni
srecor
dedassoonasi
ttakespl
ace.Sopossi
bil
i
tyofanyt
ransact
ionbei
ng

omi
tt
edf
rom t
hebooksofaccounti
smi
nimi
zed.

 Si
ncet
het
ransact
ionsar
ekeptr
ecor
dedi
njour
nal
,chr
onol
ogi
cal
l
ywi
thnar
rat
ion,i
tcanbeeasi
l
y

ascer
tai
nedwhenandwhyat
ransact
ionhast
akenpl
ace.

 Asar
esul
tledgeri
skeptt
idyandbr
ief
.

 Jour
nal
showst
hecompl
etest
oryofat
ransact
ioni
noneent
ry.

 Anymi
stakei
nledgercanbeeasi
l
ydet
ect
edwi
tht
hehel
pofj
our
nal
.

JOURNALS/
DAYBOOKSANDTHEI
RSOURCEDOCUMENTS.

43|
Page
Book Sour
ceDocument

Cashbook Recei
pts/
adv
icesf
orm banker
set
c.

Pet
tycashbook Pet
tycashv
oucher
/recei
ptsf
orpay
ment
s

Sal
esdaybook Sal
esi
nvoi
ce

Pur
chasesdaybook Pur
chasesi
nvoi
ce

Sal
esr
etur
ns Cr
edi
tnot
etocust
omer

Pur
chasesr
etur
ns Cr
edi
tnot
efr
om suppl
i
eri
ndi
cat
ingaccept
ance

(
ordebi
tnot
efr
om ust
osuppl
i
er)

Jour
nal
proper Voucher
s/al
lot
her
sabov
easi
tbeusedf
oral
l

St
epsi
nJour
nal
i
sing

Thepr
ocessofanal
ysi
ngt
hebusi
nesst
ransact
ionsundert
heheadsofdebi
tandcr
edi
tandr
ecor
ding

t
hem i
ntheJour
nal
iscal
l
edJour
nal
i
sing.Anent
rymadei
nthej
our
nal
iscal
l
eda‘
Jour
nal
Ent
ry’
.

St
ep1:
Det
ermi
net
het
woaccount
swhi
char
einv
olv
edi
nthet
ransact
ion.

St
ep2:
Classi
fyt
heabov
etwoaccount
sunderPer
sonal
,Real
orNomi
nal
.

St
ep3:
Findoutt
her
ulesofdebi
tandcr
edi
tfort
heabov
etwoaccount
s.

St
ep4:
Ident
if
ywhi
chaccounti
stobedebi
tedandwhi
chaccount
ist
obecr
edi
ted.

St
ep5:
Recor
dthedat
eoft
ransact
ioni
nthedat
ecol
umn.

NB:
Thesequenceoft
hedat
esandmont
hsshoul
dbest
ri
ctl
ymai
ntai
ned.

St
ep6:
Ent
ert
henameoft
heaccountt
obedebi
tedi
nthedet
ail
scol
umnv
erycl
oset
othe

l
efthandsi
deoft
hedet
ail
scol
umnf
oll
owedbyt
heabbr
evi
ati
onDr
.int
hesame

l
i
ne.Agai
nstt
his,
theamountt
obedebi
tedi
swr
it
teni
nthedebi
tamountcol
umn

44|
Page
i
nthesamel
i
ne.

St
ep7;
Wri
tet
henameoft
heaccountt
obecr
edi
tedi
nthesecondl
i
nel
eav
ingaf
ew

spaceawayf
rom t
hemar
gini
nthedet
ail
scol
umn.Agai
nstt
his,t
heamount
tobecr
edi
tedi
s

wr
it
teni
nthecr
edi
tamountcol
umni
nthesamel
i
ne.

St
ep8:
Wri
tet
henar
rat
ionwi
thi
nbr
acket
sint
henextl
i
nei
nthedet
ail
scol
umn.

St
ep9:
Drawal
i
neacr
osst
heent
ir
edet
ail
scol
umnt
osepar
ateonej
our
nal
ent
ryf
rom t
he

ot
her
.

e1:Aug.20th;
Exampl Pai
dRentexpensesbyChequeGH¢2,
500.

Jour
nal
i
set
het
ransact
ionabov
e.

Fol
l
owi
ngt
hest
epsf
orj
our
nal
i
singabov
e,bel
owi
sthesol
uti
ont
otheExampl
e1.

Gener
alJour
nal

Dat
e Det
ail LF Dr Cr

GH¢ GH¢

Aug. BankAccount 2,
500

20 RentExpensesAccount 2,
500

(
Bei
ngRentexpensespai
d)

Exampl
e2:

Jour
nal
i
set
hef
oll
owi
ngt
ransact
ionsi
nthebooksofAmarandCoEnt
erpr
ise.

45|
Page
2015

Mar
ch1 Mr
.Amarst
art
edbusi
nessbyi
ntr
oduci
ngGH¢75,
000cashi
ntot
he

busi
nessAmarandCoEnt
erpr
ise.

2 Boughtgoodsf
orcashGH¢25,
000

3 Sol
dgoodsf
orGH¢40,
000cheque

5 Boughtgoodsoncr
edi
tfr
om Zoobi
Ltd.GH¢29,
000

8 Sol
dgoodsoncr
edi
ttoRober
tandSonsGH¢37,
000

11 Recei
vedgoodswor
thGH¢6,
000f
rom Rober
tandSonsduet
owr
ongspeci
fi
cat
ion

13 Pai
dtoZoobi
Ltd.GH¢15,
000bycheque

14 Ret
urnedgoodswor
thGH¢7,
500t
oZoobi
Ltdduet
owr
ongspeci
fi
cat
ion

15 Pai
drentexpenseGH¢1,
500bycheque

20 Boughtf
urni
tur
eforcashGH¢7,
000

Sol
uti
on

Gener
alJour
nal
Dat
e Det
ail LF Dr Cr
GH¢ GH¢
1-
Mar CashAccount 75,
000

46|
Page
Capital Account 75,
000
(Beingst arti
ngcapi talf
orthebusiness)
2-
Mar PurchasesAccount 250,
000
CashAccount 25,
000
(Beinggoodspur chasedwi thcash)
3-
Mar BankAccount 40,
000
SalesAccount 40,
000
(Beinggoodssol dforcheque)
5-
Mar PurchasesAccount 29,
000
Zoobi LtdAccount 29,
000
(Beinggoodspur chasedoncr edit
)
8-
Mar Rober t&SonsLt dAccount 37,
000
SalesAccount 37,
000
(Beinggoodssol doncr edi
t)
11-
Mar ReturnInwar dsAccount s 6,
000
Rober t&SonsLt dAccount s 6,
000
(Beingboughtgoodsr eturnedbecauseof
wrongspeci f i
cati
on)
13-
Mar Zoobi LtdAccount 15,
000
BankAccount 15,
000
(Beingpay mentmadef orgoodsbought)
14-
Mar Zoobi LtdAccount 7,
500
Retur nOut wardsAccount s 7,
500
(Beingboughtgoodsr eturnedbecauseof
wrongspeci f i
cati
on)
15-
Mar RentAccount s 1,
500
BankAccount s 1,
500
(BeingRentexpensepai dbycheque)
20-
Mar Furnitur
e 7,
000
CashAccount s 7,
000
(Beingfur nitureboughtwi t
hcash)

LEDGERANDTYPESOFLEDGER

LEDGER

Theyar
ebookswhi
chcont
ainsacondensedandcl
assi
fi
edr
ecor
dofal
lthemonet
aryt
ransact
ionsof

47|
Page
t
hebusi
nessgener
all
ybr
ought
,tr
ansf
err
edorpost
edf
rom t
hebooksofor
igi
nalent
ry.Ledger
sar
e

al
socal
l
edt
heki
ngofal
lbooksofaccount
sbecauseal
lent
ri
esf
rom t
hej
our
nal
smustbepost
edt
o

t
hev
ari
ousaccount
sint
hel
edger
.

Af
terat
ransact
ionhasf
ir
stbeenr
ecor
dedi
nthebooksofor
igi
nalent
ry(
jour
nal
s),t
heyar
epost
ed

i
ntot
hei
rspeci
fi
candappr
opr
iat
eledgerwher
eanaccounti
smai
ntai
nedf
ort
hatpur
pose.Al
edgeri
s

si
mpl
yapr
inci
pal
booki
nwhi
chv
ari
ousaccount
sofagi
vencl
assar
emai
ntai
ned.

Feat
uresofaLedger

• I
thast
woi
dent
ical
sides-l
efthandsi
de(
debi
tsi
de)andr
ighthandsi
de(
credi
tsi
de)
.

• Thedi
ff
erenceoft
het
otal
oft
het
wosi
desr
epr
esentbal
anceont
hel
edgeraccount
.Ift
het
otal

oft
het
wosi
desar
eequal
ther
ewi
l
lbenobal
ance.

• Usual
l
ybal
ancei
sdr
awnatt
heendofy
earandr
ecor
dedont
hedef
ici
tsi
det
omaket
het
wo

si
desequal
.Thi
sbal
ancei
sknownascl
osi
ngbal
ance.

• Thecl
osi
ngbal
anceoft
hecur
renty
earwi
l
lbet
heopeni
ngbal
anceoft
henexty
ear
.

Ty
pesofLedger
s

Basi
cal
l
y,t
her
ear
ethr
eemai
nledger
sforat
ypi
cal
buy
ingandsel
l
ingbusi
ness.Theyar
e;

1.Sal
es Ledger
-it cont
ains t
he Per
sonalaccount
s of i
ndi
vi
dualcust
omer
sto whom

goods/
ser
vicesar
esol
doncr
edi
tforpay
ment
stober
ecei
vedl
ater
.Thati
stosayt
hosewho

owet
hebusi
nessorsi
mpl
y,t
heaccount
sofi
ndi
vi
dual
Trader
ecei
vabl
es.

2.Pur
chasesLedger
-itcont
ainst
hePer
sonalaccount
sofi
ndi
vi
dualsuppl
i
ers/
tradecr
edi
tor
s

f
rom whom goods/
ser
vicesar
eboughtoncr
edi
tforpay
ment
stobemadel
ater
.Thati
stosay

48|
Page
t
hosewhom t
hebusi
nessowesorsi
mpl
y,t
heaccount
sofi
ndi
vi
dual
Tradepay
abl
es

3.Gener
alLedger
-itcont
ainsal
lot
heraccount
sthant
radedebt
orsandt
radecr
edi
tor
s.I
nef
fect
,

al
lthei
mper
sonalaccount
sincl
udi
ngex
penses,i
ncomes,asset
s,l
i
abi
l
iti
es,capi
tal
,cr
edi
tor
s

f
orf
ixedasset
s,et
c.ar
efoundi
nthegener
all
edger
.

Recor
dingTr
ansact
ionsi
ntheLedger

I
nwr
it
ingt
heeconomi
chi
stor
yofanyor
gani
zat
ion,
thet
ransact
ionsr
elat
ingt
oeachoft
heel
ement
s

off
inanci
alst
atement
s(asset
s,l
i
abi
l
iti
es,
capi
tal
,i
ncomeandexpenses)ar
erecor
dedi
nan“
Account
”,

al
soknownast
he“
T’Account
s”.

St
epsi
nPost
ingTr
ansact
ionsi
ntheLedger

Fol
l
owt
hesest
epst
opostt
ransact
ionsf
romt
hej
our
nal
tot
her
espect
ivel
edgeraccount(
T’Account
).

St
ep1:
Ident
if
ytheaccount
swhi
char
einv
olv
edi
nthet
ransact
ion.

St
ep2:
Findoutt
her
ulesofdebi
tandcr
edi
tfort
heabov
etwoaccount
s.

St
ep3:
Ident
if
ywhi
chaccounti
stobedebi
tedandwhi
chaccounti
stobecr
edi
ted(
usi
ng

t
hedoubl
eent
rypr
inci
pledi
scussedear
li
er)
.

St
ep4:
Recor
dthedat
eoft
ransact
ioni
nthedat
ecol
umnont
hesi
deoft
heT’
Account

wher
eyouar
emaki
ngt
heent
ry

St
ep5:
Ent
ert
henameoft
heaccountt
hatwi
l
lcar
ryt
hecor
respondentent
ryt
otheonei
n

whi
chy
ouar
emaki
ngt
heent
ry

St
ep6:
Repeatst
ep1t
o5i
nthecor
respondi
ngTAccountt
ocompl
etet
hedoubl
eent
ry

49|
Page
Cont
inuat
ionofExampl
e2:

Jour
nal
i
set
hef
oll
owi
ngt
ransact
ionsi
nthebooksofAmarandCoEnt
erpr
iseandpostt
hem i
nthe

Ledger
:-
2015

Mar
ch1 Mr
.Amarst
art
edbusi
nessbyi
ntr
oduci
ngGH¢75,
000cashi
ntot
he

busi
nessAmarandCoEnt
erpr
ise.

2 Boughtgoodsf
orcashGH¢25,
000

3 Sol
dgoodsf
orGH¢40,
000cheque

5 Boughtgoodsoncr
edi
tfr
om Zoobi
Ltd.GH¢29,
000

8 Sol
dgoodsoncr
edi
ttoRober
tandSonsGH¢37,
000

11 Recei
vedgoodswor
thGH¢6,
000f
rom Rober
tandSonsduet
owr
ongspeci
fi
cat
ion

13 Pai
dtoZoobi
Ltd.GH¢15,
000bycheque

14 Ret
urnedgoodswor
thGH¢7,
500t
oZoobi
Ltdduet
owr
ongspeci
fi
cat
ion

15 Pai
drentexpenseGH¢1,
500bycheque

20 Boughtf
urni
tur
eforcashGH¢7,
000

I
nthef
ir
stt
ransact
ion,
twomai
ncomponent
soft
heor
gani
zat
ionar
eaf
fect
ed

Asset
s=busi
nessnowhascash

Capi
tal
=owneri
ntr
oducedmoneyi
ntobusi
ness

I
nanal
ysi
ngt
het
ransact
iont
odet
ermi
newhi
chaccount
swi
l
lbedebi
tedandcr
edi
tedr
espect
ivel
y,i
t

i
simpor
tantt
onot
ethef
oll
owi
ng:

I
nint
roduci
ngGH¢75,
000i
ntot
hebusi
ness,

Mr
.Amar- t
heGi
verVal
uesoCr
edi
tMrAmarAccount
s

Busi
ness(
AmarandCoEnt
erpr
ise)- t
heRecei
verofVal
uesoDebi
t

50|
Page
Si
nceMr
.Amari
stheowneroft
hebusi
ness(
AmarandCoEnt
erpr
ise)
,hi
sdet
ail
swi
l
lber
ecor
dedi
n

t
heaccount
scal
l
edCAPI
TALACCOUNTS,
andcr
edi
ted.Thi
srepr
esent
sMR.Amar
’sf
inanci
ali
nter
est

i
nthebusi
ness,
consi
stentwi
tht
heBusi
nessEnt
it
yConcept
s

AmarandCoEnt
erpr
isei
sther
ecei
verofv
aluei
nthef
orm ofCash.Thi
saspectcr
eat
eanAsset–

Cashbal
ance.Sot
heAccountcal
l
edCASHACCOUNTwi
l
lbeopenedanddebi
ted.

Gi
verofVal
ue - Capi
tal - Cr
edi
tSal
es

Recei
verofVal
ue - Bank - Debi
tBank

CashAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March1 Capi
tal
Account 75,
000

Capi
tal
Account

Dat
e Det
ail
s GH¢ Date Detai
l
s GH¢
2015
March1 CashAccount 75,
000

I
nthesecondt
ransact
ion,
onl
yasset
sar
eaf
fect
ed,
butont
wodi
ff
erentasset
s

Asset
s=busi
nesshasr
ecei
vedgoods(
inv
ent
ory
)

Asset
s=busi
nesshasgi
vencashout

I
nanal
ysi
ngt
het
ransact
iont
odet
ermi
newhi
chaccount
swi
l
lbedebi
tedandcr
edi
tedr
espect
ivel
y,i
t

i
simpor
tantt
onot
ethef
oll
owi
ng:
51|Page
I
nbuy
inggoodsGH¢25,
000andpay
ingbycash,

Busi
ness(
AmarandCoEnt
erpr
ise)- t
he Gi
verofVal
ue (
Decr
eased i
n cash)so Cr
edi
tCash

Account
s

Busi
ness(
AmarandCoEnt
erpr
ise)- t
he Recei
ver of Val
ue (
Incr
eased i
nInv
ent
oryt
hrough

Pur
chases)soDebi
tPur
chaseAccount

Gi
verofVal
ue - Cash - Cr
edi
tSal
es

Recei
verofVal
ue - Pur
chase - Debi
tBank

Pur
chasesAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March2 CashAccount 25,
000

CashAccount

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March2 Inv
ent
oryAccount 25,
000

I
nthet
hir
dtr
ansact
ion,
twomai
ncomponent
soft
heor
gani
zat
ionar
eaf
fect
ed

Asset
s=busi
nesshasr
ecei
vedmoneyi
ntobank

I
ncome=busi
nesshassol
dgoodsi
ncr
easi
ngt
hebusi
nessi
ncome(
sal
es)

I
nanal
yzi
ngt
het
ransact
iont
odet
ermi
newhi
chaccount
swi
l
lbedebi
tedandcr
edi
tedr
espect
ivel
y,i
t

i
simpor
tantt
onot
ethef
oll
owi
ng:

I
nsell
i
ngt
hegoodsGH¢40,
000andr
ecei
vi
ngcheque,
52|Page
Gi
verofVal
ue - Sal
es(
sel
l
ingofgoods) - Cr
edi
tSal
es

Recei
verofVal
ue - Bank(
recei
vedchequeaf
tert
hesal
e) - Debi
tBank

BankAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March3 Sal
esAccount 40,
000

Sal
esAccount

Dat
e Det
ail
s GH¢ Dat e Detai
l
s GH¢
2015
March3BankAccount 40,
000

Basedont
heabov
e,anal
yset
her
estoft
het
ransact
ionsandr
ecor
dthem i
nther
espect
iveaccount
s.

Compar
eyouanswer
stot
heent
ri
esi
nthev
ari
ousaccount
sasshowni
nther
estoft
hissect
ion.

Gener
alLedger

CashAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March1 Capi
tal
Account 75,
000 Mar
ch 2 I nv
entor
yAccount 25,
000
20 Fur
nit
ureAccount 7,
000

Capi
tal
Account

Dat
e Det
ail
s GH¢ Date Detai
l
s GH¢
2015
March1 CashAccount 75,
000

53|
Page
BankAccount

Date Det
ail
s GH¢ Date Detai
ls GH¢
2015 2015
March3 Sal
esAccount 40,
000 March13 ZoobiAccount 15,
000
March15 RentExp.Account 1,
500

Sal
esAccount

Dat
e Det
ail
s GH¢ Dat e Detai
l
s GH¢
2015
March 3 BankAccount 40,
000
8Rober
t&SonsAcc. 37,
000
Pur
chasesAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March2 CashAccount 25, 000
March 5 ZoobiAccount 29,
000

Ret
urnI
nwar
dsAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March11 Rober
t&SonsAcc.6,
000

Ret
urnOut
war
dsAccount

Date Det
ail
s GH¢ Date Det
ail
s GH¢
2015 2015
March14 Zoobi
Account 7,
500

RentExpenseAccount
54|
Page
Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March15 BankAccount 1,
500

Fur
nit
ureAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March20 CashAccount 7,
000

Sal
esLedger
Rober
t&SonsAccount

Date Det
ail
s GH¢ Date Det
ail
s GH¢
2015 2015
March 8 Sal
esAccount 37,
000 Mar
ch11 Ret.I
nwar
dsAcc. 6,
000

Pur
chaseLedger
Zoobi
Account

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March13 BankAccount 15,
000March 5 Pur
chasesAccount29,
000
14 Ret.Out
wards Acc.

Bal
anci
ngof
fAccount
s/Ledger
sandExt
ract
ionofTr
ial
Bal
ance

Bal
anci
ng-
offAccount
s

Att
heendoft
heper
iod,
thet
otal
soft
hedebi
tsi
deofanaccountshoul
dbeequalt
othet
otal
soft
he

cr
edi
tsi
de(
dual
i
tyconcept
).
Tobal
anceof
faccount
smeanst
oputi
nabal
anci
ngf
igur
e(st
ri
ki
nga

55|
Page
bal
ance)i
nanaccountt
omakesur
ethatbot
hdebi
tandcr
edi
tsi
des’t
otal
sar
eequal
.Thebal
anci
ng

f
igur
eshoul
dbegi
nthenextper
iodasei
theranassetoral
i
abi
l
ity
.

Howt
oBal
ance-
offAccount
s

 Cast(
sum up)bot
hthedebi
tandcr
edi
tent
ri
esoft
heaccountandnot
ethem.

 Whi
chev
eri
slar
gerbecomest
het
otal
sofbot
hsi
desoft
heaccount
.

 Det
ermi
net
hedi
ff
erencebet
weent
hesumsnot
ed(
thi
sist
hebal
anci
ngf
igur
e).

 I
nser
tthebal
anci
ngf
igur
eatt
hesi
dewi
tht
hesmal
l
estsum sot
hatbot
hsi
desar
eequal(
thi
s

i
sthebal
ancec/
dorc/
f).

 Tr
ansf
ert
hebal
anci
ngf
igur
etot
heopposi
tesi
deofwher
ethebal
ancec/
dbel
owt
het
otal
s.

(
Thi
sisbal
anceb/
dorb/
f).

 Thebal
ancec/
dshoul
dhav
ethedat
eoft
hel
astdayoft
heper
iodandt
hebal
anceb/
dshoul
d

hav
ethedat
eofdaybegi
nni
ngt
heper
iod.

 Thesi
deoft
heaccountwher
ethebal
anceb/
disdet
ermi
nest
henameoft
heaccountbal
ance

Gener
alLedger
CashAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015
March1 Capi
tal
Account 75,
000 Mar
ch 2 I nv
entor
yAccount 25,
000
20 Fur
nit
ureAccount 7,
000
31 Bal
ancec/d 43,
000
75,
000 75,
000
Apr
il1 Bal
anceb/
d 43,
000

Capi
tal
Account

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015

56|
Page
Mar
ch 31 Bal
ancec/
d 75,
000 Mar
ch1 CashAccount 75,
000
75,
000 75,
000
Apr
il1 Bal
anceb/d 75,000

BankAccount

Date Det
ail
s GH¢ Dat e Detai
ls GH¢
2015 2015
March3 Sal
esAccount 40, 000 March13 Zoobi Account 15,
000
March15 RentExp.Account 1, 500
31 Bal ancec/
d 23,
500
40,
000 25,
000
Apr
il1 Bal
anceb/d 23,
500
SalesAccount

Date Det
ail
s GH¢ Date Det
ail
s GH¢
2015 2015
March 31 Bal ancec/d 77,
000 Mar
ch 3 BankAccount 40,
000
8 Rober
t&SonsAcc. 37,
000
77,
000 77,
000
Apr
il1 Bal
anceb/
d 77,000

Pur
chasesAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March2 CashAccount 25,
000March 31 Bal
ancec/
d 54,
000
March 5 ZoobiAccount 29, 000
54,000 54,
000
Apr
il1 Bal
anceb/d 54,000

Ret
urnI
nwar
dsAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March11 Rober
t&SonsAcc.6,000March 31 Bal
ancec/
d 6,
000
6,
000 6,
000
Apr
il1 Bal
anceb/
d 6,
000

Ret
urnOut
war
dsAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015

57|
Page
Mar
ch 31 Bal
ancec/d 7,
500 March14 ZoobiAccount 7,
500
7,
500 7,500
Apr
il1 Bal
anceb/ d 7,
500

RentExpenseAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March15 BankAccount 1,
500 March 31 Bal
ancec/
d 1,
500
1,
500 1,
500
Apr
il1 Bal
anceb/d 1,
500

Fur
nit
ureAccount

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March20 CashAccount 7,
000 March 31 Bal
ancec/
d 7,
000
7,
000 7,
000
Apr
il1 Bal
anceb/d 7,
000

Sal
esLedger
Rober
t&SonsAccount

Date Det
ail
s GH¢ Date Det
ail
s GH¢
2015 2015
March 8 Sal
esAccount 37,
000 March11 Ret .Inwar
dsAcc. 6,
000
31 Balancec/d 31,
000
37,
000 37,
000
Apr
il1 Bal
anceb/
d 31,
000

Pur
chaseLedger
Zoobi
Account

Date Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
March13 BankAccount 15,
000March 5 Pur
chasesAccount29,
000
14 Ret.Out
wards Acc. 7,
500
31 Bal
ancec/d 6,500

58|
Page
29,
000 29,
000
Apr
il1 Bal
anceb/
d 6,
500

THETRI
ALBALANCE

I
nthepr
evi
oussect
ion,y
ouhav
elear
nthow t
orecor
dandcl
assi
fyt
het
ransact
ionsi
nthev
ari
ous

account
sal
ongwi
thbal
anci
ngt
her
eof
.Thenextst
epi
ntheaccount
ingpr
ocessi
stopr
epar
ea

st
atementt
ocheckt
hear
it
hmet
icalaccur
acyoft
het
ransact
ionsr
ecor
dedsof
or.
Thi
sst
atementi
s

cal
l
ed‘
Tri
alBal
ance’
.

Tr
ialbal
ancei
sast
atementwhi
chshowsdebi
tbal
ancesandcr
edi
tbal
ancesofal
laccount
sint
he

l
edger
.Si
nce,ev
erydebi
tshoul
dhav
eacor
respondi
ngcr
edi
taspert
her
ulesofdoubl
eent
rysy
stem,

t
het
otal
oft
hedebi
tbal
ancesandcr
edi
tbal
ancesshoul
dagr
ee.I
ncase,
ther
eisadi
ff
erence,
onehas

t
ocheckt
hecor
rect
nessoft
hebal
ancesbr
oughtf
orwar
dfr
om t
her
espect
iveaccount
s.Tr
ialbal
ance

canbepr
epar
edi
nanydat
epr
ovi
dedaccount
sar
ebal
anced

Obj
ect
ivesofExt
ract
ingTr
ial
Bal
ance

Theobj
ect
ivesofpr
epar
ingat
ri
albal
ancear
e:

Tocheckt
hear
it
hmet
ical
accur
acyoft
hel
edgeraccount
s.

Tol
ocat
etheer
ror
s.

Tof
aci
l
itat
ethepr
epar
ati
onoff
inal
account
s.

Poi
ntst
obenot
ed:

 Dat
eonwhi
cht
ri
albal
ancei
spr
epar
edshoul
dbement
ionedatt
het
op.

 NameofAccountcol
umn(
Det
ail
s)cont
ainst
hel
i
stofal
ll
edger
account
s.

59|
Page
 I
nthedebi
tcol
umn,
debi
tbal
anceoft
her
espect
iveaccount
isent
ered.

 Cr
edi
tbal
anceoft
her
espect
iveaccounti
swr
it
teni
nthecr
edi
tcol
umn.

 Thel
astt
wocol
umnsar
etot
all
edatt
heend

AmarandCoEnt
erpr
ise

Tr
ial
Bal
anceasatMar
ch31,
2015

Det
ail
s Debi
t Cr
edi
t

GH¢ GH¢

CashA/
c 43,
000

Capi
tal
A/c 75,
000

BankA/
c 23,
500

Sal
esA/
c 77,
000

Pur
chaseA/
c 54,
000

Ret
urnI
nwar
dsA/
c 6,
000

Ret
urnOut
war
dsA/
c 7,
500

RentExpensesA/
c 1,
500

AccountRecei
vabl
e–Rober
t&SonsA/
c 31,
000

AccountPay
abl
e–Zoobi
LtdA/
c 6,
500

Fur
nit
ureA/
c 7,
000

60|
Page
166,
000 166,
000

ENDOFSESSI
ONFOURTRYQUESTI
ONS

1.Jour
nal
i
zet
hef
oll
owi
ngt
ransact
ions

Dat
e Tr
ansact
ions GH¢

2014

Jan.
1 St
art
edbusi
nesswi
thcash 50,
000

Jan.
3 Sol
dGoodst
oRohan 40,
000

Jan.
7 Goodspur
chasedf
rom Kar
ikar
i 20,
000

Jan.
20 Pai
dRent 500

Jan.
25 Commi
ssi
onRecei
ved 200

Jan.
30 Machi
ner
ypur
chased 10,
000

2.Mr
s.AmandaBoat
engcommencedherbusi
nesswi
tht
hef
oll
owi
ngi
n2012;

61|
Page
GH¢

Pl
antandMachi
ner
y 55,
000

St
ock 165,
000

Fur
nit
ure 7,
000

Cash 94,
000

Cr
edi
tor
s; Exhi
bitLt
d 22,
000

Pi
nkSheetl
td 43,
300

Debt
ors; Af
fi
dav
itLt
d 54,
300

Capi
tal 310,
000

Thef
oll
owi
ngt
ookpl
acei
ntheper
iodof2012.

 AnamountofGH¢6,
000waspai
dasadv
ancer
entf
ort
hreemont
hs.

 Pai
dGH¢60,
000cashont
hepur
chaseofequi
pmentcost
ing.

 Pur
chasedof
fi
cesuppl
i
escost
ingGH¢17,
600onaccountFr
om PapaKakaLt
d.

 Pr
ovi
dedser
vicest
oit
scust
omer
sandr
ecei
vedGH¢88,
500i
ncash.

 Pai
dtheaccount
spay
abl
eont
heof
fi
cesuppl
i
espur
chasedear
li
er.

 Recei
vedGH¢32,
900f
rom t
hesal
eofgoodst
oAf
fi
dav
itl
tdbycheque.

 Sol
dgoodswor
thGH¢30,
000t
oYaanom l
tdoncr
edi
t.

 Pur
chasedof
fi
cesuppl
i
escost
ingGH¢5,
200onaccountf
rom Exhi
bitLt
d.

 Pai
dwagest
oit
sempl
oyeesf
ort
heGH¢19,
100bycheque.

 Pai
del
ect
ri
ci
tyandTel
ephonebi
l
lofGH¢2,
470andGH¢1,
250r
espect
ivel
yal
lbycash.

Requi
red:

i
.Recor
dtheabov
etr
ansact
ionsi
nther
elev
antl
edgeraccount
s

i
i.Ext
ractat
ri
albal
anceasatt
heendoft
heper
iod31stAugust
,2012.
62|Page
3. Mr
.Koomsonst
art
edbusi
nesswi
thcashofGH¢20,
000,l
andandbui
l
dingv
aluedatGH¢50,
000

andaToy
otaMi
nibusv
aluedatGH¢20,
000.

Dur
ingt
hef
ir
stmont
hofoper
ati
onsi
nSept
ember
,2014,
thef
oll
owi
ngt
ransact
ionst
ookpl
ace:

Sept
.1:
Credi
tpur
chaseofgoodsf
rom Uni
l
everamount
edt
oGH¢10,
000.

Sept
.2Cashsal
esofGH¢8,
000

Sept
.2:
Credi
tsal
est
o:MensahEnt
erpr
iseGH¢2,
000;
Kof
iBaduGH¢1,
000

Sept
.3:
Pur
chasedgoodst
otal
i
ngGH¢5,
000,
pay
mentef
fect
edi
nst
ant
lybycash.

Sept
.5:
Cashsal
esofGH¢3,
000pai
ddi
recti
ntot
hebank.

Sept
.8:
Boughtst
ati
oner
iescost
ingGH¢500oncashbasi
s

Sept
.10:
CashbankedGH¢10,
000

Sept
.10:
MensahEnt
erpr
iser
etur
nedgoodsv
aluedatGH¢800.

Sept
.12:
Recei
vedachequeofGH¢1,
000f
rom Kof
iBadu.

Sept
.15:
Boughtf
ixt
uresoncr
edi
tfr
om KpogasGH¢1,
200.

Sept
.15:
Sol
dgoodsf
orcashGH¢3000.

Sept
.15:
Recei
vedf
rom MensahEnt
erpr
isecashofGH¢1,
200.

Sept
.17:
Wit
hdr
ewcashf
rom bankf
orbusi
nessuseGH¢5,
000.

Sept
.17:Mr
.Koomsonpai
dint
othebusi
nessbankaccountanamountofGH¢4,
000f
rom hi
s

per
sonal
sav
ings.
63|
Page
Sept
.17:
Pur
chasedgoodsf
orcashGH¢5,
000.

Sept
.18:
Cashsal
esamount
ingt
oGH¢6,
000.

Sept
.18:
Pai
del
ect
ri
cit
ybi
l
lofGH¢300bycheque.

Sept
.18:
Pai
dwagesi
ncashGH¢200.

Sept
.20:
Issuedchequewi
thav
alueofGH¢8,
000t
oUni
l
everLt
d.

Sept
.25:
Mr.Koomsonwi
thdr
ewGH¢500f
rom t
hebankaccountf
orhi
sper
sonal
use.

Requi
red:

i
.Recor
dtheabov
etr
ansact
ionsi
ntheGener
alJour
nal

i
i
.Recor
dtheabov
etr
ansact
ionsi
nther
elev
antl
edgeraccount
s

i
i
i.Ext
ractat
ri
albal
anceasatt
heendoft
heper
iod30thSept
ember
,2014.

64|
Page
SESSI
ONFI
VE

CASHBOOK

OVERVI
EW

I
n ev
erybusi
nesshouset
her
ear
ecash t
ransact
ionsaswel
lascr
edi
ttr
ansact
ions.Al
lcr
edi
t

t
ransact
ionswi
l
lbecomecasht
ransact
ionswhenpay
ment
sar
emadet
osuppl
i
ersorcashr
ecei
ved

f
rom cust
omer
s.Si
nce,casht
ransact
ionswi
l
lbenumer
ous,i
tisbet
tert
okeepasepar
atebookt
o

r
ecor
donl
ythecasht
ransact
ions.
Thi
ssessi
oni
ntr
oducest
udent
stocashbook,ki
ndsofcashbook

andt
hepr
epar
ati
onofcashbook.

LEARNI
NGOBJECTI
VES

Af
terst
udy
ingt
hisl
esson,
youwi
l
lbeabl
eto:

 Under
standt
heNeedandMeani
ngoft
hev
ari
ousKi
ndsofCashBook

 Pr
epar
eSi
ngl
eCol
umn,
TwoCol
umnandThr
eeCol
umnCashBooks

 Under
standt
heNeedandt
hePur
poseofPet
tyCashBook;

 Pr
epar
ethePet
tyCashBook

CASHBOOK

Acashbooki
saspeci
alj
our
nalwhi
chi
susedt
orecor
dal
lcashr
ecei
ptsandcashpay
ment
s.Abook

ofor
igi
nalent
ryi
nwhi
cht
ransact
ionsr
elat
ingonl
ytocashr
ecei
ptsandpay
ment
sar
erecor
dedi
n

det
ail
.Thecashbooki
sabookofor
igi
nalent
ryorpr
imeent
rysi
ncet
ransact
ionsar
erecor
dedf
ort
he
65|Page
f
ir
stt
imef
rom t
hesour
cedocument
s.

Thecashbooki
sal
edgeri
nthesenset
hati
tisdesi
gnedi
nthef
orm ofacashaccountandr
ecor
ds

cashr
ecei
ptsont
hedebi
tsi
deandcashpay
ment
sont
hecr
edi
tsi
de.Thus,t
hecashbooki
sbot
ha

j
our
nal
andal
edger
.

KI
NDSOFCASHBOOK

Ther
ear
emai
nlyt
hreeki
ndsofCashBook

Si
ngl
ecol
umncashbook:

Recor
dsonl
ycashr
ecei
ptsandpay
ment
s.I
thasonl
yonemoneycol
umnoneachoft
hedebi
tand

cr
edi
tsi
desoft
hecashbook.

Si
ngl
eCol
umnCashBook

Dat
e Det
ail LF Cash Dat
e Det
ail LF Cash

Twocol
umncashbook:

Consi
stsoft
wosepar
atecol
umnsont
hedebi
tsi
deaswel
lascr
edi
tsi
def
orr
ecor
dingcashandbank

t
ransact
ions.

Two(
Doubl
e)Col
umnCashBook

Dat
e Det
ail LF Cash Bank Dat
e Det
ail LF Cash Bank

66|
Page
Thr
eecol
umncashbook:

I
tisacashbookwhi
chhav
ethr
eecol
umnsoneachsi
de.Onei
susedt
orecor
dcasht
ransact
ions,
the

secondi
susedt
orecor
dbankt
ransact
ionsandt
hir
disusedt
orecor
ddi
scountr
ecei
vedandpai
d.

Onemai
nadv
ant
ageofat
hreecol
umncashbooki
sthati
tisv
eryhel
pfult
obusi
nessmen,si
ncei
t

r
eveal
sthecashandbankdeposi
tsatagl
ance.Thedi
scountcol
umnont
hedebi
tsi
deoft
hecash

bookwi
l
lrecor
ddi
scount
sal
l
owedandt
hatont
hecr
edi
tsi
dedi
scount
srecei
ved.

NB:Thedi
scount(
cashdi
scount
s)col
umnsar
ememor
andum col
umnsonl
y.Ther
efor
etheydonot

const
it
utet
hedi
scountaccount
.

Thr
ee(
Trebl
e)Col
umnCashBook

Dat
e Det
. LF Di
sc. Cash Bank Dat
e Det
. LF Disc. Cash Bank
Al
l
. Rec.

Exampl
e1

Ent
ert
hef
oll
owi
ngt
ransact
ionsi
nthedoubl
ecol
umncashbookofKwodwoGr
aham andSons

Ent
erpr
iseandbal
ancet
hecashbook.

2015

Aug. 1Openi
ngBal
ance:
Cashi
nHandGH¢4,
250CashatBankGH¢13,
750

2Pai
dtopet
tycashi
erGH¢2,
500

2Cashsal
esGH¢1,
750

67|
Page
3Pai
dtoAar
onbychequeGH¢3,
750

3Mr
.Bai
doo,
adebt
orpai
dGH¢4,
500bychequet
othebusi
ness

5Recei
vedchequef
rom Mr
.JapGH¢6,
000pai
dint
obank

8Cashpur
chasesGH¢2,
500

8Pai
drentbychequeGH¢2,
500

9Cashwi
thdr
awnf
rom bankf
orof
fi
ceuseGH¢2,
500

10Cashsal
esGH¢3,
750

14St
ati
oner
ypur
chasedGH¢1,
000bycash

20Cashsal
esGH¢6,
750

21Pai
dcashi
ntobankGH¢10,
000

23Wi
thdr
ewcashf
orper
sonal
useGH¢1,
000

25Sal
ari
espai
dbychequeGH¢9000.

Sol
uti
on
68|Page
KWODWOGRAHAM ANDSONSENTERPRI
SE

CASHBOOK

Dat
e Par
ti
cul
ar LF Cash Bank Dat
e Par
ti
cul
ars LF Cash Bank

s GH¢ GH¢ GH¢ GH¢

2015 2015

Aug Bal
ance b/ 4,
250 13,
75 Aug2 Pet
tyCash 2,
500

1 d 0

2 Sal
es 1,
750 3 Aar
on 3,
750

3 Bai
doo 4,
500 8 Pur
chases 2,
500

5 Jap 6,
000 8 Rent 2,
500

9 Bank c 2,
500 9 Cash c 2,
500

10 Sal
es 3,
750 14 St
ati
oner
y 1,
000

20 Sal
es 6,
750 21 Bank c 10,
00

21 Cash c 10,
00 23 Dr
awi
ngs 1,
000

25 Sal
ari
es 9,
000

30 Bal
ance c/ 2,
000 16,
50

d 0

19,
00 34,
25 19,
00 34,
25

0 0 0 0

Sept Bal
ance 2000 16,
50

69|
Page
1 b/
d 0

Exampl
e2

Compi
l
ethr
ee col
umn cash book ofTher
esa and Daught
ers Ent
erpr
ise f
rom t
he f
oll
owi
ng

t
ransact
ions:

2016

June 1Theownerst
art
edt
hebusi
nesswi
thacashofGH¢200,
000

2Deposi
tedi
ntoBankGH¢50,
000.

4Cashpur
chasesGH¢5,
000.

5Pur
chasesbychequeGH¢6,
000.

6Goodssol
dtoNat
hanoncr
edi
tGH¢5,
000.

8Recei
vedchequef
rom ManoGH¢490,
Discountal
l
owedGH¢10.

10Pai
dcar
ri
ageGH¢1,
000.

12Wi
thdr
ewf
rom Bankf
orof
fi
ceuseGH¢10,
000.

15Pai
dtoSundayacr
edi
tor
GH¢4,
960,
Discountal
l
owedbyher
GH¢40.

20Recei
vedachequef
orGH¢4950f
rom Nat
hani
nful
l
set
tl
ementofhi
saccount
,

whi
chi
sdeposi
tedi
ntoBank

70|
Page
Sol
uti
on

THERESAANDDAUGHTERSENTERPRI
SE

CASHBOOK

Dat Det
ail LF Di
sc. Cash Bank Dat Det
ail
s LF Di
s Cash Bank

e s Al
l
ow GH¢ GH¢ e c. GH¢ GH¢

. Rec

201 201 Bank c 50,


00

6 Bal
an b/ 200,
0 6 0

Jun ce d 00 Jun

.1 2

2 Cash c 50,
00 4 Pur
chas 5,
000

0 es

8 Manu 10 490 5 Pur


chas 6,
000

es

12 Bank c 10,
00 10 Car
ri
ag 1000

71|
Page
0 e

20 Nat
ha 50 4950 12 Cash c 10,
00

n 0

15 Sunday 40 4950

30 Bal
ance c/ 154,
0 34,
49

d 00 0

60 210,
0 55,
44 40 210,
0 55,
44

00 0 00 0

Jul Bal
an b/ 154,
0 34,
49

1 ce d 00 0

PETTYCASHBOOK

Thi
sisabooki
nwhi
chpet
tycash(
thesum ofmoneykepti
nhand)expendi
tur
esar
erecor
ded.A

pet
tycashbooki
sgener
all
ymai
ntai
nedonacol
umnarbasi
s-asepar
atecol
umnbei
ngal
l
ott
edf
or

eacht
ypeofexpendi
tur
e.

I
mpr
estsy
stem

Undert
hissy
stem af
ixedsum ofmoneyi
sgi
vent
othepet
tycashi
ert
ocov
ert
hepet
tyexpensesf
or

t
hemont
h.Att
heendofamont
hthepet
tycashi
ersubmi
tshi
sst
atementofpet
tyexpensest
othe

chi
efcashi
erf
orr
eimbur
sement(
oft
hesameamountspent
).Thus,
thei
mpr
estf
ort
henextmont
his

t
hesameasi
twasatt
hebegi
nni
ngoft
hecur
rentmont
h.

72|
Page
Adv
ant
agesofI
mpr
estSy
stem

• I
tact
sasaheal
thycheckont
hepet
tycashi
er.

• Pet
tycashbookr
emai
nsupt
odat
e.

• I
tpr
event
sunnecessar
yaccumul
ati
onofcashi
nhandand

• Thust
hechancesofdef
alcat
ionofcashar
emi
nimi
zed.

For
matofPet
tyCashAnal
ysi
s

Anal
ysi
sofExpenses

Recei
p Dat
e Det
ail Ref Tot
al Post
ag St
ati
oner T&T Fuel Sundr

t s e y y

Undert
heanal
ysi
sofexpensesi
nthef
ormat
,theexpensesheadi
ngsusedi
sext
ract
edf
rom t
he

av
ail
abl
equest
ion.St
udent
sar
etobemi
ndf
uloft
heexpenseheadi
ngsused.

Exampl
e3

Pr
epar
ePet
tyCashBookoni
mpr
estsy
stem f
rom t
hef
oll
owi
ngpar
ti
cul
arsf
orDodi
Dodi
Ent
erpr
ise.

2014

Sept
.1.Recei
vedf
orpet
tycashpay
ment
sGH¢1,
000

73|
Page
4.Pai
dforst
ati
oner
yGH¢140

9.Pai
dforpost
ageGH¢80

10.Pai
dforpr
int
ingchar
gesGH¢150

11.Pai
dforcar
ri
ageGH¢125

17.Pai
dfort
elegr
amsGH¢25

20.Pur
chasedenv
elopsGH¢30

21.Pai
dforcof
feet
oof
fi
cest
affGH¢30

22.Pai
dforof
fi
cecl
eani
ngGH¢50

30.Pai
dtoRaj
eshGH¢200

Sol
uti
on

DODI
DODIENTERPRI
SE

PETTYCASHBOOK

Anal
ysi
sofExpenses

Recei
pts Dat
e Det
ail
s Re Tota St
ati
oner Of
fi
ce Ledger
Post
age
f l y Cl
eani
ng Account

74|
Page
/Tel
egram
&Pr
int
ing
/Carri
age
GH¢ 2014 GH¢ GH¢ GH¢ GH¢ GH¢

1000 1-
Sep Cash

St
ati
oner
4-
Sep 140 140
y

9-
Sep Post
age 80 80

10-
Sep Pr
int
ing 150 150

11-
Sep Car
ri
age 125 125

17-
Sep Tel
egr
am 25 25

Env
elope
20-
Sep 30 30
s

21-
Sep Pr
int
ing 30 30

Of
fi
ce
22-
Sep Cl
eani
ng 50 50

30-
Sep Raj
esh 200 200

Tot
als 830 350 230 50 200

Bal
ance c/
d 170

1000 1000

b/
170 1-
Oct Bal
ance
d

Exampl
e4

Gabr
ieloper
atesapet
tycashont
hei
mpr
estsy
stem wi
thaf
loatofGH¢200.Asagener
alr
ulei
nthe

company “
ALLSHALLPASSLTD.
”rei
mbur
sement
sar
emadesucht
hatcashi
nhanddoesnotf
all
75|
Page
bel
owGHGH¢24.

Thef
oll
owi
ngi
sasummar
yoft
hepet
tycasht
ransact
ionsoft
hecompanyf
ort
hemont
hofJune

2015: GH¢

June 1: Recei
vedf
rom Cashi
er 167

2: Pai
dforel
ect
ri
cit
yexpenses 68

3: Pai
dwagesandsal
ari
es 30

6: Pai
drentandr
ates 17.
2

10: Pai
dfort
rav
ell
i
ng 60

11: Pai
dforwages 8

12: Boughtenv
elopes 36

13: Pai
dAmandoacr
edi
tor 40

16: Boughtst
amps 24

17: Boughtenv
elopes 20

18: Pai
del
ect
ri
cit
y 50

20: Pai
drent 8

26: Pai
dforsal
ari
es 7

28: Pai
dAmandacr
edi
tor 36.
7

Requi
rement
:Ent
ert
heabov
etr
ansact
ionsi
nthePet
tyCashbookandbal
ancet
hepet
tycashbook.

Sol
uti
on

ALLSHALLPASSLTD
PETTYCASHBOOK
Anal
ysi
sofExpenses
Ledger
Recei
pts Dat
e Det
ail
s Ref Tot
al El
ect W &S R&R Tr
avel St
ati
oner
y
Account
GHC JUNE Det
ail
s GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

76|
Page
33 1 Bal
ance b/
d
167 1 Cash
2 El
ect
ri
cit
y 68 68
3 W&S 30 30
Rent&
6 17.
2 17.
2
Rate
10 Trav
ell
i
ng 60 60
Tot
als 175.
2 68 30 17.
2 60
10 Bal
ance c/
d 24.
8
200 200
24.
8 10 Bal
ance b/
d
175.
2 10 Cash
11 Wages 8 8
12 Env
elopes 36 36
13 Amando 40 40
16 St
amps 24 24
17 Env
elopes 20 20
Tot
als 128 8 80 40
17 Bal
ance c/
d 72
200 200
72 17 Bal
ance b/
d
128 17 Cash
18 El
ect
ri
cit
y 50 50
20 Rent 8 8
26 Sal
ari
es 7 7
28 Amanda 36.
7 36.
7
Tot
als 101.
7 50 7 8 36.
7
30 Bal
ance c/
d 98.
3
200 200
98.
3 1-
Jul Bal
ance b/
d
101.
7 “ Cash

ENDOFSESSI
ONFI
VETRYQUESTI
ONS

1.On1stJanuar
y2014Haj
i
aShi
ki
shi
kiLt
d.st
art
edbusi
nesswi
tht
heai
m ofbecomi
ngal
eaderi
nthe

i
ndust
ryofDi
WoFi
eAsem.

Thef
oll
owi
ngwer
ethebusi
nesst
ransact
ionsf
orJanuar
y2014.

77|
Page
1/
1/2014 Bank 50,
000CR

1/
.1.
2014 Cash 30,
000

Jan.
1 Deposi
tedcashi
ntobank 5,
000

2 Cashsal
es 37,
000

3 Pai
drentbycheque 15,
500

4 Wi
thdr
ewcashf
rom bankf
orbusi
nessuse 12,
000

7 Recei
vedchequef
rom Ant
wiDansoi
npay
mentofgoods 21,
000

10Deposi
tedcashi
ntobank 18,
000

17Pai
dEmef
aforgoodsboughtoncr
edi
tforGH¢65,
000l
ess5%di
scountbycash.

20Pai
dwagesbycash 20,
000

Boughtf
ixt
uresbycash 15,
000

22Cel
est
ial
pai
dusheraccountofGH¢30,
000bychequel
ess10%di
scount
.

22Recei
vedal
oanofGH¢42,
000cashf
rom Busummur
u.

23Pai
dHon.Phot
ooGH¢10,
000bycash.

24Wi
thdr
ewcasht
opaypr
emi
um ont
hel
i
fepol
i
cyoft
heGener
alManager 30,
000

27Cashsal
esbanked 12,
000

28Loui
sapai
dusbycheque 11,
000

29Recei
vedGH¢31,
000f
rom EsherQuay
ebycash.

29Ev
apai
dusheraccountbycashl
essadi
scountofGH¢5,
000 110,
000

Requi
red:
Wri
teupat
hree-
col
umncashbookf
orHaj
i
aShi
ki
shi
kiLt
d.f
orJanuar
y2014.

2. Ent
ert
hef
oll
owi
ngt
ransact
ionsi
nthr
eecol
umncashbookof
Mr.Appi
agy
eiandbal
ancet
he

cashbook.
78| Page
2016

Sept
.1 Cashi
nhandGH¢75,
000

CashatbankGH¢40,
000

4 Pai
dcashi
ntobankGH¢20,
000.

6 Pur
chasedmachi
ner
ybychequeGH¢10,
000.

8 Recei
vedf
rom Mi
l
li
cent
GH¢2,
560,
Discountal
l
owedGH¢40.

10 Pai
dtoPr
isci
l
labychequeGH¢3,
970i
nful
lset
tl
ementof
hisaccountGH¢4,
000.

11 Wi
thdr
ewcashf
rom Bankf
orper
sonal
useGH¢5,
000.

15 Recei
vedchequef
rom Ber
nar
dGH¢4,
900.Al
l
owedhi
m di
scountGH¢100.

24 Al
i
ce,
ourcust
omerhaspai
ddi
rect
lyi
ntoourbankaccountGH¢10,
000.

27 Rentpai
dbychequeGH¢3,
000

3. Ent
ert
hef
oll
owi
ngt
ransact
ionsi
nthr
eecol
umncashbookof
Mrs.Ev
aMensah.

2014

Apr
il1 Cashi
nhandGH¢50,
000

Bankbal
anceGH¢15,
000

2 Sol
dgoodst
oTheodor
aforGH¢15,
000,
cashdi
scount
all
owed1%andr
ecei
vedcashf
or

t
hebal
ance.

3 Taxpai
dGH¢1,
000bycash

7 Boughtgoodsf
rom At
ikopof
orGH¢2,
400,cashdi
scount
recei
ved2%andpai
dcheque

f
ort
hebal
ance.

9 Recei
vedr
epay
mentofl
oanf
rom El
l
enAddai
GH¢10,
000.

12 Pai
dcashi
ntoBankGH¢5,
000.
79|
Page
14 Pai
dGH¢1,
400t
oAbi
ri
&Co.
,hal
fbycashandhal
fby
cheque.

16 Di
vi
dendcol
l
ect
edbyt
heBankasperbankst
atement
GH¢2,
000.

18 Sol
dgoodsf
orcashanddeposi
tedi
ntot
hebankont
hesamedayGH¢5,
000.

20 SentGH¢460casht
oVer
aaspay
mentf
orexpensesbymobi
l
emoney
,themobi
l
e

moneychar
gebei
ngGH¢46

4. Pr
epar
epet
tycashbookoni
mpr
estsy
stem f
rom t
hef
oll
owi
ngpar
ti
cul
arsgi
venbel
ow:

2015 GH¢

Dec. 1 Bal
anceonhand 25

1 Recei
vedchequet
omaket
hei
mpr
est 975

2 Pai
dforpost
age 40

4 Pai
dforst
ati
oner
y 225

6 Pai
dforwages 140

8 Pai
dforcar
ri
age 130

10 Pai
dfort
rav
ell
i
ngexpenses 150

11 Pai
dfort
elegr
amsexpenses 50

12 Cof
feet
oof
fi
cest
aff 45

19 Tax
ihi
re 150

5.Thi
squest
ioncombi
nes,
jour
nal
sandl
edger
s

Thef
oll
owi
ngar
ethebal
ancesext
ract
edf
rom t
hebooksofAl
iBabaEnt
erpr
iseat30thJune2015.

Debt
ors: El
l
enGH¢60,
000, Ver
aGH¢40,
000

Cr
edi
tor
s: Abdul
GH¢30,
000, Ev
aGH¢20,
000
80|
Page
CashonHandGH¢350,
000, Bankbal
anceGH¢1,
000,
000

Of
fi
ceEqui
pmentGH¢750,
000

Capi
tal
GH¢1,
400

Thef
oll
owi
ngt
ransact
ionst
ookpl
acedur
ingt
hemont
hofJul
y2015

Jul
y Pai
dRentbycashGH¢200,
000

2 Cr
edi
tSal
es:
Ell
enGH¢250,
000,
PomaaGH¢275,
000,
Ver
aGH¢585,
000

2 CashSal
esGH¢750,
000

3 Cr
edi
t Pur
chases:AbdulGH¢150,
000,Sandr
a GH¢175,
000,Ev
a GH

¢295,
000

4 Recei
ved Cheques:El
l
en GH¢200,
000,Pomaa GH¢175,
000 (
discount

GH¢25,
000)
,Ver
aGH¢480,
000

6 Pai
d Cheques: Abdul GH¢120,
000 (
discount GH¢10,
000)
, Sandr
a

GH¢100,
000,
EvaGH¢200,
000

8 Ret
urnsI
nwar
ds:
Ell
enGH¢50,
000,
PomaaGH¢5,
000andVer
aGH¢15,
000

10 Ret
urnsOut
war
ds:
Sandr
aGH¢15,
000,
EvaGH¢5,
000

12 Cr
edi
tSal
es:
Ell
enGH¢250,
000,
PomaaGH¢200,
000,
Ver
aGH¢75,
000

15 CashSal
esGH¢900,
000

16 Pai
dInsur
ancebycashGH¢250,
000

16 Cr
edi
t Pur
chases: Sandr
a GH¢125,
000, Ev
a GH¢205,
000, Abdul

GH¢180,
000

16 Pur
chasedMot
orVehi
cl
eforToy
otaGhanaonCr
edi
tGH¢250,
000

17 CashSal
esGH¢1,
200,
000
81|Page
17 Recei
ved cheques:El
l
en GH¢200,
000 (
discount
.GH¢10,
000)
,Pomaa

GH¢270,
000,
Ver
aGH¢85,
000(
discountGH¢15,
000)

18 Pai
d Cheques: Abdul GH¢150,
000; Sandr
a GH¢180,
000 (
discount

GH¢5,
000)Ev
aGH¢210,
000

20 CashPur
chasesGH¢1,
200,
000,Pai
dToy
otat
hef
ullamountbyChequeat

10%Di
scount

21 Pai
dCashi
ntoBankGH¢1,
500,
000

25 Al
iBabawi
thdr
ewGH¢40,
000asagi
ftt
ohi
swi
feonherbi
rt
hdayf
rom t
he

bankaccount

30 Pur
chasedOf
fi
ceEqui
pmentbyChequeGH¢2,
500,
000

Requi
red

a)Wr
it
eupt
heabov
etr
ansact
ionsi
nther
elev
antbooksofor
igi
nal
ent
ry

b)Wr
it
eupt
heThr
eeCol
umnCashBook

c)Postt
other
elev
antper
sonal
andi
mper
sonal
ledger
sandbal
anceof
ftheaccount
s

d)Pr
epar
eaTr
ial anceasat31stJul
Bal y2015

SESSI
ONSI
X

BANKRECONCI
LIATI
ONSTATEMENTS

OVERVI
EW

Thi
ssessi
onseekst
odi
scusst
hei
nfor
mat
ionv
alueofobt
aini
ngar
eli
abl
ebankbal
ance.Thus,

st
udent
swi
l
lgot
hrought
hepr
ocessofr
econci
l
ingt
hebankbal
ancei
nthecashbook,whi
chi
s

unr
eli
abl
e,wi
tht
hebankst
atementbal
ance.

82|
Page
LEARNI
NGOBJECTI
VES

Att
heendoft
hissessi
on,
youwi
l
lbeabl
eto

• Toexpl
aint
heneedf
orBankr
econci
l
iat
ionst
atement

• Toexpl
aint
her
elev
anceofpr
operdocument
ati
onf
orr
econci
l
iat
ionpur
poses

• To i
dent
if
ythe causes oft
he di
ff
erences bet
ween t
he bal
ances on cash book and bank

st
atement
s

• Toi
dent
if
ythemai
nreasonswhybanksdi
shonourcheques

• Reconci
l
ecashbookbal
anceswi
thbankst
atementbal
ances

BankReconci
l
iat
ionSt
atement

Thebal
anceoft
hebankcol
umni
nthecashbook(
twoort
hreecol
umn)r
epr
esent
sthecust
omer
s’

cashbal
anceatbank.I
tshoul
dbet
hesameasshownbyt
hecust
omer
’sbankst
atementonany

par
ti
cul
arday
.For
ever
yent
rymadei
nthecashbooki
fther
eisacor
respondi
ngent
ryi
nthebank

st
atement(
mai
ntai
nedbyt
hebank)orv
icev
ersa,
thebankbal
ancewi
l
lbet
hesamei
nbot
hthecash

bookandt
hebankst
atement
.

I
tmusthowev
erbenot
edt
hat
,t
hecashbookandt
hebankst
atementar
emai
ntai
nedbyt
wodi
ff
erent

par
ti
esandhencei
tisnotcer
tai
nthat
ent
ryi
nonebookwi
l
lal
way
shav
eacor
respondi
ngent
ryi
nthe

ot
her
.

Nor
mal
l
yent
ri
esi
nthecashbookshoul
dtal
l
y(agr
ee)wi
tht
hosei
nthebankst
atementandt
he

bal
ancesshownbybot
hbooksshoul
dbet
hesame.Whenamount
sar
epai
dint
othebusi
nessbank

account
,thebankcr
edi
tst
hebusi
nessaccountandt
hecashbooki
sdebi
ted.Si
mil
arl
y,whencheques

ar
edr
awn,
thebankdebi
tst
hebusi
nessbankaccountwi
tht
heamountassoonast
heyar
epr
esent
ed

andhonour
edandt
hecashbooki
scr
edi
tedbyt
hebusi
nessaccount
antorcashi
er.
83|Page
Whatappear
son t
hedebi
tsi
deoft
hecash bookappear
son t
hecr
edi
tcol
umn oft
hebank

account
/st
atementi
nthebankst
atementandwhatappear
sont
hecr
edi
tsi
deoft
hecashbook

appear
sont
hedebi
tcol
umnoft
hebankaccount
/st
atementi
nthebankst
atement
.Itf
oll
ows

t
her
efor
ethatal
lthi
ngsbei
ngequalt
het
wobooksshoul
dhav
ethesamebal
ance.Buti
npr
act
ice,
the

bal
ancesgener
all
ydi
ff
er.I
ncaseof
disagr
eementi
nthebal
anceoft
hecashbookandt
hebank

st
atement
,theneedf
orpr
epar
ingBankReconci
l
iat
ionSt
atementar
ises.

Bankr
econci
l
iat
ionst
atementi
sal
i
sti
nwhi
cht
hev
ari
ousi
temst
hatcauseadi
ff
erencebet
ween

bankbal
anceaspercashbookandbankst
atementbal
anceonanygi
vendat
eforpur
posesof

r
econci
l
ingt
hem.

NeedandI
mpor
tance

Af
tert
raci
ng t
hev
ari
ousi
temsofdi
ff
erence,abankr
econci
l
iat
ionst
atementi
spr
epar
ed.The

f
oll
owi
ngar
eit
sadv
ant
agesi
nwhi
chl
i
esi
tsi
mpor
tance.

 Theer
ror
sthatmi
ghthav
etakenpl
acei
nthecashbooki
nconnect
ionwi
thbankt
ransact
ionscan

beeasi
l
yfound.

 Regul
arpr
epar
ati
onofbankr
econci
l
iat
ionst
atementpr
event
sfr
auds.

 I
tindi
rect
lyi
mposesmor
alcheckont
heaccount
ingst
aff
.

 Byt
hepr
epar
ati
onofbankr
econci
l
iat
ionst
atement
,uncr
edi
tedchequecanbedet
ect
edandst
eps

canbet
akenf
ort
hei
rcol
l
ect
ion

CashBook

I
nthepr
evi
ouschapt
er,t
hedi
ff
erentf
ormsofcashbookhasbeendi
scussed.Thedebi
tsi
deoft
he

84|
Page
cashbook(
thebankcol
umn)
repr
esent
s:

1.Chequesdeposi
tedi
ntobankf
orcol
l
ect
ion.

2.Cashpai
dint
obankand

3.Someent
ri
est
hatar
emadeonl
yaf
terr
ecei
vi
ngt
hei
nfor
mat
ionf
rom t
hebank,
thesei
ncl
ude;

i
. Amount
scol
l
ect
edbyt
hebankonbehal
foft
heaccounthol
deraspert
hest
andi
ng

i
nst
ruct
ions,
forexampl
e,I
nter
estcol
l
ect
edoni
nvest
ment
.

i
i
. I
nter
estgi
venbyt
hebankerf
ort
hebal
ancekeptbyusi
nourbankaccount
.

i
i
i. Theamountpai
dbyourcust
omer
sdi
rect
lyi
ntoourbankaccount
.

Ont
heot
herhand,
ont
hecr
edi
tsi
deoft
hecashbook,
repr
esent
s:

1.Chequesi
ssuedf
orpay
ment
.

2.Cashwi
thdr
awnf
rom bankf
orof
fi
ceuseandper
sonal
use.

3.I
naddi
ti
on,
someent
ri
esar
emadeaf
terr
ecei
vi
ngi
nfor
mat
ionf
rom t
hebank,
thesei
ncl
ude;

i
. Amount
spai
dbyt
hebankonourbehal
faspert
hest
andi
ngi
nst
ruct
ions,f
orexampl
e,

pay
mentofi
nsur
ancepr
emi
um.

i
i
. I
nter
estchar
gedbyt
hebankf
ort
heamountdr
awnov
erandabov
etheact
ualbal
ancekept

i
nthebankaccount
.

i
i
i. Bankchar
gespay
abl
efort
heagencyandut
il
it
yser
vicesr
ender
edbyt
hebank

BankSt
atement

Bankst
atementi
smer
elyacopyofacust
omer
’saccounti
nthebooksofabank(
i.
e.bank

st
atement
sar
epr
epar
edbyt
hebank)
.Itshowsal
lthedeposi
ts,
wit
hdr
awal
sandt
hebal
anceav
ail
abl
e

i
nacust
omer
’saccount
.

For
matofBankSt
atement
85|Page
Dat
e Descr
ipt
ions/
Par
ti
cul
ars Ref
. Wit
hdrawa Deposi
t Bal
ance
l s
(
Debit
) (Cr
edit
)

I
nthedat
ecol
umn,
thedat
esoft
het
ransact
ionsar
erecor
ded.I
nthepar
ti
cul
arscol
umnwi
thdr
awal
s

anddeposi
tsar
erecor
ded.Thebal
anceaf
tereacht
ransact
ioni
srecor
dedi
nthenextcol
umn.

Fol
l
owi
ngt
hepr
inci
plesofDoubl
eEnt
ry,
bankcr
edi
tst
heaccountoft
hecust
omerf
oral
ltheamount
s

r
ecei
vedf
rom t
hecust
omer
andonhi
sbehal
f.Si
mil
arl
ythebankdebi
tst
heaccountoft
hecust
omer

f
oral
lwi
thdr
awal
sandamount
spai
dtoot
her
sonbehal
foft
hecust
omer
.

Themai
npoi
ntt
ober
emember
edi
sthatent
ri
esar
emadeonl
yaf
tercash/
chequei
srecei
vedorpai
d,

excepti
nthe case ofi
nter
estand bankchar
ges.I
nter
estand bank char
ges ar
e mer
e book

adj
ust
ment
sandi
nthese,
ther
ear
enei
therr
ecei
ptofcashnorpay
mentofcash.

Di
ff
erencebet
weenCashBookandBankSt
atement

Basi
sofDi
sti
nct
ion CashBook(
Bank BankSt
atement
Col
umn)
Mai
ntai
nedby Account
antorcashi
er Banker
Deposi
tsofcash Ent
eredont
hedebi
tsi
de Ent
ered on t
he
oft
hecashbook cr
edi
tcol
umnoft
hebank
st
atement

86|
Page
Wi
thdr
awal
sofcash Ent
eredont
hecr
edi
tsi
de Ent
ered on t
he debi
t
oft
hecashbook col
umn of t
he bank
st
atement
Chequesdeposi
ted Ent
eredont
hedebi
tsi
de Ent
ered on t
he cr
edi
t
oft
hecashbookont
he col
umn of t
he bank
dat
eofdeposi
t st
atement onl
y on t
he
dat
eonwhi
cht
hecheque
i
sreal
i
zed
Chequesi
ssued Ent
eredont
hecr
edi
tsi
de Ent
ered on t
he debi
t
oft
hecashbookont
he col
umn of t
he bank
dat
eofdeposi
t st
atement onl
y on t
he
dat
e on whi
ch t
hey ar
e
pr
esent
edandpai
d
Col
l
ect
ionandpay
ment
s Ent
eredi
nthecashbook Ent
ered i
n t
he bank
as per cust
omer
s af
ter seei
ng t
he bank st
atement
i
nst
ruct
ion (
eg.st
andi
ng st
atement
or
der
s)

CommonCausesofDi
sagr
eement
s

Basi
cal
l
y,t
her
ear
etwocausesofadi
sagr
eementbet
weent
hecashbookbal
anceandt
hebank

st
atementbal
ance.Thesear
e;

1. Ti
mingDi
ff
erences

2. I
nfor
mat
ional
Dif
fer
ences

Ti
mingDi
ff
erence

Thi
soccur
sbecausecasht
ransact
ionsar
erecor
dedatdi
ff
erentt
imesbet
weent
heof
fi
ce(
i.
e.i
nthe

87|
Page
cashbook)andt
hebank(
i.
e.i
nthebankst
atement
).Forexampl
e,chequel
odgementar
eusual
l
y

r
ecor
dedf
arear
li
eri
nthecashbookt
hant
hedat
eonwhi
cht
hebankcr
edi
tst
hebusi
nessbank

account
.Iti
sal
sot
ruewi
thcashpay
ment
s–t
hesear
erecor
dedear
li
eri
nthecashbookbef
ore

cr
edi
tor
spr
esent
sthosechequesf
orpay
mentorl
odget
hem wi
tht
hebanker
s.

Exampl
esoft
imi
ngdi
ff
erences;

 Unpr
esent
edCheques– chequesi
ssuedoutbyt
heent
it
ybuty
ett
obepr
esent
edt
othe

banker
sorpr
esent
edt
othebanker
sbuty
ett
ocl
ear
.Asar
esul
tthebankhasnotdebi
ted

cust
omer
saccount
/bankst
atement
.

 Uncr
edi
tedCheques-chequesr
ecei
vedanddeposi
tedbyt
heent
it
ybuty
ett
obecr
edi
tedby

t
hebank

 Er
ror
sbyt
hebank

o wr
ongcr
edi
ts;
err
orsbyt
hebankt
hati
ncr
easesanent
it
iesbal
ance

o wr
ongdebi
ts;
err
orsbyt
hebankt
hatdecr
easesanent
it
iesbal
ance

I
nfor
mat
ional
Dif
fer
ence

Thi
soccur
sbecausesomesetofi
nfor
mat
ionoccurexcl
usi
vel
yatei
therbusi
nessori
tsbanker
s.

Thus,
eit
hert
hebanker
sort
hebusi
nesshav
epr
ivyt
othei
nfor
mat
ionbutt
heot
herdoesnot
.Fact
ors

t
hatgi
ver
iset
oinf
ormat
iondi
ff
erencesi
ncl
udet
hef
oll
owi
ng;

 Bankchar
gesandi
nter
est

 St
andi
ngor
der

 Di
shonour
edcheques

88|
Page
 Cr
edi
ttr
ansf
ers(
e.g.di
vi
dendscr
edi
ted)

 Di
rectdebi
ts

TheReconci
l
iat
ionPr
ocess

Adj
ustt
hecashbookwi
tht
hei
nfor
mat
ional
dif
fer
ence:

 Br
ingdownt
hebal
anceoft
heor
igi
nal
cashbooki
ntot
headj
ust
edcashbook

 Ent
eront
hecr
edi
tsi
deoft
hecashbookal
lit
emsnotpr
evi
ousl
yent
eredbutappear
edont
he

debi
tsoft
hebankst
atemente.
g.bankchar
ges

 Ent
eront
hedebi
tsi
deoft
hecashbooki
temst
hatappear
edont
hecr
edi
tsi
deoft
hebank

st
atementbutnotpr
evi
ousl
yent
eredi
nthecashbook

Pr
epar
etheBRSusi
ngt
het
imi
ngdi
ff
erences:

 I
nfor
mat
ionent
eredi
nthecashbooknoty
etr
ecor
dedbyt
hebankont
hebankst
atement

namel
y;unpr
esent
edchequesanduncr
edi
tedcheques

 Commoner
ror
sbyt
hebank(
wrongdebi
tandwr
ongcr
edi
t)

BankReconci
l
iat
ionSt
atementasat30-
09-
2016 Gh¢

Gh¢

Bal
anceasperadj
ust
edcashbook *
***

Add Unpr
esent
edcheques *
***

Wr
ongcr
edi
t *
*** *
***

*
***

Less Uncr
edi
tedcheques *
***

89|
Page
Wr
ongdebi
t *
*** (
***
*)

Bal
anceasperbankst
atement *
***

I
fthebal
anceaspert
headj
ust
edcashbooki
snotf
avour
abl
e(cr
edi
tbal
ance)
,thesamef
ormatcan

beused.Howev
er,
thebal
anceasperadj
ust
edcashbookshoul
dst
art
edasanegat
ivef
igur
ebyj
ust

put
ti
ngi
tinabr
ackett
oindi
cat
enegat
ive

BankReconci
l
iat
ionSt
atementasat30-
09-
2016

Gh¢ Gh¢

Bal
anceasperadj
ust
edcashbook (
***
*)

Add Unpr
esent
edcheques *
***

Wr
ongcr
edi
t *
*** *
***

*
***

Less Uncr
edi
tedcheques *
***

Wr
ongdebi
t *
*** (
***
*)

Bal
anceasperbankst
atement *
***

Exampl
e1
CASHBOOK
2005 Det
ail
s GH¢ 2005 Det
ail
s GH¢
Jan.1 Bal
anceb/
fwd 250,
000 Jan. Rentchqno1158001 125,
000
2
4 Cashdeposi
t 500,
000 6 Ot
uah1158002 116,
000
8 Chequedeposi
ts 152,
000 8 Baba1158003 569,
000
15 Cashdeposi
t 815,
000 8 Di
nah1158004 115,
300
29 Chequedeposi
ts 1,
526,
00 9 Amedeka1158005 197,
900
0

90|
Page
12 Kat
ri
na1158006 690,
000
15 West
el1158009 112,
500
19 I
nsur
ance1158010 45,
600
Bal
ancec/
d 1,
272,
00
0
3,
243,
00 3,
243,
00
0 0

BANKSTATEMENT
DATE DETAI
LS DR CR BALANCE
GH¢ GH¢ GH¢
Jan.1 Bal
anceb/
fwd *
***
*250,
000
4 Chqwi
thdr
awal
1158001 125,
000 125,
000
9 Cashdeposi
t 500,
000 625,
000
14 Chqwi
thdr
awal
1158003 569,
000 56,
000
15 Di
vi
dend-
Uni
l
ever
Ghana 63,
400 119,
400
17 Chqwi
thdr
awal
1158009 112,
500 6,
900
18 Chqwi
thdr
awal
1158010 45,
600 (
38,
700)
18 Tr
adecr
edi
t 105,
000 66,
300
30 Chequedeposi
ts 1,
526,
000 1,
592,
300
31 St
andi
ngor
der 115,
000 1,
477,
300
31 Char
ges 85,
000 1,
392,
300
31 Chequebookf
ees 50,
000 *
***
*1,
342,
300
Requi
red:
Prepar
eaBankr
econci
l
iat
ionSt
atementf
orPapi
t dasat31stJanuar
oLt y2015

Sol
uti
on

PAPI
TOLTD
ADJUSTEDCASHBOOK
GH¢ GH¢
Bal
anceb/
d St
andi
ngOr
der

91|
Page
1,
271,
700 115,
000
Di
vi
dend Char
ges
63,
400 85,
000
Tr
adeCr
edi
t Chequebookf
ees
105,
000 50,
000
Bal
c/d
1,
190,
000
1,
440,
100 1,
440,
100
Bal
b/d
1,
190,
000

BANKRECONCI
LIATI
ONSTATEMENT

GH¢ GH¢

Bal
anceasperadj
ust
edcashbook 1,
190,
100

AddUnpr
esent
edCheques: Ot
uah 116,
000

Di
nah 115,
300

Amedzeka 197,
900

Kat
ri
na 690,
000

1,
119,
200

2,
309,
300

Less Uncr
edi
tedcheques 152,
000

BankLodgement 815,
000

(
967,
000)

Bal
anceasperBankSt
atement 1,
342,
300

Exampl
e2

92|
Page
Thesummar
yoft
hebankcol
umni
nthecashbookofNoFear
sEnt
erpr
isef
ort hended31st
hemont

May2013i
sgi
venasf
oll
ows

CASHBOOK

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2013
May1 Bal
ancedb/
d 21,
000 May 31 Tot
alPay
ment
s 32,
000
31 Tot
alRecei
pts 63,
000 31 Bal
ancec/
d 52,
000
84,
000 84,
000
Nov
.1 Bal
anceb/
d 52,
000

Thebankst
atementf
ort
heper
iodr
ecei
vedf
rom Wi
ki
leakbankPLCshowedadi
ff
erentbal
anceon

31stAugust2011.At
hor
oughi
nvest
igat
ioncar
ri
edoutbyt
hel
evel
200account
ingcl
assr
eveal
edt
he

f
oll
owi
ng:

 Chequesdr
awnbyt
heent
erpr
iseamount
ingt
oGH¢1,
200wasy
ett
obepr
esent
edt
othebankf
or

pay
mentbyt
hepay
eeAseda.

 Bankchar
gesofGH¢478andi
nter
estchar
geofGH¢207ent
eredont
hebankst
atementhadnot

beenr
ecor
dedi
nthecashbook.

 Theopeni
ngbal
ancei
nthecashbookshoul
dhav
ebeenGH¢12,
000andnotasst
atedi
nthecash

booksummar
y.

 A chequeofGH¢560dr
awnbyt
hef
ir
m hadbeenchar
gedbyt
hebanki
ner
rort
oanot
her

cust
omer
’saccount
.

 Tr
ader
scr
edi
ttot
ali
ngGH¢7,
200hadbeencr
edi
t hebankon27th ofAugustbutnoty
edbyt et

r
ecor
dedi
nthecashbook.

 Amountr
ecei
vedi
nthel
astf
ewday
sofAugustt
otal
i
ngGH¢8,
200andr
ecor
dedi
nthecashbook
93|Page
hav
enotbeeni
ncl
udedi
nthebankst
atementasat31stAugust2011.

 Achequef
orGH¢2,
300i
nfav
ouroft
hef
ir
m hasbeenr
ecor
dedt
wiceasadebi
tint
hecashbook.

 Ther
ecent
lyr
ecei
vedbankst
atementshowsachequeofGH¢586i
ssuedt
oNy
ant
aky
iforcl
eri
cal

wor
kdonef
ort
heent
erpr
isehasbeendi
shonour
edbyt
hebank.Noent
ryf
ort
hedi
shonouri
s

r
ecor
dedi
nthecashbook.

ed15th August2011f
 Achequedat orGH¢455i
nfav
ourofSi
rOneEnt
erpr
isehasbeencor
rect
ly

r
ecor
dedi
nthebankst
atement
,buti
ncl
udedi
nthecashbookpay
ment
sasGH¢544.

 Thebankhadwr
ongl
ydebi
tedachequeofGH¢770whi
chshoul
dhav
ebeenpl
acedagai
nst

anot
hercust
omer
’saccount
.

Requi
red

a.Pr
epar
eanadj
ust
edcashbookshowi
ngt
her
evi
sedbal
ancewhi
chshoul
dappeari
nthebooksof

Si
rOneEnt
erpr
iseasat31stAugust
,2011.

b.Pr
epar
ethebankr
econci
l
iat
ionst
atementasat31stAugust2011.

Sol
uti
on

SI
RONEENTERPRI
SE

ADJUSTEDCASHBOOK

GH¢ GH¢

Bal
anceb/
d BankChar
ges 478

94|
Page
52,
000

Tr
adeCr
edi
t 7,
200 I
nter
est 207

Er
ror(
544+455)
999 Er
ror(
recor
dedt
wicewr
ongl
y)

2,
300

Di
shonor
edcheque 586

Bal
c/d 56,
628

1,
440,
100 1,
440,
100

Bal
anceb/
d

56,
628

BANKRECONCI
LIATI
ONSTATEMENT

GH¢ GH¢

Bal
anceasperadj
ust
edcashbook 56,
628

AddUnpr
esent
edCheques 12,
000

Wr
ongDebi
t 560

12,
560

60,
188

Less Uncr
edi
tedcheques (
8,200)

Bal
anceasperBankSt
atement 60,
988

ENDOFSESSI
ONSI
XTRYQUESTI
ONS
1.TheCashbook(
bankcol
umnonl
y)andt
heBankst
atementofEVAEnt
erpr
isear
egi
venbel
ow:

CASHBOOK
95|
Page
2010 Det
ail
s GH¢ 2010 Det
ail
s GH¢
Jan.1 Bal
anceb/
fwd 1,
000 Jan. Rentchqno1158001 250
2
4 Cashdeposi
t 1000 6 Aseda1158002 232
8 Chequedeposi
ts 304 8 Emer
ald Deku 1,
138
1158003
15 Cashdeposi
t 1,
630 8 Phi
l
omi
na1158004 230
29 Chequedeposi
ts 3,
052 9 Dar
koAnna1158005 395
12 Kat
ri
na1158006 1,
380
15 West
el1158009 225
19 I
nsur
ance1158010 91.
2

BANKSTATEMENT
DATE DETAI
LS DR CR BALANCE
GH¢ GH¢ GH¢
Jan.1 Bal
anceb/
fwd *
***
*1000
4 Chqwi
thdr
awal
1158001 250 750
9 Cashdeposi
t 1000 1750
14 Chqwi
thdr
awal
1158003 1,
138 `
612
15 Di
vi
dend-
EcobankGhana 63.
4 675.
4
17 Chqwi
thdr
awal
1158009 225 450.
4
18 Chqwi
thdr
awal
1158010 91.
2 359.
2
18 Tr
ader
scr
edi
t 210 569.
2
30 Chequedeposi
ts 3,
052 3621.
2
31 St
andi
ngor
der 230 3391.
2
31 Char
ges 170 3,
221.
2
31 Chequebookf
ees 50 *
***
*3,
171.
2
Requi
red;

i
. Pr
epar
eanadj
ust
edcashbookshowi
ngt
her
evi
sedbal
ancewhi
chshoul
dappeari
nthebooks

96|
Page
ofEVAEnt
erpr
iseasat31stJanuar
y,2010.

i
i
. Pr
epar
ethebankr
econci
l
iat
ionst
atementasat31stJanuar
y2010.

2.Thesummar
yoft
hebankcol
umni
nthecashbookofAPI
NOLt
d.f
ort
hemont
hendedOct
ober31,

2012i
spr
esent
edt
oyoubel
ow;

CASHBOOK

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
Oct
.1 Bal
ancedb/
d11,
000 Oct
. 31 Tot
alPay
ment
s 54,
000
Oct
.31 Tot
alRecei
pts 79,
000 31 Bal
ancec/
d 36,
000
90,
000 90,
000
Nov
.1 Bal
anceb/
d 36,
000

Whent
hebankst
atementoft
hecompanywasr
ecei
vedon31stOct
ober2012,
itshowedabal
anceof

GH¢21,
560whi
chdi
ff
eredf
rom t
hatoft
hecashbook.
Youri
nvest
igat
ionoft
heaccount
ingr
ecor
dsf
or

t
heper
iodr
eveal
sthef
oll
owi
ngi
nfor
mat
ion.

 Bankchar
gesofGH¢320appeari
nthebankst
atementon30t
hOct
ober2012buthav
enotbeen

r
ecor
dedi
nthecashbook.

 Chequesf
rom acust
omerPapaKayt
otal
i
ngGH¢2,
890ent
eredi
nthecashbookon29t
hOct
ober
,

2012wer
ecr
edi
tedbyt
hebankon2ndNov
ember
,2012.

 Achequef
orGH¢1000ent
eredi
nthecashbookwasy
ett
obesubmi
tt
edf
orpay
mentbyt
he

pay
ee.

 Achequef
orGH¢12,
900dr
awnbyAPI
NOLt
d.t
opayf
oranewi
tem ofpl
anthadbeenmi
stakenl
y

ent
eredi
nthecashbookasGH¢1,
290.
97|Page
 Thet
otal
oft
her
ecei
ptsi
deoft
hecashbookhadbeenunder
stat
edbyGH¢1,
000.

 Achequef
orGH¢980f
rom acust
omerpai
dinon26t
hOct
oberwasdi
shonour
edt
woday
slat
er.

 AchequeofGH¢9700dr
awnbyAPI
NOLt
d.wascor
rect
lyent
eredi
nthecashbookbutdebi
tedt
o

t
hebankst
atementbyt
hebankasGH¢7900

 Tr
ader
scr
edi
ttot
all
i
ngGH¢1630hav
ebeencr
edi
tedi
nthebankst
atementon27t
hOct
ober
,2012,

butnoty
etr
ecor
dedi
nthecashbook.

 Amountr
ecei
vedi
nthel
astf
ewday
sofOct
obert
otal
l
ingGH¢3800andr
ecor
dedi
nthecashbook

hav
enotbeeni
ncl
udedi
nthebankst
atementasat31stOct
ober2012

 Thebankhadwr
ongl
ydebi
tedachequeofGH¢270whi
chshoul
dhav
ebeenpl
acedagai
nst

anot
herman.

Requi
red

i
. Pr
epar
eanadj
ust
edcashbookshowi
ngt
her
evi
sedbal
ancewhi
chshoul
dappeari
nthe

booksAPI
NOLt
dasat31stOct
ober
,2012.

i
i
. Pr
epar
ethebankr
econci
l
iat
ionst
atementasat31stOct
ober2012.

3.On30th Sept
ember
,2011t
hebankcol
umnoft
hecashbookofNy
amaLt
dshowedabal
anceof

GH¢568,
400whi
l
ethebankst
atementr
ecei
vedf
ort
hatsamemont
hshowedanov
erdr
aftof

GH¢418,
500.Ani
nvest
igat
ionconduct
edbyt
hecashi
err
eveal
edt
hef
oll
owi
ng:

 achequedr
awni
nfav
ourofAkiOl
aLt
dforGH¢23,
100wasi
ncl
udedi
nthecashbookr
ecei
ptas

GH¢231,
000

 asat30th Sept
ember2011,t
hebankhadnoty
etcr
edi
tedt
hecompany
’saccount
swi
thdeposi
ts
98|Page
t
otal
l
ingGH¢825,
000

 chequesdr
awnamount
ingt
oGH¢63,
000hadnotbeenpr
esent
edt
othebankf
orpay
ment

 chequesr
ecei
vedf
orGH¢330,
000wasr
ecor
dedasGH¢303,
000i
nthecashbook

 achequedr
awnf
orGH¢150,
000i
nfav
ourofDr
eam Dr
iveLt
dhasbeendi
shonour
edbyt
hebank

 accor
dingt
othebankst
atement
,thebankchar
gedacommi
ssi
onont
urnov
erofGH¢22,
800

 achequef
orGH¢125,
000dr
awnbyanot
hercust
omerhadbeenent
eredt
oNy
amaLt
d’saccounti
n

er
rorbyt
hebank

Requi
red

i
. Det
ermi
net
hebal
anceatbankt
obei
ncl
udedi
nNy
amaLt
d’ ancesheetasat30thSept
sbal ember
,

2011.

i
i
. Pr
epar
ear
econci
l
iat
ionst
atement

SESSI
ONSEVEN

CONTROLACCOUNTS

OVERVI
EW

I
namanualaccount
ingsy
stem,t
her
ear
eboundt
o beer
ror
sint
her
ecor
dingandpost
ingof

t
ransact
ionst
othev
ari
ousl
edger
s.Cont
rol
sar
ether
efor
esetupt
omi
nimi
zeer
ror
sint
heaccount
ing

i
nfor
mat
ion sy
stems.Thi
s sessi
on exami
nes a t
ype ofaccount
ing cont
rolused t
o checkt
he

99|
Page
ar
it
hmet
ical
accur
acyoft
hedoubl
eent
ryr
ecor
dsi
nthel
edger
.

LEARNI
NGOBJECTI
VES

Att
heendoft
hissessi
on,
youshoul
dbeabl
eto

• Expl
ainCont
rol
Account
s

• Under
standt
hepur
poseofcont
rol
account
s

• I
dent
if
y and pr
epar
ethe Sal
es Ledger
/Debt
ors LedgerCont
rolAccount
s and Pur
chases

Ledger
/Cr
edi
tor
sLedgerCont
rol
Account
s

CONTROLACCOUNT

I
nasmal
lor
gani
zat
ioni
tmaybepossi
blef
oroneper
sont
omai
ntai
nal
lthel
edgeraccount
s

accur
atel
yandev
endealwi
ther
roreasi
l
ywhent
heyoccur
.Howev
er,
wher
eabusi
nessmai
ntai
nsa

l
argenumberofaccount
s,i
tisnoteasydeal
i
ngwi
ther
ror
s.Thi
smakesi
tnecessar
ytodi
vi
det
he

l
edgeri
ntosect
ionsandt
oassi
gnt
her
ecor
dingofeachsect
iont
odi
ff
erentper
sons.Themai
nar
eas

t
owhi
chsuchl
edger
scanbedi
vi
dedar
eint
hesubsi
diar
yledger-account
srecei
vabl
eandpay
abl
e

l
edger
,thegener
all
edger
.Inv
eryl
ageror
gani
sat
ionst
hesub-
div
isi
onmayf
urt
herbedi
vi
dedamong

empl
oyees.

Wher
ethi
sty
peofdi
vi
si
onst
akepl
acei
twi
l
lbenecessar
ytoi
nst
it
utecont
rol
sont
heaccur
acyoft
he

post
ingsmadet
oeachl
edger
.Thi
sisachi
evedbymai
ntai
ningt
otalaccount
sforaccount
srecei
vabl
e

andpay
abl
esi
nthegener
all
edger
.Theset
otal
account
sar
eknownascont
rol
account
s.

TheNat
ureofCont
rol
Account
s

AContr
olAccounti
sanaccount
,thebal
anceofwhi
chr
efl
ect
stheaggr
egat
ebal
ancesofmany
100|
Page
r
elat
ed subsi
diar
yaccount
swhi
ch ar
epar
toft
hedoubl
eent
rysy
stem.
Thecont
rolaccounti
s

t
her
efor
eamemor
andum r
ecor
donl
y.I
tissucht
hatt
hebal
ancesoneachaccounti
nthel
edger
,

whensummedup,wi
l
lbeequalt
othet
otalont
hecont
rolaccountf
ort
hatl
edger
.Iti
sbui
l
twi
tht
he

t
otal
sofal
ltr
ansact
ionst
hathav
eindi
vi
dual
l
ybeenpost
edi
ntot
hev
ari
ousaccount
s.Asar
esul
titi
s

somet
imescal
l heTot
edt alAccountoft
hel
edgerconcer
ned.I
tisanaccounti
nthegener
all
edgert
o

cont
rol
indi
vi
dual
account
sinasubsi
diar
yLedger
.

Cont
rolaccount
sar
emai
ntai
nedt
ofaci
l
itat
eeasydet
ect
ionofer
ror
sbecauset
heyactascheckon

t
heent
ri
esi
nthev
ari
ousl
edger
s.Wher
ethet
ri
albal
ancet
otal
sar
enotequal
,bal
ancesi
neachl
edger

canbeaddedt
oget
herandcompar
edwi
tht
hebal
ancei
nther
espect
ivecont
rolaccount
s.Or
dinar
il
y

t
het
woshoul
dbeequal
,wher
ether
eisadi
ff
erence,suchl
edgert
hatf
ail
stor
econci
l
ewi
tht
he

cont
rol
accountwi
l
lbei
nvest
igat
edr
athert
hanal
lthel
edgeraccount
s.

Funct
ionsofCont
rol
Account
s

 Thecont
rol
account
shel
pust
olocat
eer
ror
s.

 Thecont
rolaccount
spr
ovi
deasummar
y.Thet
otalbal
ancesoft
hedebt
orsandcr
edi
tor
scanbe

der
ivedqui
ckl
yandeasi
l
y.

 Thecont
rolaccount
sar
epr
epar
edbyadi
ff
erentper
sont
hant
heonewhopr
epar
est
hesal
esand

pur
chasesl
edger
s,whi
chal
somakef
raudmor
edi
ff
icul
t.

 Faci
l
itat
est
hepr
epar
ati
onoft
ri
albal
ance.

 Faci
l
itat
est
hepr
epar
ati
onoff
inal
account
s.

101|
Page
Debt
orsorSal
esLedgerCont
rol
Account

Sal
es l
edgercont
rolaccounti
sthe accountcont
aini
ng t
he summar
y ofal
ldebt
ors/
account

r
ecei
vabl
es.Whati
spost
edt
othedebi
tsi
deoft
hisaccounti
stheaggr
egat
eofal
lthei
temsr
ecor
ded

ont
hedebi
tsi
deofal
ldebt
ors’
account
s.Thesameappl
i
est
othecr
edi
tsi
deoft
heaccount
.

At
ypi
cal
for
matwi
l
lbeasf
oll
ows;

Debt
orsorSal
esLedgerCont
rol
Account

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
Dec.1 Bal
anced/
d xxx Dec.1 Bal
anceb/
d xxx
31 Cr
edi
tSal
es xxx 31 Ret
urnI
nwar
ds xxx
Di
shonour
edcheques xxx Cashr
ecei
vedf
rom Debt
ors xxx
Cash/
Bankr
efund xxx Chequesr
ec.f
rom Debt
orsxxx
I
nter
estonov
erduebal
.xxx Di
scountAl
l
owed xxx Baddebt
srecov
ered
xxx Baddebtwr
it
tenof
f xxx
Bi
l
lsr
ecei
vabl
esdi
shon’
d xxx Bi
l
lsr
ecei
vabl
es xxx
Bal
ancec/
d xxx Bal
anceSetof
fs xxx
Bal
ancec/
d xxx
102|
Page
xxxx xxxx
Bal
anceb/
d xxx Bal
anceb/
d xxx

Sour
cesofi
nfor
mat
ionf
orDebt
orsCont
rol
Account

I
tem Sour
ce
Openi
ngdebt
ors Debt
orsschedul
eorl
i
stf
rom t
hepr
evi
ousper
iod
Cr
edi
tsal
es Tot
alson sal
esday
bookorsal
esj
our
nalf
ort
he
cur
rentper
iod
Ret
urnsi
nwar
ds Ret
urnsi
nwar
dsj
our
nal
tot
als
Cashandchequesr
ecei
ved Cashbook t
otalf
orr
ecei
ptsf
rom debt
ors on t
he
r
ecei
ptssi
de
Baddebt
swr
it
tenof
f Gener
alj
our
nal
ent
ri
est
othatef
fect
Di
scountal
l
owed Cashbookdebi
tsi
de
Cl
osi
ngdebt
ors Debt
orsschedul
eorl
i
stf
rom t
heendoft
heper
iod

Cr
edi
tor
sorPur
chasesLedgerCont
rol
Account

Thi
sist
heaccountcont
aini
ngt
hesummar
yofal
ltheaccount
soft
hecr
edi
tor
sorsuppl
i
ersi
nthe

pur
chasel
edger
.

At
ypi
cal
for
matwi
l
lbeasf
oll
ows;

Cr
edi
tor
sorPur
chasesLedgerCont
rol
Account

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2015 2015
Dec.1 Bal
anced/
d xxx Dec.1 Bal
anceb/
d xxx
31 Ret
urnOut
war
ds xxx 31 Cr
edi
tPur
chasesxxx
CashPai
dtocr
edi
tor
s xxx Cashr
efunds xxx
Chequepai
dtocr
edi
tor
s xxx Chequesr
efund xxx

103|
Page
Di
scount
srecei
ved xxx I
nter
estonov
erduebal
s.xxx Bi
l
lsPay
abl
e
xxx Bi
l
lspay
abl
esdi
shonour
ed xxx
Bal
anceSetof
fs xxx
Bal
ancec/
d xxx Bal
ancec/
d xxx
xxxx xxxx
Bal
anceb/
d xxx Bal
anceb/
d xxx

Sour
cesofi
nfor
mat
ionf
orCr
edi
tor
sCont
rol
Account

I
tem Sour
ce
Openi
ngcr
edi
tor
s Cr
edi
tor
sschedul
eorl
i
stf
rom t
hepr
evi
ousper
iod
Cr
edi
tpur
chases Tot
alsonPur
chasesday
bookorpur
chasesj
our
nal
f
ort
hecur
rentper
iod
Ret
urnsout
war
ds Ret
urnsout
war
dsj
our
nal
tot
als
Cashandchequespai
dto Cashbook t
otalf
orpay
ment
sto cr
edi
tor
s on t
he
cr
edi
tor
s pay
ment
/cr
edi
tsi
de
Di
scountr
ecei
ved Cashbookcr
edi
tsi
de
Cl
osi
ngdebt
ors Cr
edi
tor
sschedul
eorl
i
stf
rom t
heendoft
heper
iod

Set
-Of
fandTr
ansf
ersf
rom oneCont
rol
Accountwi
th/
int
oanot
her

104|
Page
Thesear
esi
tuat
ionswher
eoneormor
ecust
omer
smaybeadebt
or(
int
hesal
esl
edger
)anda

cr
edi
tor(
int
hepur
chasesl
edger
)att
hesamet
imei
nthebooksofonebusi
nessent
it
y.Anexampl
eis

wher
eabusi
nessbuy
soncr
edi
tfr
om i
tssuppl
i
erandatt
hesamet
imesel
l
soncr
edi
tadi
ff
erent

pr
oductorser
vice.

I
nsuchsi
tuat
ion,
set
tl
ementcoul
dbebyf
indi
ngt
henet(
set
-of
ffi
gur
e)amountt
obepai
dorr
ecei
ved

i
nst
eadofpay
inghi
m/herasacr
edi
torandl
atercol
l
ect
ingmoneyf
rom hi
m/herasadebt
or.Thi
sis

r
efl
ect
edi
nthecont
rolaccount
stocl
eardebt
soft
hesameamount
.Ifonedebti
shi
ghert
hant
he

ot
her
,set
-of
fcoul
dst
il
lbedonewi
tht
hesmal
l
erf
igur
eleav
ingt
hedi
ff
erenceal
onet
obepai
dincash.

Ther
ear
etwoway
sofput
ti
ngt
hepr
obl
em;

a.Wher
ethenat
ureoft
hebal
ancet
obeset
-of
fisst
ated(
i.
eei
therdebi
torcr
edi
tbal
ancest
obeset
-

of
f.Anexampl
eis‘
adebi
tbal
anceofGH¢3,
000i
nthesal
esl
edgerset
-of
fagai
nstacr
edi
tbal
ance

i
nthepur
chasesl
edger
’.Thesol
uti
onwi
l
lbet
oCr
edi
tSal
esLedgerCont
rolA/
C(t
ocl
eart
hedebi
t

bal
ance)andDebi
tPur
chasesLedgerCont
rolA/
C(t
ocl
eart
hecr
edi
tbal
ance)wi
thGH¢3,
000.

b.Wher
ethenat
ureoft
hebal
ancet
obeset
-of
fisnotst
atedandst
udent
sar
etof
igur
eoutwhatt
he

posi
ti
onmi
ghtbe.Anexampl
eis‘
abal
anceofGH¢3,
000i
nthesal
esl
edgerset
-of
fagai
nsta

bal
ancei
nthepur
chasesl
edger
’.Thesol
uti
onl
i
esi
nthef
actt
hatnor
malbal
ancesoft
he

account
sar
etobeassumed(
i.
eSal
escont
rolhasdebi
tbal
anceandcr
edi
tforpur
chasesl
edger

cont
rolaccount
)anddeal
twi
thusi
ngt
hepr
inci
plei
n(1)abov
e.

NB:I
ncont
rolaccount
s,st
udent
swi
l
lnotonl
ybet
est
edonhowt
opr
epar
esal
esandpur
chasel
edger

cont
rol
account
s,butwi
l
lal
sobet
est
edont
hei
rst
rengt
honwhataf
fect
ssal
esandpur
chasel
edger
s.

I
nthatcase,someot
heri
temst
hathav
enot
hingt
odowi
thsal
esandpur
chasesl
edgerwi
l
lbe

i
ncl
uded,butst
udent
sshoul
dknow andexcl
udet
hem i
nthei
ranswer
s.Exampl
eonebel
ow gi
vea

ty
picalexampl
eofsuchi
tems.
105| Page
Exampl
e1

Thef
oll
owi
ngi
nfor
mat
ionr
elat
est
oSADAGYADALTD.f
ort
hemont
hended31stAugust
,2013.The

f
oll
owi
ngwer
ethebal
ancesi
nthebooksofSADAGYADALTD.i
nthebegi
nni
ngoft
hemont
hwer
e;

Dr
. Cr
.

Sal
esLedger GH¢40,
660 GH¢240

Pur
chasesLedger GH¢520 GH¢27,
800

GH¢

Cashpur
chases 12,
735

Ret
urnsi
nwar
ds 1,
938

Baddebt
swr
it
tenof
f 853

Chequepay
ment
stosuppl
i
ers 64,
320

Di
scountr
ecei
ved 1,
717

Cashsal
es 76,
321

Debt
or’
schequesdi
shonour
ed 2,
639

Pur
chasesRet
urns 1,
222

Cr
edi
tsal
es 132,
845

Di
scountal
l
owed 3,
699

Cr
edi
tpur
chases 70,
394

Setof
fbet
weenSal
esLedgerandPur
chasesLedger 2,
850

Chequesr
ecei
vedf
rom debt
ors 144,
820

106|
Page
Debi
tbal
ancesi chasesLedgerat31stDecember
nPur , 563

2013

Cr
edi
tbal
ancesi esLedgerat31stDecember
nSal ,2013 2,
154

Pr
ovi
sionf
orDoubt
ful
debt
s 4,
500

Requi
red:

Pr
epar
ethePur
chasesLedgerCont
rolAccountandSal
esLedgerCont
rolAccount
sast
heywoul
d

appeari
ntheGener
alLedgerofSADAGYADALTD.f
ort
hey
earended31stDecember2013.

Sol
uti
on

SADAGYADALTD
Pur
chasesLedgerCont
rol
Account
s

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2013 2013
Aug.1 Bal
ancedb/
d 520 Aug.1 Bal
ancedb/
d 27,
800
31Chequepay
mentt
oSupp. 64,
320 31Cr
edi
tPur
chases 70,
394
Di
scountr
ecei
ved 1,
717 Bal
ancec/
d 563 Pur
chases r
etur
ns
1,
222 Setof
f 2,
850
Bal
ancec/
d 28,
128
98,
757 98,
757
Sept
.1 Bal
anceb/
d 563 Sept
.1 Bal
anceb/
d 28,
128

Sal
esLedgerCont
rol
Account
s

Dat
e Det
ail
s GH¢ Dat
e Det
ail
s GH¢
2013 2013
Aug.1 Bal
ancedb/
d 40,
660 Aug.1 Bal
ancedb/
d

107|
Page
240
31Cr
edi
tSal
es 132,
845 31Ret
urnI
nwar
ds 1,
938
Di
shonour
edCheque 2,
639 Baddebt
swr
it
tenof
f 853
Bal
ancec/
d 2,
154 Di
scountAl
l
owed 3,
699
Chequer
ecei
vedf
rom Debt
. 144,
820
Setof
f 2,
850
Bal
ancec/
d 23,
898
98,
757 98,
757
Sept
.1 Bal
anceb/
d 23,
898 Sept
.1 Bal
anceb/
d 2,
154

ENDOFSESSI
ONSEVENTRYQUESTI
ONS

1.Thef
oll
owi
ngar
eext
ract
sfr
om t
hebooksofGhanabebaLt
d.f
ort
hemont
hofSept
ember

2016.

GH¢

01/
09/
2016 Sal
esl
edgerbal
ances(
debi
tbal
ances) 256,
000

01/
09/
2016 Sal
esl
edgerbal
ances(
credi
t 13,
000

bal
ances)

Dur
ingt
hemont
h: Cashsal
esf
ort
hemont
h 500,
000

Sal
esJour
nal
tot
als 1,
200,
000

Cashr
ecei
vedf
rom cust
omer
s 680,
000

Di
scount
sAl
l
owed 14,
000

Pr
ovi
sionf
orbaddebt 20,
000

Bi
l
lsRecei
vabl
eAccept
edby 100,
000

cust
omer
s

Sal
esRet
urnst
otal
s 52,
000
108|
Page
Baddebt
swr
it
tenof
f 13,
200

Chequesr
ecei
vedf
rom cust
omer
s 250,
000

Cust
omer
s’Chequesr
etur
nedunpai
d 100,
000

30/
09/
2016 Bal
ances(
Credi
t) 5,
100

Bal
ances(
Debi
t) ?
??,
???

Requi
red;

i
. Whatar
etheadv
ant
agesofcont
rol
account
s?

i
i
. Pr
epar
eDebt
orsCont
rol
Accountf
orGol
daEnt
erpr
i orasat30thSept
sef ember2016

2.Fr
om t
hef
oll
owi
ngbal
ancesofEv
aAppi
ah,pr
epar
ethePur
chasesCont
rolAccountasat

31/
12/
2014

GH¢

Di
scountr
ecei
vedf
ort
hemont
h 250

Cr
edi
tPur
chases 10,
500

Ret
urnsOut
war
ds 156

CashPur
chases 1,
500

CashPai
dtosuppl
i
ersf
ort
hemont
h 8,
560

Chequespai
dtocr
edi
tor
s 4,
800

Bi
l
lspay
abl
eaccept
ed 600

Bal
ances:
01/
12/
2014Debi
tbal
ances 400

01/
12/
2014Cr
edi
tbal
ances 6,
900

31/
12/
2014Debi
tbal
ances 10
109|
Page
31/
12/
2014Cr
edi
tbal
ances ?
,??
?

3.GAVETl
i
mit
edpr
epar
esmont
hlycont
r s.At1stMar
olaccount ch,2011,t
hef
oll
owi
ngbal
ances

exi
stedi
nthecompany
’sr
ecor
ds:

Sal
esl
edgert
otal
s GH¢84,
280(
Dr) GH¢107(
Cr)

Pur
chasesl
edgert
otal
s GH¢850(
Dr) GH¢57,
044(
Cr)

Thef
oll
owi
ngar
ethet
otal
soft
ransact
ionswhi
cht
ookpl
acedur
ingMar
ch2016,
asext
ract
edf
rom

t
hecompany
’sr
ecor
ds:

GH¢
Sal
esDay
bookt
otal
s 26,
780
Bi
l
lsr
ecei
vabl
eaccept
edbycust
omer
s 768
Baddebtwr
it
tenof
f 1,
087
Pur
chasesDay
bookt
otal
s 19,
500
Sal
esr
etur
ns 670
Cust
omer
schequedi
shonour
ed 345
Bi
l
lspay
abl
eaccept
ed 8,
220
Pr
ovi
sionf
ordoubt
ful
debt 2,
740
Cashpur
chases 3,
470
Ref
undt
ocust
omer
s 1,
320
Chequepay
mentt
osuppl
i
ers 12,
860
Cashandchequesr
ecei
vedf
rom cust
omer
s 17,
400
Di
scountr
ecei
ved 756
Di
scountal
l
owed 439
Cashsal
es 5,
600
I
nter
estchar
gedonov
erdueaccountofdebt
ors 120

110|
Page
Sal
esl
edgerandpur
chasesl
edgercont
raset
tl
ement 978
Car
ri
ageout
war
ds 234
Ret
urnout
war
ds 279

heendof31stMar
Att ch,
2016,
thesal
esl
edgercont
rol
accounthadacr
edi
tbal
anceofGH¢2,
340and

t
hepur
chasesl
edgercont
rol
accounthadadebi
tbal
anceofGH¢54.

Requi
red:
Prepar
ethesal
esl
edgercont
rol
accountandpur
chasesl
edgercont
rol
accountt
o

det
ermi
net
hemont
hendbal
ances.

SESSI
ONEI
GHT

PREPARATI
ONOFELEMENTARYFI
NANCI
ALSTATEMENT

OVERVI
EW

I
nfor
mat
ioni
nfi
nanci
alst
atement
sist
heout
putoft
heaccount
ingi
nfor
mat
ionsy
stem;r
ecor
ding

t
ransact
ions (
input
s),cl
assi
fyi
ng,summar
izi
ng and anal
yzi
ng (
processi
ng)
,fi
nanci
alst
atement

(
out
put
).Thi
ssessi
oni
ntr
oducest
udent
stohow t
hef
inalout
putaf
terr
ecor
dingandpr
ocessi
ng

t
ransact
ionswi
l
lbepr
esent
edt
ouser
soff
inanci
ali
nfor
mat
ion.

LEARNI
NGOBJECTI
VES

Att
heendoft
hissessi
on,
youshoul
dbeabl
eto

• I
dent
if
yCapi
tal
,Rev
enueandDef
err
edRev
enueExpendi
tur
es.

• Under
standCapi
tal
andRev
enuer
ecei
pts.

• Under
standandpr
epar
eabasi
cincomest
atementofanent
it
y

• Under
standandpr
epar
eabasi
cst
atementoff
inanci
alposi
ti
onofanent
it
y
111|
Page
I
NTRODUCTI
ON

Oncet
het
ri
albal
ancei
spr
epar
edt
henextst
epi
stof
indoutt
henetr
esul
t(per
for
mance)and

f
inanci
alposi
ti
onoft
hebusi
nessconcer
n.Thebusi
nessconcer
n’sf
inanci
alposi
ti
oni
sboundt
obe

af
fect
edbyt
her
esul
tofi
tsoper
ati
ons.‘
Mat
chi
ngPr
inci
ple’
gov
ernst
hepr
epar
ati
onoft
heset
wo

st
atement
s.Accor
dingt
othi
spr
inci
plet
her
evenuesand r
elev
antexpendi
tur
esi
ncur
red dur
inga

par
ti
cul
arper
iodshoul
dbemat
ched.Thusapr
operdi
sti
nct
ionmustbeaccount
edf
orbet
ween

capi
taland r
evenue t
ransact
ions.Busi
nesst
ransact
ions can be capi
talt
ransact
ions orr
evenue

t
ransact
ions.

CAPI
TALTRANSACTI
ONS

Thebusi
nesst
ransact
ions,whi
chpr
ovi
debenef
it
sorsuppl
yser
vicest
othebusi
nessconcer
nfor

mor
ethanoney
earoroneoper
ati
ngcy
cleoft
hebusi
ness,
areknownascapi
tal
transact
ions.

Thet
ransact
ionswhi
chr
elat
etocapi
talar
eagai
nsub-
div
idedi
ntocapi
talexpendi
tur
eandcapi
tal

r
ecei
pt.

Capi
tal
Expendi
tur
e

Capi
talexpendi
tur
eisi
ncur
redt
oacqui
re,manuf
act
ureori
mpr
oveasset
sfort
hepur
poseofear
ning

i
ncomeov
ert
imei
nanor
gani
sat
ion.

Feat
uresofCapi
talExpendi
tur
e

Theexpendi
tur
eismade

 Toacqui
reasset
sref
err
edt
oasnon-
cur
rentasset
s.
112|
Page
 Toconst
ructnon-
cur
rentasset
s,e.
g.wagesorsal
ari
esofwor
ker
stoconst
ructanor
gani
sat
ion’
s

bui
l
ding.

 Toputanewnon-
cur
rentasset
sinausabl
eposi
ti
on,e.
g.l
egalchar
gesont
hepur
chaseofl
and

andbui
l
ding,costonr
egi
ster
ingandacqui
ri
nganumberpl
atef
oranew v
ehi
cle,t
ranspor
t

expenseonnewmachi
ner
yboughtandanyexpenset
oputt
henewmachi
ner
yinusabl
eposi
ti
on.

 Toi
ncr
easet
her
evenueear
ningcapaci
tyofanassetorbusi
nessor
gani
sat
ion.

 Toacqui
reanasset
,thatgi
vesbenef
it
sov
ermanyy
ear
sint
hebusi
nessor
gani
sat
ion,e.
g.

goodwi
l
lpai
dfori
napur
chasedbusi
nessor
gani
sat
ion.

 Foranasset
,thoughr
evenuei
nnat
ure,
yetpr
ovi
debenef
it
sformanyy
ear
s,e.
g.ext
endedorheav
y

adv
ert
isi
ngpr
ogr
ammewi
thi
nay
ear
,andpr
eli
minar
yorbusi
nessf
ormat
ionexpenses.

 Topayof
fanyl
oani
nit
ial
l
yacqui
redf
ort
heoper
ati
onsoft
hebusi
ness.

Mostoft
heseasset
sacqui
redar
eref
err
edt
oasnon-
cur
rentasset
s

Capi
tal
Recei
pts/I
ncome

Thi
sref
erst
opr
oceedsormoni
esr
ecei
vedf
rom;

• Theownerofabusi
nessasaddi
ti
onal
inv
est
ment
sint
hebusi
ness

• Thesal
eofnon-
cur
rentasset
s

• Theacqui
si
ti
onofal
oanf
orbusi
nessoper
ati
ons

REVENUETRANSACTI
ONS

Thebusi
nesst
ransact
ions,whi
chpr
ovi
debenef
it
sorsuppl
i
esser
vicest
oabusi
nessconcer
nforan

account
ing per
iod onl
y,ar
e knownas r
evenue t
ransact
ions. Rev
enue t
ransact
ions can be

113|
Page
Rev
enueExpendi
tur
eorRev
enueRecei
pt.

Rev
enueRecei
pt/I
ncome

Thi
sref
erst
orecei
ptori
ncomet
hati
sear
nednor
mal
l
yint
hecour
seofbusi
nessoper
ati
onswhi
ch

maybef
rom;

• t
hemai
noper
ati
onsoft
heor
gani
sat
ion,
or

• f
rom ot
hersour
ces.

Exampl
escanbesal
es,
renti
ncomeandot
hercommi
ssi
onsr
ecei
ved.

Rev
enueExpendi
tur
e

Thi
sist
heexpendi
tur
ewhi
chi
sincur
redf
ort
hepur
poseofmai
ntai
ningt
henon-
cur
rentassetandt
he

ear
ningcapaci
tyoft
hebusi
nessor
gani
sat
ion.

Feat
uresofRev
enueExpendi
tur
e

Theexpendi
tur
eisi
ncur
red;

 nor
mal
l
yint
hecour
seoft
hebusi
nessoper
ati
ons

 const
ant
lyi
nthecour
seofbusi
nessoper
ati
ons

 andconsumedt
otal
l
yint
heper
iodi
tisi
ncur
red.

 Thef
ull
benef
itoft
heexpendi
tur
eisnor
mal
l
yconsumedt
otal
l
yint
heper
iodi
nwhi
chi
tisi
ncur
red.

114|
Page
FI
NANCI
ALSTATEMENTS

Fi
nanci
alst
atement
sar
est
atement
spr
epar
edt
opr
ovi
dei
nfor
mat
ionont
hef
inanci
alper
for
mance,

f
inanci
alposi
ti
onandt
hecashf
lowsofabusi
nessent
it
y

Thecomponentofabasi
cfi
nanci
alst
atement
sar
e;

a) TheSt
atementofFi
nanci
alPosi
ti
on

b) TheI
ncomeSt
atementorSt
atementofCompr
ehensi
veI
ncome

c) TheSt
atementofCashFl
owSt
atement

d) TheSt
atementofChangesi
nEqui
ty

e) Not
est
othef
inanci
alst
atement
s(i
.e.di
scl
osur
es)

NB:
Att
hisl
evel
int
hepr
epar
ati
onoff
inanci
alst
atement
,wewi
l
lli
mitourst
udi
est
othepr
epar
ati
onof

bot
hthest
atementoff
inanci
alposi
ti
onandt
hei
ncomest
atementonl
y.

Pr
epar
ati
onofFi
nanci
alSt
atement

Thef
inalaccount
sofbusi
nessconcer
ngener
all
yincl
udest
wopar
ts.Thef
ir
stpar
tisTr
adi
ngand

Pr
ofi
tandLossAccount(
IncomeSt
atement
).Thi
sispr
epar
edt
ofi
ndoutt
henetr
esul
toft
he

busi
ness(
per
for
manceoft
hebusi
ness)
.Thesecondpar
tisSt
atementofFi
nanci
alPosi
ti
onwhi
chi
s

pr
epar
edt
oknowt
hef
inanci
alposi
ti
onoft
hebusi
ness.

I
ncomeSt
atement
:

Thei
ncomest
atementshowst
hef
inanci
alper
for
manceofanent
it
yov
eraper
iod oft
ime.I
t

summar
izest
her
evenue(
income)and(
expenses)expendi
tur
eofanent
it
yov
ert
ime.
Asi
mpl
efor
mat

f
orani
ncomest
atementi
s:

Rev
enues–Expenses=NetI
ncome
115|
Page
Rev
enuesar
eear
nedf
ort
hesal
eofgoodsorser
vices.Not
ethatr
evenuesoccurwhent
hesal
eis

made.Thepay
mentmayormaynothav
ebeenr
ecei
ved.(
NB:
Rev
enueRecei
pt)

Expensesar
eincur
redwhenabusi
nessr
ecei
vesgoodsandser
vices.Li
ker
evenues,
pay
mentmayor

maynothav
ebeenmade.(
NB:
Rev
enueExpendi
tur
e)

Mostbusi
nessesr
equi
remor
einf
ormat
ionf
rom t
hei
rbusi
nessest
hanasi
mpl
eincomest
atement

canpr
ovi
de.Ther
efor
e,t
heyuseamul
ti
-st
epi
ncomest
atementf
ormat
.

Af
ormatf
oramul
ti
-st
epi
ncomest
atementi
s:

GH¢
Salesr
evenue ****
Less:
Costofgoodssol d (**
**)
Grossprofi
t **
**
Less:Operat
ingexpenses (*
***)
I
ncomef rom operati
ons *
***
Less:Incomet axes (
****
)
Netincome(Profi
t/Loss) ***
**
Costofgoodssol
dorcostofsal
esr
epr
esent
stheexpenseabusi
nessi
ncur
redt
obuyormakea

pr
oductf
orr
esal
e.I
tiscal
cul
atedas;

GH¢

Openi
ngi
nvent
ory xxx

Add:
Pur
chasesofgoodsdur
ingt
hey
ear xxx

Add:
Car
ri
ageI
nwar
ds xxx

Less:Ret
urnOut
war
ds xxx

Costofgoodsav
ail
abl
eforsal
e xxx

Less:
Closi
ngi
nvent
ory xxx

116|
Page
Costofgoodssol
d xxx

Bel
owi
sthef
ormatofaf
ull
incomest
atement

GH¢ GH¢
Sal
es XXX
Less:
Ret
urnsi
nwar
ds (
XXX)
Netsal
es(
A) XXX
CostofGoodsSol
d(B)
:
Openi
ngi
nvent
ory XXX
Add:
Pur
chases XXX
Car
ri
agei
nwar
ds XXX
Less:
Ret
urnsout
war
ds (
XXX)
GoodsAv
ail
abl
e XXX
LessCl
osi
ngSt
ock (
XXX)
COGS(
B) (
XXX)
Gr
ossPr
ofi
t(A–B) XXX
Add:
Discountr
ecei
ved XXX
Renti
ncome XXX
Commi
ssi
onr
ecei
ved XXX
Tot
ali
ncome(
C) XXX
LessExpenses:
Gener
alandAdmi
nist
rat
iveExpenses XXX
Sel
l
ingandDi
str
ibut
ionExpenses XXX
Fi
nanci
alChar
ges/
Expenses XXX
Tot
alExpenses(
D) (
XXX)
NetPr
ofi
t/
Loss(
C–D) XXX

117|
Page
St
atementofFi
nanci
alPosi
ti
on:

Thest
atementoff
inanci
alposi
ti
onshowst
hef
inanci
alposi
ti
onofanent
it
yatapoi
nti
nti
me.I
t

summar
izest
heasset
s,l
i
abi
l
iti
esandowner
s’equi
tyofanent
it
yatapar
ti
cul
arpoi
nti
nti
me

Thebasi
cfor
matf
ort
hebal
ancesheeti
s:

Equi
ty=Asset
s–Li
abi
l
iti
es

Bel
owi
sthef
ormatofast
atementoff
inanci
alposi
ti
on

NameoftheOrganisati
on
St
atementofFi
nancial
Posit
ionasat……………..
Cost Acc.Depr NetBookVal ue
Non-CurrentAssets GH¢ GH¢ GH¢
Bui
ldings xxx xxx Xx x
Equipment xxx xxx Xx x
Furnit
ureandfit
tings xxx xxx Xx x
xxx xxx Xx x
CurrentAssets
Cl
osi ngInv
entory xxx
TradeReceivabl
es xxx
Prepayments xxx
Bankbalance xxx
Cashi nhand xxx xxx

CurrentLi
abil
it
ies
TradePayables xxx
Bankov er
draft xxx
Accruedexpenses xxx Xx
x

NetcurrentAssets xxx
TotalNetAssets xxx
LessLong-termli
abil
i
ties xxx
Capit
alEmpl oyed xxx

Fi
nancedby:
Capi
tal xxx
Add:NetPr
ofi
t xxx
xxx
118|
Page
Less:
Drawi
ngs Xxx
Owner’
sEqui
ty Xxx

SomeAdj
ust
ment
sNeededf
ort
hePr
epar
ati
onofFi
nanci
alSt
atement
s

Accr
uedExpense

Thi
sref
erst
oexpenset
hatt
hef
ir
m hasconsumedt
hebenef
it
sassoci
atedwi
thi
tbuti
syett
opayf
or

i
t.Ty
picalexampl
esar
etel
ephoneandel
ect
ri
cit
ywhosebi
l
lsmayber
ecei
vedaf
tert
heendoft
he

f
inanci
alper
iodunderconsi
der
ati
on.Togett
heamounti
ncur
red,
theamountowi
ngatt
heendoft
he

y
earmustbeaddedt
oanyamountal
readypai
dasf
oll
ows;

Expensei
ncur
red GH¢

Amountpai
d xxx

Add:
Amountout
standi
ng xxx(
NB:
thi
samountwi
l
lbei
nthest
atementof

f
inanci
alposi
ti
onascur
rentl
i
abi
l
ity
)

Amountt
oincomest
atement xxx

Pr
epai
dExpense

Thi
sref
erst
oexpenset
hatt
hef
ir
m hasnoty
etconsumedt
hebenef
it
sassoci
atedwi
thi
tbuthadpai
d

f
ori
t.Ty
pical
exampl
esar
epr
epai
dinsur
anceandwagespai
dinadv
ance.Togett
heamounti
ncur
red,

t
heamountpai
dinadv
anceatt
heendoft
hey
earmustbededuct
edf
rom anyamountal
readypai
das

f
oll
ows;

Expensei
ncur
red GH¢

Amountpai
d xxx

Less:
Amountpr
epai
d xxx(
NB:
thepr
epai
damountwi
l
lbei
nthest
atementof

f
inanci
alposi
ti
onasacur
rentasset
)
119|
Page
Amountt
oincomest
atement xxx

Pr
ovi
sionsf
orDepr
eci
ati
onandBaddebt
s

Pr
ovi
sionf
ordepr
eci
ati
ont
othest
atementofcompr
ehensi
vei
ncomewi
l
lbet
hecur
renty
ear
-end

char
ges.Theaccumul
atedamountwi
l
lbededuct
edf
rom t
hecostoft
henon-
cur
rentassetconcer
ned

i
nthest
atementoff
inanci
alposi
ti
ont
oshow t
henetbookv
alueasatt
hest
atementoff
inanci
al

posi
ti
ondat
e.

Wi
thr
espectt
opr
ovi
si
onf
orbaddebt
s,car
eshoul
dbet
aken.Theamountt
obesenti
ntot
he

st
atementofcompr
ehensi
vei
ncomei
sthechangef
rom oneper
iodt
oanot
her
.Thecur
renty
ear
’s

pr
ovi
si
onshoul
dbecompar
edt
othatoft
hepr
evi
ousy
earandi
fthechangei
sani
ncr
easei
tis

t
reat
edasanexpensesi
ncet
hedebt
ors’
sit
uat
ionhaswor
sened.

Ont
heot
herhand,i
fthechangei
sadecr
ease,t
heni
tist
reat
edas“
otheri
ncome”andaddedt
othe

Gr
ossPr
ofi
t.Howev
er,i
nal
lcases,t
henewpr
ovi
sionwi
l
lgoi
ntot
hest
atementoff
inanci
alposi
ti
on

asadeduct
ionf
rom t
heTot
alDebt
orsf
igur
e.

Exampl
e1

Gi
venbel
ow i
sthet
ri
albal
anceofPapi
sCoEnt
erpr
ise.Pr
epar
ethei
ncomest
atementandt
he

st
atementoff
inanci
alposi
ti
onf
ort
hey
earended2015.

Par
ti
cul
ars Dr
. Cr
.

GH¢ GH¢

I
nvent
oryason1/
01/
2015 50,
000

Sal
es 290,
000

Sal
esr
etur
ns 10,
000

Pur
chases 245,
000

Pur
chaser
etur
ns 5,
000
120|Page
Car
ri
agei
nwar
ds 4,
000

Car
ri
ageout
war
ds 6,
000

Wagesandsal
ari
es 30,
000

Pr
int
ingandst
ati
onar
y 900

Di
scountal
l
owed 900

Di
scountr
ecei
ved 600

Pr
ovi
sionf
orDepr
eci
ati
on 3,
000

Bui
l
dings 214,
100

Adv
ert
isi
ngandt
rav
ell
i
ngExpenses 5,
600

Capi
tal 272,
900

AccountRecei
vabl
es 20,
000

AccountPay
abl
e 15,
000

586,
500 586,
500

Addi
ti
onal
inf
ormat
ion:

I
nvent
oryason31/
12/
2015wasGH¢59,
000

Sol
uti
on
121|Page
PAPI
SCOENTERPRI
SE

I
NCOMESTATEMENTFORTHEYEARENDI
NG31/
12/
2015

GH¢ GH¢ GH¢

Sal
es 290,
000

LessSal
esRet
urns (
10,
000)

NetSal
es 280,
000

LessCostofSal
es:

Openi
ngI
nvent
ory 50,
000

Pur
chases 245,
000

AddCar
ri
ageI
nwar
ds 4,
000

249,
000

LessPur
chaseRet
urns (
5,000) 244,
000

294,
000

LessCl
osi
ngSt
ock (
59,
000) (
235,
000)

Gr
ossPr
ofi
t 45,
000

Di
scountRecei
ved 600

45,
600

LessExpenses:

Car
ri
ageOut
war
ds 6,
000

Wages&Sal
ari
es 30,
000

Pr
int
ing&St
ati
oner
y 900

Di
scountAl
l
owed 900

Adver
ti
sing&Tr
avel
l
ing 5,
600 43,
400
122|Page
Exp.

NetPr
ofi
t 2200

PAPI
SCOENTERPRI
SE

STATEMENTOFFI
NANCI
ALPOSI
TIONASAT31STDECEMBER2014

NON-
CURRENTASSETS COST ACC.DEP NBV

GH¢ GH¢ GH¢

Bui
l
dings 214,
100 (
3,000) 211,
100

CURRENTASSETS

I
nvent
ory 59,
000

Account
sRecei
vabl
e 20,
000

79,
000

LESSCURRENTLI
ABI
LITI
ES

Account
sPay
abl
e (
15,
000) 64,
000

275,
100

Fi
nancedBy

Capi
tal 272,
900

AddNetPr
ofi
t (
2,200)

275,
100

Exampl
e2

From t
hef
oll
owi
ngbal
ancesext
ract
edf
rom t
hebooksofSobol
oEnt
erpr
ise,
prepar
efi
nal
account
s
123|Page
f
ort
hey
earendi
ng31stDecember
,2014.Par
ti
cul
ars

Debi
t Cr
edi
t

GH¢ GH¢

Capi
tal 95,
000

Pl
ant&Machi
ner
y 37,
000

Mot
orVehi
cle 28,
000

Repai
rst
oMachi
ner
y 1,
990

Wages&sal
ari
es 32,
000

El
ect
ri
ci
tyexpenses 2,
750

Adv
ert
isi
ngexpenses 1,
000

Cashandbankbal
ances 3,
000

Landandbui
l
ding 101,
750

Pur
chases 190,
000

Ret
urnOut
war
ds 3,
000

Sal
es 375,
000

Tr
avel
l
ingexpenses 2,
250

Commi
ssi
on 6,
000

Account
sRecei
vabl
e(Debt
ors) 52,
500

Account
sPay
abl
e(Cr
edi
tor
s) 40,
650

I
nvent
oryason1/
12/
2014 55,
500

Dr
awi
ngs 12,
000

519,
650 519,
650

Addi
ti
onal
inf
ormat
ion
124|Page
i
. St
ockon31stDecember
,2013wasGH¢72,
500.

i
i
. Depr
eci
ati
oni
schar
geasf
oll
ows;Pl
ant&Machi
ner
y15%oncostandMot
orv
ehi
cle10%on

cost

i
i
i. Accr
uedexpensesatt
heendoft
heper
iodar
easf
oll
ows;El
ect
ri
cit
yGH¢100andWages&

sal
ari
esGH¢2000

i
v. Pr
epai
dexpensesatt
heendoft
heper
iodar
easf
oll
ows;Repai
rst
oMachi
ner
yGH¢190and

Adv
ert
isi
ngGH¢250

Youar
erequi
redt
opr
epar
ethei
ncomest
atementandt
hest
atementoff
inanci
alposi
ti
onf
ort
he

Sobol
oEnt
erpr
isef
ort
hey
earended2014.

Sol
uti
on

SOBOLOENTERPRI
SE

I NG31STDECEMBER2014
NCOMESTATEMENTFORTHEYEARENDI

GH¢ GH¢ GH¢

Sal
es 375,
000

LessCostofSal
es

Openi
ngI
nvent
ory 55,
500

Pur
chases 190,
000

LessRet
urnOut
war
ds (
3000) 187,
000

242,
500

LessCl
osi
ngI
nvent
ory (
72,
500) (
170,
000)

Gr
ossPr
ofi
t 205,
000
125|
Page
Ot
herI
ncome(
s):

Commi
ssi
ons 6,
000

211,
000

LessExpenses:

El
ect
ri
ci
ty 2,
750

AddEl
ect
ri
cit
yAccr
ued 100 2,
850

Wages&Sal
ari
es 32,
000

AddWages&Sal
ari
es 2,
000 34,
000

Repai
rst
oMachi
ner
y 1,
900

LessMachi
ner
yPr
epai
d (
190) 1,
710

Adv
ert
isi
ng 1000

LessAdv
ert
isi
ngPr
epai
d (
250) 750

Tr
avel
l
ingExpenses 2,
250

Depr
eci
ati
on:
Plant&Machi
ner
y 5,
550

Mot
orVehi
cle 2,
800 8,
350 (
49,
910)

NetPr
ofi
t 161090

SOBOLOENTERPRI
SE
STATEMENTOFFI
NANCI
ALPOSI
TIONASAT31stDECEMBER2014
NON-
CURRENTASSETS COST ACC.DEP NBV
GH₵ GH₵ GH₵
Plant&Machi
ner
y 37,
000 (
5,550) 31450
126| Page
Land&Bui
l
dings 101,
750 - 101,
750
Mot
orVehi
cle 28,
000 (
2,800) 25,
200
166,
750 (
8,350) 158,
400
CURRENTASSETS
I
nvent
ory 72,
500
Account
sRecei
vabl
e 52,
500
Pr
epay
ment
:Repai
rst
oMachi
ner
y 190
Adv
ert
isi
ngPr
epai
d 3000
128,
440
LESSCURRENTLI
ABI
LITI
ES
Account
sPay
abl
e 40,
650
El
ect
ri
ci
tyAccr
ued 100
Wages&Sal
ari
es 2,
000 (
42,
750) 85,
690
244,
090
Fi
nancedBy
:
Capi
tal 95,
000
AddNetPr
ofi
t 161,
090
256,
000
LessDr
awi
ngs (
12,
000)
244,
090

Exampl
e3

Bel
owi
stheTr
ial
Bal
anceofAGYA-
DUMSOLTD.asat31stDecember
,2013

Dr
. Cr
.

127|
Page
GH¢ GH¢
Openi
ng I
nvent
ory
4,
030
01/
01/
2013
Pur
chases 18,
700
Di
scountal
l
owed 1,
300
WagesandSal
ari
es 7,
000
Sal
es 27,
700
Tr
avel
l
ingexpenses 400
Adv
ert
isi
ngExpenses 1,
300
Car
ri
ageOut
war
ds 1,
040
LongTer
m Loan 1,
000
Di
vi
dendsRecei
ved 2,
350
Pr
ovi
sionf
orDoubt
ful
Debt
s 700
BadDebt
s 400
Ut
il
it
ybi
l
ls 805
I
nter
estExpenses 300
Bui
l
ding 5,
600
Car 2,
800
Debt
ors 4,
200
Cr
edi
tor
s 2,
170
Capi
tal
CashandBank 2,
045 16,
000
49,
920 49,
920

Addi
ti
onal
inf
ormat
ion

1.Cl
osi
ngI
nvent
oryon31stDecember
,2013wasGH¢4,
500.

128|
Page
2.Depr
eci
ati
oni
schar
geasf
oll
ows;

Bui
l
ding20%oncost

Car5%oncost

3.Accr
uedexpensesatt
heendoft
heper
iodar
easf
oll
ows;

I
nter
estGH¢75

Ut
il
it
yBi
l
lsGH¢20

4.Adv
ert
isi
ngexpenseshasbeenpr
epai
dbyGH¢450

Youar
erequi
redt
opr
epar
ethei
ncomest
atementandt
hest
atementoff
inanci
alposi
ti
onf
ort
he

companyf
ort
hey
earended2013.

Sol
uti
on

I
nthebooksofAGYA-
DUMSOLTD

I
ncomeSt
atementf
ort
heper
iodended31stDecember
,2013

GH¢ GH¢ GH¢

Sal
es 27,
700

Costofsal
es

Op.St
ock 4,
030

Pur
chase 18,
700

Less.Cl
osi
ngst
ock (
4,500)

(
18,
230)

Gr
ossPr
ofi
t 9,
470

129|
Page
Di
vi
dendRecei
ved 2,
350

Expenses:

Di
scountAl
l
owed 1,
300

WagesandSal
ari
es 7,
000

Tr
avel
l
ingExpenses 400

Adv
ert
isement 1,
300

Less.Pr
epay
ment (
450) 850

Car
ri
ageOut
war
ds 1,
040

BadDebt
s 400

I
nter
estExpenses 300

Add.Accr
ual
s 75 375

Ut
il
it
yBi
l
l 805

Add.Accr
ual
s 20 825

Depr
eci
ati
on;

Bui
l
ding(
20%*5,
600) 1,
120

Car(
5%*2,
800) 140 1,
260

(
13,
450)

NetLoss (
1,630)

St
atementofFi
nanci
alPosi
ti
onasat31stDecember
,2013
Cost Acc.Dep. NBV
130|
Page
Non-
Cur
rentAsset
s GH¢ GH¢ GH¢
Bui
l
ding 5,
600 (
1,120) 4,
480
Car 2,
800 (
140) 1,
660
8,
400 (
1,260) 7,
140
Cur
rentAsset
s
I
nvent
ory 4,
500
Debt
ors 4,
200
Pr
ovi
sionf
orDoubt
ful
Debt
s (
700) 3,
500
Pr
epay
ment 450
CashandBank 2,
045
10,
495
Less:
Credi
tor
s 2,
170
Accr
ual
s(75+20) 90 (
2,265)
8,
230
15,
370
Fi
nancedBy
Capi
tal
: 16,
000
NetLoss (
1,630)
14,
370
Loan 1,
000
15,
370

ENDOFSESSI
ONSEVENTRYQUESTI
ONS

Quest
ion1
131|
Page
Bel
owi
sthet
ri
albal
anceofAdeapenaEnt
erpr
iseasat31December2015

DR CR
GH¢ GH¢
Capi
tal 86,
000
I
nvent
ory(
1/1/
15) 60,
000
Bui
l
dings 120,
000
Fi
xtur
es&Fi
tt
ings 10,
000
Mot
orVehi
cles 30,
000
Tr
adeCr
edi
tor
s 40,
000
Tr
adeDebt
ors 15,
000
Adv
ert
isi
ng 1,
000
I
nsur
ance 1,
000
Sal
ari
es 44,
500
Rent&Rat
es 1,
000
Di
scountr
ecei
ved 1,
000
Di
scountal
l
owed 2,
000
Ret
urns 250 200
Sal
es 150,
050
Pur
chases 80,
000
El
ect
ri
ci
ty 2,
000
Bank 8,
500
Bankl
oan 100,
000
Gener
alexpenses 2,
000
377,
250 377,
250

Addi
ti
onal
Inf
ormat
ion:

a)I
nvent
oryat31December2015wasv
aluedatGH¢53,
500

132|
Page
b)El
ect
ri
ci
tybi
l
lout
standi
ngamountt
oGH¢500

c)I
nsur
ancepr
emi
um pai
dinadv
ancewasGH¢200

d)Depr
eci
ati
oni
schar
gedoncostatt
hef
oll
owi
ngr
ates;

Onf
ixt
uresandf
it
ti
ngs-5%and

Mot
orv
ehi
cl
es–10%

Youar
erequi
redt
opr
epar
ethei
ncomest
atementf
ort
hebusi
nessf
ort
hey
earended31December

2015andt
hest
atementoff
inanci
alposi
ti
onasatt
hatdat
e.

Quest
ion2

133|
Page
Thef
oll
owi
ngbal
anceswer
eext
ract
edf
rom t
hebooksofTi
naEnt
erpr
ise

REDWI
NE&SOBOLOENTERPRI
SE
Tr
ial
Bal
anceasatDecember31,
2014
DR(
GH¢) CR(
GH¢)
Pur
chases 96,
330
Car
ri
agei
nwar
ds 1,
400
Car
ri
ageout
war
ds 500
Capi
tal 63,
400
Di
scount
srecei
ved 1,
700
Di
scount
sal
l
owed 1,
250
Rentexpenses 8,
000
Ret
urnsout
war
ds 2,
800
Ret
urnsi
nwar
ds 2,
090
Sal
es 152,
000
I
nvent
ory(
1Januar
y,2014) 12,
100
Wagesandsal
ari
es 15,
000
Tr
ader
ecei
vabl
es 15,
300
Tr
adepay
abl
es 5,
100
Bankl
oan 21,
000
I
nter
estonl
oan 3,
000
Ut
il
it
ies 12,
500
Fi
xtur
es&Fi
tt
ings(
cost
) 4,
500
Del
i
ver
yVan(
cost
) 68,
000
Dr
awi
ngs 4,
000
Cashandbankbal
ances 2,
030
246,
000 246,
000

Addi
ti
onal
inf
ormat
ion:

134|
Page
a)Val
ueofi
nvent
oryatt
heendoft
hey
eari
sGH¢13,
500.

b)Rentpr
epai
disGH¢2,
500andut
il
it
ybi
l
lsout
standi
ngamountt
oGH¢2,
000.

c)Non-
Cur
rentAsset
sar
edepr
eci
atedoncostasf
oll
ows:

Fi
xtur
es&Fi
tt
ings–15%

Del
i
ver
yVan–20%

d)Tr
ader
ecei
vabl
esamount
ingt
oGH¢300hav
ebeendecl
areduncol
l
ect
ibl
e.

Requi
red:

Pr
epar
eani
ncomest
atementf
ort
hey
earended31December2014andt
hest
atementoff
inanci
al

posi
ti
onasatt
hatdat
eforRedWi
ne&Sobol
oEnt
erpr
ise.

135|
Page

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