GRADE 8

EMS

INTRODUCTION TO
ACCOUNTING

NAME:

CLASS:

Grade 8 Accounting – booklet one

 ACCOUNTING TERMS

Asset Money or anything that you own that can be turned into money,
including loans and other payments owed to you.

Fixed Assets Land and buildings, vehicles and equipment bought to operate
a business efficiently. Their value usually does not change
much over a short period of time and are expected to last for a
relatively long period of time. They are not bought or sold
regularly. (Assets kept for longer than 12 months.)

Current Assets Money in the bank, a cash float or petty cash, as well as trading
stock the business has for sale and money owed to the
business by debtors. (Assets kept for less than 12 months.)

Capital The money used to start a business.

Owner’s Equity The owner’s contribution to a business.

Liability Money owed to a person/business/bank.

Creditor A person/ business/bank to whom a business owes money.

Debtor A person who owes money to a business.

Accounting Equation Assets = Owner’s Equity + Liabilities.

Income Statement The statement which reflects the income and expenses of a
business in order to calculate the profit/loss.

Balance Sheet The statement of the Accounting Equation or wealth of a

business.

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Why do we do Accounting?
1. For the owner to calculate whether he has made a profit or loss.

2. For SARS to determine the tax liability of the business.

3. Allows the owner to control and manage expenses and other aspects.

4. In order to have something to show possible investors.

5. In order to have something to show the bank when borrowing money.

THE ACCOUNTING CYCLE

The accounting process is a series of activities that begins with transactions and ends with
the closing of the books.
It is repeated each reporting period and includes these major steps:

1. 2. 3. 4.

Source Journals General Financial

Documents Ledger Statements

Cash Register Roll Cash Receipts Journal

Duplicate Receipts (CRJ) Balance Sheet Balance Sheet
Deposit Slips Accounts

Cheque Counterfoils Cash Payments Journal

Invoices/statements (CPJ) and

Duplicate invoice Debtors Journal

(DJ)
Nominal Income Statement
Invoices Creditors Journal Accounts
(CJ)

Plus

Debtors Ledger

Creditors Ledger

In Grade 8 we deal with the topics which are bolded.

You will study the others in Grade 9.

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 Incomes Vs Expenses Vs Assets
Incomes Expenses Assets
That which is earned for The payment made for Something of value that is
performing a service. something that is durable, and kept for a long
consumed by the business time and that the business
– i.e. used up. owns.

The Types of Transactions that we record:

We will divide the transactions into the categories mentioned above:

1. Receiving an income:

1.1 Capital Received

This is an important transaction, as it is the first transaction that a business
will need to record! Capital is the money that the owner invests in the
business. This money can then be used to buy other stuff.

1.2 Current Income

When a business performs a service, the money received from the client is
referred to as current income. It is important to specify where money
comes from. Why?

1.3 Rent Income

If the business owns a property, and rents this property to a tenant, the
money received is referred to as rent income.

2. Paying for Expenses

Each transaction will describe the nature of the expense. Companies use certain terms
to describe the particular expense. It is important that we all use the same terms.

2.1 Stationery Pens and Paper!

2.2 Materials The stuff we use when we render a service.
2.3 Rent Expense What we pay for our premises
2.4 Wages The weekly payment to staff.
2.5 Salaries The monthly payment to staff.
2.6 Advertising We pay advertisers for advertising!
2.7 Packing material The stuff we use to pack our products.
2.8 Telephone We pay for calls made!
2.9 Drawings The money that the owner takes.
2.10 Water and Electricity We pay this to the municipality.

3. The purchase of Assets:

We can categorize assets, things that the business owns and that are of value to the
business, into two types:

1. Current assets: assets that the business keeps for less than one year.
and
2. Non-current assets: assets that the business keeps for more than one year.

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Current assets: Although there are a variety of current assets, in grade eight we only work
with one: Money
Does this have value to the business?
Does the business ‘own’ its own money?
The answer is yes to both of these, therefore it must be an asset!

Because businesses keep all their money in the bank, the accounting term we use for
money/cash, is BANK. This refers to the account in which we record the receipt of money,
as well as the payment of money.

Non-current Assets: There are a number of different types of non-current assets:

Land and buildings: This is property that the business owns (not rents)!

Equipment: This is the equipment that the business uses for example a computer.

Vehicles: The various modes of transport that a business may own, usually cars and
motorbikes.

When we record any transaction, it is important that we use the terms introduced above,
this enables accountants from other businesses to understand the accounting records!
When we record a transaction, we need to decide what the accounts involved are.

NB!!! Because each transaction will involve money, whether we are

receiving or spending, the bank account will be involved! In addition
to this one other account will also be affected, as we need to record
why the money was received or spent!

This is referred to as the double entry system!

Liabilities:
If a business does not have the available funds to purchase goods, it has the option of either taking
out a loan, or buying the goods on credit. The end result of these two options being the same, the
business gets the goods, however it now owes a third party a sum of money.
Like assets, we differentiate between liabilities that are held for different lengths of time.

Long-term liabilities:
Long-term liabilities (or non-current) are liabilities that exist for any period longer than twelve
months.
e.g. long term loans

Current liabilities:
These are short term, and will be repaid within twelve months.
Examples of these include: Creditors, Short term loans, Bank overdrafts

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 THE ACCOUNTING EQUATION
A = OE + L

1. The owner of PV Ltd contributed R100 000 towards capital and deposited this in the
bank account of the business.

A = OE + L

2. PV Ltd bought equipment for R10 000 and paid cash from their bank account.

A = OE + L

3. PV Ltd bought trading stock for R50 000 on credit.

A = OE + L

4. The owner withdrew R5 000 from the bank for his personal use.

A = OE + L

5. PV Ltd paid their creditor R20 000 cash from their bank account.

A = OE + L

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Fill in the missing amount in each of these Accounting Equations:

1. A = OE + L
R6800 R4800 2000

2. A = OE + L
R13000 R20000

3. A = OE + L
R4500 R1500

4. A = OE + L
R3780 R0

5. A = OE + L
R6120 R0

6. A = OE + L
R16400 R24600

7. A = OE + L
R180000 R171000

8. A = OE + L
R1806 R706

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 Calculate the following. Show all your working.

1. If the total assets of a business are R532967 and the total liabilities are R76219,
what is the owner’s equity?

2. If an owner invests R350000 in a business and the business has liabilities of

R24687, what is the value of the assets of the business?

3. A business has assets of R492763 and the owner’s equity is R450000. Calculate
the total of the liabilities of the business.

4. A business has fixed assets worth R157962 and liabilities of R314573. If the
owner’s equity is R200000, calculate the value of the current assets.

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 SOURCE DOCUMENTS

CASH REGISTER ROLL

A till slip is issued by a business for a cash purchase.

The duplicate is used to record the transaction in the Cash Receipts Journal.

1. On what date was the purchase made? Solly’s Cash Dealers

……………………………………………..

2. What is the name of the person who

Took the customer’s money?

…………………………………………..

3. From which business was the purchase

made?

…………………………………………….

4. At what rate is VAT charged?

…………………………………………….

5. How much VAT was charged?

…………………………………………….

6. What do the A and C refer to?

…………………………………………….

…………………………………………….

…………………………………………….

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 RECEIPT

A receipt is issued when a business receives a payment.

The duplicate is used to record the transaction in the Cash Receipts Journal.

1. Who paid the money?

……………………………………………………………………………………………..

2. Who is the person who issued the receipt? …………………………………………..

3. When was the receipt issued? ………………………………………………………….

4. What is the receipt number? ……………………………………………………………

5. What amount was received? ……………………………………………………………

6. What are the advantages of an electronic system?

………………………………………………………………………………………………………
………………………………………………………………………………………………………

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DEPOSIT SLIP

A deposit slip is filled in when a business deposits cash and cheques in the bank.

1. Into which bank was the deposit made? ……………………………………………..

2. Who made the deposit? ………………………………………………………………..

3. On date was the deposit made? ………………………………………………………

4. Into what account was the deposit made? …………………………………………..

5. How much cash was deposited? ……………………………………………………..

6. What was the total value of the deposit? ……………………………………………

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 CHEQUE

A cheque is used when a business makes a payment.

The cheque counterfoil is used to record the transaction in the Cash Payments Journal.

1. Who was the payer? …………………………………………………………….

2. Where does the payer bank? …………………………………………………..

3. What date was the payment made? ……………………………………………

4. What is the number of the cheque? …………………………………………….

5. Who was paid? ……………………………………………………………………

6. How much was paid? …………………………………………………………….

7. What was bought?

……………………………………………………………………………………...

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 ELECTRONIC FUNDS TRANSFER

An electronic transfer is also used by a business to make a payment.

The proof of payment is used to record the transaction in the Cash Payments Journal.

1. Who was the payer?

…………………………….……..…………………………………………………………………

2. Where does the payer bank? ..………………..……………………………………….

3. What date was the payment made?…………..……………………………………….

4. Who was paid? ………………………………………………………………………….

5. How much was paid? ………………………………………………………………….

6. Where does the payee bank?...............................................................................

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 INVOICE

An invoice is issued when a debtor makes a purchase from a business

with the intention of paying at a later date.
The duplicate is used to record the transaction in the Debtors Journal.

An invoice is received when a business makes a purchase

with the intention of paying at a later date.
The original invoice is used to record the transaction in the Creditors Journal.

1. On what date was the purchase made? Invoice no. 3431

22 October 2012
Nike South Africa
……………………………………………. Order number: 34/2012
Customer: Topshoes CC
Model Price Quantity Price
2. What is the name of the debtor? Swoosh R499 10 4990
Subtotal 4990
……………………………………………. VAT @ 14 % 698,60
Total 5688,60
5 % discount for accounts settled within 30 days.

3. To which business does the debtor

owe money?

…………………………………………….

4. How much does the debtor owe the creditor?

…………………………………………….

5. If the cost of the items purchased amounts to R4 990, why does the debtor owe
R5 688,60?

…………………………………………….

6. What was the total value of the goods

the debtor may purchase on credit?

…………………………………………….

7. How much must the debtor pay if the account is settled after 23 days?

…………………………………………….

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 STATEMENT

A statement shows the records all the purchases and payments of a debtor to a business.

Sport Tracker CC
44 Plein Street
Cape Town
8001
Statement
To: Boots n All Invoice 234 for the month of September 2012
Date Description Debit Credit Balance
1 September Balance owing
987
2012
6 September Invoice 333
1 655 2 642
2012
22 September Credit Note 22
105 2 537
2012
28 September Receipt 101
987 1 550
2012
Balance owing as at 30 September 2012 R1 550
Overdue 0
All amounts paid within 30 days will qualify for a 5 % discount.

1. What is the date of the statement? ………………………………………………………..

2. What is the name of the debtor? …………………………………………………………...

3. How much was owed by the debtor on 1/09/2012? …………………………………

4. How much altogether was owed on 20/09/2012?

…………………………………………………………………………..………………………

5. How much did the debtor pay in the period of the statement? ..………………………...

6. How many purchases were made in the period of the statement? ……………………

7. How many items were returned in the period of the statement? ……………………….

8. What words tell you an item was returned? ……………………………………………….

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Paste your source documents on this page and identify them.

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 The Books of First Entry - Cash Journals

Up until now, we have looked at accounting theory and principles, not actual accounting that
accountants do! It is now necessary to look at how to actually record transactions in the
accounting system.

To do this we follow a process that you should be aware of already, this process begins with what
we refer to as the books of first entry. The books of first entry are divided into two books, the
Cash Receipts Journal, where we record cash in, and the Cash Payments Journal in which we
record cash out.

The Cash Receipts Journal: Format

Cash Receipts Journal of Anytrader for October 2005

do da Details Analysis Bank Current Sundry Details of
c y
Income Amount Sundry
01 3 A. Trader 100 000 100 000 100 000 Capital
02 5 L. Jet 500 500 500
100 500 500 100 000
1 2 3 4 4 5

Transactions:

3 The owner, A Trader, invested Capital of R100 000, Issued himself with Receipt 001
5 Earned an income of R500 for performing a service for L. Jet, issued her with receipt 002.

Notes:

1 Write the name of the other party, if the name is not known, write cash.

This is a part of the bank column, if more than one amount is received on a particular
2 day, the amounts are added up in the analysis column, and the total goes into the
bank column.
This is the amount received; every transaction will affect the bank column. This is a
3
debit entry.
These are the contra accounts, the other accounts involved in the transaction. They
4
are the credit part of the transaction.
Because we cannot have a column for every account, we use the sundry column. Any
5
account can be recorded in the sundry column.

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The Cash Payments Journal: Format

Cash Payments Journal of Anytrader for October 2005

Sundry
doc day Details Bank Wages Materials Details of Sundry
Amount
1 7 S. Test 800 800
2 9 Makro Stores 900 900
3 11 Steer & Co. 950 950 Rent expense
1 3 4 4 4 5

Transactions:

7 Paid S. Test R800 with cheque 001 for wages for the first week of business
9 Bought materials from Makro Stores for R900 paid with cheque 002.
11 Paid the rent for the month, to Steer and co. R950, issued cheque 003.

Notes:

The name that appears on the cheque is written here. Often cash cheques are issued,
1
in this case, the word cash is written.
There is no analysis column in the Cash Payments Journal.
2

This is the amount being paid. It is a credit to the bank account – bank is an asset, and
3
assets decrease on the credit side.
These are the contra accounts, they are expenses and assets, that are getting bigger,
4
therefore these are debits.
If a column is not present for an account, the sundry column is used. As in the CRJ.
5

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Exercise one:

Recording transactions in the Journals (CPJ and CRJ)

To record transactions, we use the Cash Receipts Journal and the Cash Payments Journal, all
money that is received is recorded in the Cash Receipts Journal, while all money paid is recorded
in the Cash Payments Journal. These journals are known as the books of first entry, as they
record the transactions for the first time!

Record the following transactions in the Cash Receipts and Cash Payments Journals of Dial a
Nerd Computer Services CC for the month of April. Use the journals provided.

Record the following transactions of Dial a Nerd, for the month of April 2011:

2 Humpphry Finklestein, a computer engineer, started a computer services company and

deposited R150 000 in the company’s bank account as capital.
3 Humpph, as his friends calls him, bought a Vespa scooter from Piaggio Scooters for
R15 000 in order to get to and from his clients.
He also invested (purchased) R80 000 in an office, which he plans to share with another
company.
4 On his first day of business, Humpph earned R4000 from servicing computers.
5 Paid the Cape Argus R350 for an advert placed in the Weekend Argus.
6 The advert brought in more business, earned R2000.
9 Bought stationery from Waltons Stationers, R900.
13 Humpph (who is also a computer programmer) bought a super computer from Rectron
Computers for R14 000 to use for programming.
15 Placed another advert, this time in the Cape Times, R500.
18 Due to the advert, had a busy day – earned R8000
20 Had letterheads printed, and bought more stationery, paid PNA R500
26 Realising the need for tools to open up and fix computers, Humpph bought a set of
titanium tools from FEDS Tools, paid R1100.
30 Received R1500 rent from our tenant.
Paid Telkom R190 for the telephone account.
Finklestein took a salary for himself of R7500.

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Cash Receipts Journal of Dial a Nerd for April 2011
Current Sundry Accounts
Doc Day Details Fol Analysis Bank
Income Amount Details
2 H. Finkelstein 150 000 150 000 150 000 Capital
4 Cash 4000 4000 4000
03 6 Cash 2000 2000 2000
18 Cash 8000 8000 8000
05 30 Cash 1500 1500 1500 Rent income
165 500 14 000 151 500

Cash Payments Journal of Dial a Nerd for April 2011

Sundry Accounts
Doc Day Details Fol Bank Advertising Stationery
Amount Details
3 Piaggio Scooters 15 000 15 000 Vehicles
Cash 80 000 80 000 Land and Buildings
5 Cape Argus 350 350
4 9 Waltons Stationers 900 900
13 Rectron Comp. 14 000 14 000 Equipment
15 Cape Times 500 500
20 PNA 500 500
26 Feds Tools 1100 1 100 Equipment
9 30 Telkom 190 190 Telephone
10 H. Finkelstein 7500 7500 Salaries
120 040 850 1400 117 790

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Exercise Two:

Recording Transactions in the Cash Receipts and Payments Journals

You are the new accountant of Fairy King Enterprises, a business run by an ex-teacher Mr Slincol,
who decided to move into the lucrative field of hosting children’s parties. Mr Slincol has provided
you with a record of the past month’s transactions. You are required to record these
transactions in the relevant books of first entry.

Transactions for the month of May 2012:

1 Mr Slincol decided to invest an additional R25 000 in his business in order to expand, he
issued himself receipt no 033.

Bought balloons and party hats from Wonderland CC, paid the amount of R150 with
cheque number 0076.

5 Performed a party for a regular client A. Treefellow, and was paid R250, issued receipt no.
034.

9 Bought a vacuum cleaner, to clean up the usual mess after a party, paid Game Stores
R400 with cheque no. 0077.

11 Organised a party at Kirstenbosch Gardens for R. Bush, got paid R450 and issued receipt
035.

13 Bought food for the rats, cats and rabbit that are an important part of any party, paid Pets r
Us R45 with cheque 0078

21 Paid the municipality R100 for water and electricity with cheque 0079.

24 Performed at the Spur for a nine year old client, J. Rust, charged R150, issued receipt no.
036.

28 Paid Telkom R360 by cheque 0080, of this amount, R120 was for the owners personal
account.

30 Received R1500 for renting out the garage that we do not use, from B. Simpson issued
receipt 037.

Paid the rent for the office to Steer and Co, paid the amount of R3000 with cheque no.
0081.

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Cash Receipts Journal of Fairy King Enterprises for October 2012
Current Sundry Accounts
Doc Day Details Fol Analysis Bank
Income Amount Details
033 1 Mr Slincol 25 000 25 000 25 000 Capital
034 5 A. Treefellow 250 250 250
035 11 R. Bush 450 450 450
036 24 J. Rust 150 150 150
037 30 B. Simpson 1 500 1 500 1 500 Rent Income
27 350 850 26 500

Cash Payments Journal of Fairy King Enterprises for October 2012

Sundry Accounts
Doc Day Details Fol Bank Materials Equipment
Amount Details
076 1 Wonderland CC 150 150
077 9 Game Stores 400 400
078 13 Pets r Us 45 45
079 21 Municipality 100 100 Water and Electricity

080 28 Telkom 360 240 Telephone

120 Drawings
081 30 Steer & Co 3000 3 000 Rent Expense
4 055 195 400 3 460

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Exercise three:
Sam King Snake Catcher CC

Record the following transactions of Sam King Snake Catcher CC for the first week of October
2012. Sam King who grew up catching and collecting snakes with her parents in the Kruger
National Park has decided to use her unusual skill in a new business.

Transactions for October 2012:

1 Sam sold her collection of exotic snakes to generate enough personal savings
to start a business. She received R25 000 in total and invested this in her new
business, Sam King Snake Catcher CC. She issued herself Receipt 1.

Sam bought a delivery bike (with a basket for the caught snakes). Paid C. Heat Motors
R8000 with cheque 001.

Also on the first Sam bought the necessary snake catching equipment from
wild pets and places.co.za, sent them cheque 002 for R500

2 Paid the Cape Argus R150 with cheque 003, for the following advert:

SNAKE CATCHER: do you have problems with

Pesky puff adders or boisterous boomslang??

CALL SAM KING NOW: 083 444 SNAKE

Cheap – R300 per snake !!!!!!!!

3 Retrieved a perky puff adder from the field of a local school, Gave them a
discount of 10 %, and issued them with receipt 2.

4 Bought Snake Serum, used to catch snakes, from Pets r Us, paid R80 with cheque no. 004

5 Removed a nest of cobras, two adult snakes and three babies, charged the
client full price for the adults and ½ price for each of the baby snakes. Receipt 3.

6 Placed a second advert with the Cape Times, adding Rat Catching to our
services, paid R200 with cheque 005.

Bought disposable protective wear from Safety Stuff Ltd. Paid R340 with cheque 006.

7 Sam took R800 for her own use, she wrote out cheque 007 for herself.

Received R600 for the removal of two snakes from a client in Newlands.
Receipt 4.

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Cash Receipts Journal of Sam King Snake Catcher CC for October 2012
Current Sundry Accounts
Doc Day Details Fol Analysis Bank
Income Amount Details
01 1 Sam King 25 000 25 000 25 000 Capital
02 3 Cash 270 270 270
03 5 Cash 1 050 1 050 1 050
04 7 Cash 600 600 600
26 920 1 920 25 000

Cash Payments Journal of Sam King Snake Catcher CC for October 2012
Sundry Accounts
Doc Day Details Fol Bank Materials Advertising
Amount Details
01 1 C. Heat Motors 8 000 8 000 Vehicles
02 Wild pets and places.co.za 500 500 Equipment
03 2 Cape Argus 150 150
04 4 Pets r us 80 80
05 6 Cape Times 200 200
06 Safety stuff ltd 340 340
07 7 Sam King/cash 800 800 Drawings
10 070 420 350 9 300

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Exercise four:
Chris Andrews needs your help! He opened Chris’s Carpentry & Home Repairs at the beginning
of December 2012 and recorded his transactions on his calendar. However, he is unsure how to
record the transactions in the Cash Journals of the business.

December 2012
Sun Monday Tuesday Wednesday Thursday Friday Sat
1 2
Chris put in
money to start
his business,
R25 000
Receipt 001
3 4 5 6 7 8 9
Bought Paid for pre- Repairs to a Bought
equipment, printed client’s house, material for
R2 500 – stationery, charged repairing a roof
builders R1 200. JG R5 600. from builders
warehouse. Printers warehouse,
Cheque 001 R4 300.
Paid wages R1
500
10 11 12 13 14 15 16
Received Filled bakkie Purchased Paid wages,
R6 300 for with petrol, paint from R1 850
fixing a R450 from Cedar Paint &
client’s roof. Sunrise Hardware.
motors. R1 075

17 18 19 20 21 22 23
Completed Paid two weeks’ Took bakkie to Received
paint job – wages R3 600. Fixit Garage telephone bill,
received for a service, R320 – paid by
payment of R895. cheque.
R3 600 Spent R1 500
on presents for
family.
24 25 26 27 28 29 30
Christmas Day Day of Goodwill Purchased Received
material by R2 150 for a
cheque from job completed.
Pennypinchers, Salary – Chris
R3 200 Andrews,
R9 500
31

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Cash Receipts Journal of Chris’s Carpentry & Home Repairs for December 2012
Current Sundry Accounts
Doc Day Details Fol Analysis Bank
Income Amount Details
01 1 Chris Andrews 25 000 25 000 25 000 Capital
02 6 Cash 5 600 5 600 5 600
03 12 Cash 6 300 6 300 6 300
04 18 Cash 3 600 3 600 3 600
05 29 Cash 2 150 2 150 2 150
42 650 17 650 25 000

Cash Payments Journal of Chris’s Carpentry & Home Repairs for December 2012
Sundry Accounts
Doc Day Details Fol Bank Materials Wages
Amount Details
01 4 Builders Warehouse 2 500 2 500 Equipment
02 5 JG Printers 1 200 1 200 Stationery
03 8 Builders Warehouse 4 300 4 300
04 Cash 1 500 1 500
05 13 Sunrise motors 450 450 Fuel
06 14 Cedar paints and hardware 1 075 1 075
07 15 Cash 1 850 1 850
08 20 Cash 3 600 3 600
09 21 Fixit Garage 895 895 Repairs
10 22 Telkom 320 320 Telephone
11 Cash 1 500 1 500 Drawings
12 27 Pennypinchers 3 200 3 200
13 29 Chris Andrews 9 500 9 500 Salaries
2 31 890 8 575 6 950 16 365

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