P.O. Box 342-01000 Thika
Email:
Web: www.mku.ac.ke
DEPARTtfEtfT OF BUSItfESS AtfD SOCIAL STUDIES
COURSE CODE: BBtf 114
COURSE TITLE: FUtfDAtfEtfTAL OF ACCOUtfTItfG 1
Instructional Material for BBM- distance learning
, COURSE
CONTENT
BBM 114: FUNDAMENTALS OF ACCOUNTING I
Purpose: To develop the learners understanding of the principles of book-keeping and
accounts and the ability to maintain books of accounts and preparation of financial
statements
Course Objectives: By the end of the course unit the student should be able to:-
Compile accounting data
Prepare financial statements
Interpret accounting information
Use accounting information in decision making.
Course Content:
Introduction to Accounting- Purpose of accounting, basic principles; concepts and
conversions underlying accounting reports, accounting equation, accounting
terminology, users of financial statements and their information needs
Double entry book:- keeping and books of original entry
Distinction between and treatment of capital revenue and expenditure in accounts
Types of ledgers and their uses
Petty cash book:- Analysis petty cash book; imprest system
Reconciliation of bank and cash balances
Types of errors and their correction
Control ledger accounts
Provisions:-
Preparation of final accounts:- Preparation of the trading, profits and loss
accounts; balance Sheet
Recommended Text Books:
Honrgren and Sundem, G. L, Introduction to Financial Accounting, (6th Edition),
New York; Prentice Hall.
Heinz and Party, college accounting, 18th edition.
International accounting standards (IASs ) and International reporting standards
(IFRs)
KASNEB newsletters.
The journal of accountants-ICPAK.
Wood, Frank, Business Accounting (17th Edition), International Thompson.
Other support materials: Various applicable manuals and journals; variety of electronic
information resources.
2
,TABLE OF CONTENT
COURSE CONTENT.................................................................2
TOPIC ONE: INTRODUCTION TO ACCOUNTING..........................5
1.1....................................................................................................The Nature
and Purpose of Accounting..........................................................5
1.2....................................................................................................Users of
Accounting Information...............................................................6
1.3....................................................................................................Accounting
Concepts and Conventions..........................................................8
1.4...................................................................................................Qualities of
useful Financial Information.......................................................13
1.5...................................................................................................Review
Questions...................................................................................14
1.6 References................................................................................15
TOPIC TWO: RECORDING BUSINESS TRANSACTIONS...............17
2.1...................................................................................................Introduction
17
2.2...................................................................................................Components
of accounting equations.............................................................18
2.3...................................................................................................Cause of
Changes in Capital.....................................................................23
2.4...................................................................................................Initial Capital
and Final Capital of a Business..................................................24
2.5...................................................................................................Double Entry
Aspects......................................................................................25
2.6...................................................................................................Accounting for
Sales, Purchases, Incomes and Expenses..................................30
2.7...................................................................................................Returns
Inwards and Returns Outwards..................................................31
2.8...................................................................................................A
ccounting for Drawings, Discounts Allowed and Discounts
Received.35 2.9 Trial Balance
36
2.10 Review Questions...................................................................43
TOPIC 3: SOURCE DOCUMENTS AND BOOKS OF ORGINAL ENTRY 47
3.1...................................................................................................Definition and
Purpose......................................................................................47
3.2...................................................................................................Source
Documents.................................................................................47
3.3...................................................................................................Books of
3
, Prime Entry................................................................................50
3.5...................................................................................................Cash Books
59
3.6...................................................................................................The General
Journal........................................................................................64
3.7...................................................................................................The Ledger
66
3.8...................................................................................................Review
Questions...................................................................................67
3.9...................................................................................................References
68
TOPIC 4: CONTROL ACCOUNTS..............................................69
4.1...................................................................................................Introduction
69
4.2...................................................................................................Format of a
Sales Ledger Control..................................................................71
4.3...................................................................................................Format of a
Purchases Ledger Control Account............................................72
Kopesha Ltd....................................................................................74
4.4...................................................................................................Review
Questions...................................................................................75
4.5...................................................................................................References
75
TOPIC 5: ERRORS AND CORRECTION......................................76
5.1...................................................................................................Errors that do
not affect the ‘balancing’ of Trial Balance..................................76
5.2 Errors that affect the ‘balancing’ of Trial Balance and Suspense
Account
................................................................................................................................... 79
5.3 Review Question....................................................82
5.4 References.............................................................84
TOPIC 6: BANK RECONCIALIATION STATEMENT.......................85
6.1...................................................................................................Introduction
85
6.2...................................................................................................Purposes of
Bank Reconciliation Statement..................................................86
6.3...................................................................................................Review
Questions...................................................................................89
6.4 References............................................................................90
TOPIC 7: FINAL ACCOUNTS...................................................91
7.1.......................................................................Income Statements 91
4
Email:
Web: www.mku.ac.ke
DEPARTtfEtfT OF BUSItfESS AtfD SOCIAL STUDIES
COURSE CODE: BBtf 114
COURSE TITLE: FUtfDAtfEtfTAL OF ACCOUtfTItfG 1
Instructional Material for BBM- distance learning
, COURSE
CONTENT
BBM 114: FUNDAMENTALS OF ACCOUNTING I
Purpose: To develop the learners understanding of the principles of book-keeping and
accounts and the ability to maintain books of accounts and preparation of financial
statements
Course Objectives: By the end of the course unit the student should be able to:-
Compile accounting data
Prepare financial statements
Interpret accounting information
Use accounting information in decision making.
Course Content:
Introduction to Accounting- Purpose of accounting, basic principles; concepts and
conversions underlying accounting reports, accounting equation, accounting
terminology, users of financial statements and their information needs
Double entry book:- keeping and books of original entry
Distinction between and treatment of capital revenue and expenditure in accounts
Types of ledgers and their uses
Petty cash book:- Analysis petty cash book; imprest system
Reconciliation of bank and cash balances
Types of errors and their correction
Control ledger accounts
Provisions:-
Preparation of final accounts:- Preparation of the trading, profits and loss
accounts; balance Sheet
Recommended Text Books:
Honrgren and Sundem, G. L, Introduction to Financial Accounting, (6th Edition),
New York; Prentice Hall.
Heinz and Party, college accounting, 18th edition.
International accounting standards (IASs ) and International reporting standards
(IFRs)
KASNEB newsletters.
The journal of accountants-ICPAK.
Wood, Frank, Business Accounting (17th Edition), International Thompson.
Other support materials: Various applicable manuals and journals; variety of electronic
information resources.
2
,TABLE OF CONTENT
COURSE CONTENT.................................................................2
TOPIC ONE: INTRODUCTION TO ACCOUNTING..........................5
1.1....................................................................................................The Nature
and Purpose of Accounting..........................................................5
1.2....................................................................................................Users of
Accounting Information...............................................................6
1.3....................................................................................................Accounting
Concepts and Conventions..........................................................8
1.4...................................................................................................Qualities of
useful Financial Information.......................................................13
1.5...................................................................................................Review
Questions...................................................................................14
1.6 References................................................................................15
TOPIC TWO: RECORDING BUSINESS TRANSACTIONS...............17
2.1...................................................................................................Introduction
17
2.2...................................................................................................Components
of accounting equations.............................................................18
2.3...................................................................................................Cause of
Changes in Capital.....................................................................23
2.4...................................................................................................Initial Capital
and Final Capital of a Business..................................................24
2.5...................................................................................................Double Entry
Aspects......................................................................................25
2.6...................................................................................................Accounting for
Sales, Purchases, Incomes and Expenses..................................30
2.7...................................................................................................Returns
Inwards and Returns Outwards..................................................31
2.8...................................................................................................A
ccounting for Drawings, Discounts Allowed and Discounts
Received.35 2.9 Trial Balance
36
2.10 Review Questions...................................................................43
TOPIC 3: SOURCE DOCUMENTS AND BOOKS OF ORGINAL ENTRY 47
3.1...................................................................................................Definition and
Purpose......................................................................................47
3.2...................................................................................................Source
Documents.................................................................................47
3.3...................................................................................................Books of
3
, Prime Entry................................................................................50
3.5...................................................................................................Cash Books
59
3.6...................................................................................................The General
Journal........................................................................................64
3.7...................................................................................................The Ledger
66
3.8...................................................................................................Review
Questions...................................................................................67
3.9...................................................................................................References
68
TOPIC 4: CONTROL ACCOUNTS..............................................69
4.1...................................................................................................Introduction
69
4.2...................................................................................................Format of a
Sales Ledger Control..................................................................71
4.3...................................................................................................Format of a
Purchases Ledger Control Account............................................72
Kopesha Ltd....................................................................................74
4.4...................................................................................................Review
Questions...................................................................................75
4.5...................................................................................................References
75
TOPIC 5: ERRORS AND CORRECTION......................................76
5.1...................................................................................................Errors that do
not affect the ‘balancing’ of Trial Balance..................................76
5.2 Errors that affect the ‘balancing’ of Trial Balance and Suspense
Account
................................................................................................................................... 79
5.3 Review Question....................................................82
5.4 References.............................................................84
TOPIC 6: BANK RECONCIALIATION STATEMENT.......................85
6.1...................................................................................................Introduction
85
6.2...................................................................................................Purposes of
Bank Reconciliation Statement..................................................86
6.3...................................................................................................Review
Questions...................................................................................89
6.4 References............................................................................90
TOPIC 7: FINAL ACCOUNTS...................................................91
7.1.......................................................................Income Statements 91
4
