ACCOUNTING CYCLE:
= Accounting is evidence based – no document, no accounting
= Trial Balance: List of all transactions in general ledger – prepared monthly, not daily
= Adjustments: Clean up bookkeeper’s mess “if made”. Happens @year-end
= An entity is any business that conducts operations and is involved in trading. It can
sell goods or render services with or without the objective of making a profit.
= There are various types of entities:
- Not regulated: 1.Sole proprietorships; 2.Partnerships
- Regulated: 1.Closed corporations; 2.Companies
Processing and Recording transactions:
Source documents:
= Internal: Sales invoice
= External: Purchase invoice
[Will get different journals to fix; not to set up – except the general journal]
, Accounting systems:
= Numbers in the financial statement needs to be 1. Valid; 2. Accurate, and 3.
Complete
- Purchases and Creditors: Look at example 1 in Theory pack, pages 4-6
Sales and Debtors:
= Make sure get paid for sales
= PROPER CONTROL OVER THE MOVEMENT OF STOCK
= Example 2, Theory pages 6-8
Sales (amount after deducting returns and discounts)
Cost of Sales
Gross Profit
Debtors: Age analysis & Monthly statements is self study!!
BAD DEBTS:
Dr: Bad debts (P/L)
Cr: Debtors (SFP)
Debit VAT because you reverse output VAT that was levied
RECOVERY OF BAD DEBTS:
TWO SCENARIO’s
1. Debt written off during the year and later recovered in the same year
Dr: Bank (SFP)
Cr: Bad Debts (P/L)
(Expense decreases by the amount recovered)
= Accounting is evidence based – no document, no accounting
= Trial Balance: List of all transactions in general ledger – prepared monthly, not daily
= Adjustments: Clean up bookkeeper’s mess “if made”. Happens @year-end
= An entity is any business that conducts operations and is involved in trading. It can
sell goods or render services with or without the objective of making a profit.
= There are various types of entities:
- Not regulated: 1.Sole proprietorships; 2.Partnerships
- Regulated: 1.Closed corporations; 2.Companies
Processing and Recording transactions:
Source documents:
= Internal: Sales invoice
= External: Purchase invoice
[Will get different journals to fix; not to set up – except the general journal]
, Accounting systems:
= Numbers in the financial statement needs to be 1. Valid; 2. Accurate, and 3.
Complete
- Purchases and Creditors: Look at example 1 in Theory pack, pages 4-6
Sales and Debtors:
= Make sure get paid for sales
= PROPER CONTROL OVER THE MOVEMENT OF STOCK
= Example 2, Theory pages 6-8
Sales (amount after deducting returns and discounts)
Cost of Sales
Gross Profit
Debtors: Age analysis & Monthly statements is self study!!
BAD DEBTS:
Dr: Bad debts (P/L)
Cr: Debtors (SFP)
Debit VAT because you reverse output VAT that was levied
RECOVERY OF BAD DEBTS:
TWO SCENARIO’s
1. Debt written off during the year and later recovered in the same year
Dr: Bank (SFP)
Cr: Bad Debts (P/L)
(Expense decreases by the amount recovered)
