KWASU BUA 105 Note 1

Course Overview

  • Course Code: KWASU BUA 105

  • Course Title: Introduction to Accounting for Non-Accounting Students

  • Course Outline:

    • Introduction to Bookkeeping and Accounting

    • Overview of Accounting Procedure

    • Accounting Concepts and Conventions

    • Source Documents

    • Journal

    • Classification of Accounts

    • Ledger

    • Trial Balance

    • Final Accounts

    • Interpretation of Accounts

Introduction to Bookkeeping and Accounting

Brief History of Bookkeeping

  • Double-entry bookkeeping originated in Italy around 1200 AD.

  • Established by the late 15th century; Luca Pacioli's 1494 publication highlights its principles.

    • Key rules:

      • All entries must be double: one creditor and one debtor per transaction.

      • Each entry must include the date, amount, and reason.

Bookkeeping and Accounting

  • Bookkeeping: Systematic recording of business transactions as they occur.

  • Accounting: Recording, classifying, summarizing, and interpreting financial transactions to provide economic information for decision-making.

Overview of Accounting Procedure

  • Source Documents:

    • Receipt

    • Invoice

    • Cheque book

    • Clock card

    • Bill

  • Journal Types:

    • Sales journal

    • Purchases journal

    • Cash book journal

  • Ledger Types:

    • Sales ledger

    • Purchases ledger

    • General ledger

    • Cash book ledger

  • Trial Balance: Checks arithmetical accuracy.

  • Final Accounts:

    • Manufacturing account

    • Trading account

    • Profit or loss account

    • Appropriation account

Accounting Concepts and Conventions

  • Defined as rules and principles for preparing financial statements:

    1. Business Entity Concept

    2. Money Measurement Concept

    3. Historical Cost Concept

    4. Going Concern Concept

    5. Periodicity Concept

    6. Realization Concept

    7. Matching Concept

    8. Accrual Concept

    9. Conservatism or Prudence

    10. Materiality

    11. Consistency

    12. Dual Concept

Source Documents

  • Important documents for transaction details:

    • Invoice: Document from supplier to customer with price, date, quantity, etc.

    • Receipt: Proof of payment for goods sold.

    • Debit Note: Reflects amount due from customer.

    • Credit Note: Issued for overcharges.

    • Bill of Exchange: Details rights and obligations.

    • Cheque Book: Records bank payments.

    • Clock Card: Tracks hours worked and personnel records.

    • Statement of Account: Summary of transactions between seller and buyer.

Journal

  • Definition: A book of original entries recording transactions chronologically.

  • Types of Journals:

    1. Sales journal

    2. Purchases journal

    3. Cash book journal

    4. Return Inward journal

    5. Return Outward journal

    6. General journal

  • Advantages of Using a Journal:

    1. Reduces reliance on transaction records.

    2. Easier detection of errors or fraud before posting.

    3. Minimizes the risk of omitting transactions.