Bookkeeping And Accountancy Made Simple: For Owner Managed Businesses, Students And Young Entrepreneurs
By Peter Osalor
()
About this ebook
Our target in this manual is to ensure that at the end of careful study of this material, readers should be able to appreciate the importance of keeping proper accounting or business records and be able to:
Prepare a simple financial statement of a business,
Know how to keep complete records of business events,
Prepare monthly payroll for staff salaries,
Account for value added tax or sales tax
Differentiate between capital expenditure and revenue expenditure
And Much More
Read more from Peter Osalor
Start Small And Grow Big: Micro, Small And Medium Size Enterprises Revolution Rating: 0 out of 5 stars0 ratingsSuccess In Your Business: How To Become A Successful Entrepreneur Rating: 0 out of 5 stars0 ratings50 Proven Cures for Poverty: Be Transformed Entrepreneurs, Entrepreneurship, The Free Market System Rating: 0 out of 5 stars0 ratingsHow To Identify and Fund Your Business: 200 Business Ideas and 28 Ways to Raise Capital for Your Business Rating: 0 out of 5 stars0 ratingsHow to Prepare A Business Plan: A Step by Step Guide Rating: 0 out of 5 stars0 ratingsThe Entrepreneurial Revolution: A Solution for Poverty Eradication Rating: 0 out of 5 stars0 ratings50+ Year Old Entrepreneurs: Fulfilling Your Dreams In Your Golden Years. It's Never Too Late! Rating: 0 out of 5 stars0 ratingsLive Your Dreams Not Your Fears: Entrepreneur, Leader Or Whatever You Want To Become! Rating: 0 out of 5 stars0 ratingsTeenage Entrepreneurs: The Best Time to Start Your Business Rating: 0 out of 5 stars0 ratingsSTART A BUSINESS: THE A TO Z OF STARTING AND RUNNING A SUCCESSFUL SMALL BUSINESS Rating: 0 out of 5 stars0 ratings
Related to Bookkeeping And Accountancy Made Simple
Related ebooks
Bookkeeping: A Beginner’s Guide to Accounting and Bookkeeping for Small Businesses Rating: 5 out of 5 stars5/5Crash Course Modern Accounting Rating: 0 out of 5 stars0 ratingsQuickBooks for Accounting Professionals Rating: 0 out of 5 stars0 ratingsThe Handy Accounting Answer Book Rating: 0 out of 5 stars0 ratingsAccounting: A Comprehensive Guide to Small Business Accounting, Budgeting, and Bookkeeping Rating: 0 out of 5 stars0 ratingsQuickbooks: Guide to Master Bookkeeping and Accounting for Small Businesses and Simple Concept Techniques Rating: 0 out of 5 stars0 ratingsBookkeeping: A Comprehensive Guide to Learn the Simple and Effective Method of Bookkeeping Rating: 0 out of 5 stars0 ratingsFinancial Statements: A Simplified Easy Accounting and Business Owner Guide to Understanding and Creating Financial Reports Rating: 0 out of 5 stars0 ratingsBookkeeping For Dummies Rating: 0 out of 5 stars0 ratingsAccounting 101 Rating: 0 out of 5 stars0 ratingsPainless Financial Literacy Rating: 0 out of 5 stars0 ratingsAccounting: A Simple Guide to Financial and Managerial Accounting for Beginners Rating: 0 out of 5 stars0 ratingsAccounting: Accounting made simple, basic accounting principles, and how to do your own bookkeeping Rating: 0 out of 5 stars0 ratingsAccounting: Step by Step Guide to Accounting Principles & Basic Accounting for Small business Rating: 4 out of 5 stars4/5Bookkeeping: Step by Step Guide to Bookkeeping Principles & Basic Bookkeeping for Small Business Rating: 5 out of 5 stars5/5Accounting II Essentials Rating: 4 out of 5 stars4/5Accounting for Real Estate Transactions: A Guide For Public Accountants and Corporate Financial Professionals Rating: 0 out of 5 stars0 ratingsPrinciples of Business Financial Accounting Rating: 0 out of 5 stars0 ratingsWhat You Need to Know Before Starting an Accounting Practice Rating: 0 out of 5 stars0 ratingsComputerised Accounting Practice Set Using Xero Online Accounting: Australian Edition Rating: 0 out of 5 stars0 ratingsExam Prep for:: Financial Accounting Rating: 0 out of 5 stars0 ratingsHow to Read & Understand Financial Statements When You Don't Know What You Are Looking At: For Business Owners and Investors Rating: 0 out of 5 stars0 ratingsAccounting Acquaintance: An Introduction to Accounting: Theory and Practice Rating: 0 out of 5 stars0 ratingsAccounting Principles Comprehensive Guide to learn the Simple and Effective Methods of Accounting Principles Rating: 0 out of 5 stars0 ratingsExam Prep for:: Intermediate Accounting- WK PPRS Rating: 0 out of 5 stars0 ratingsQuickBooks: A Beginner’s Guide to Bookkeeping and Accounting for Small Businesses Rating: 0 out of 5 stars0 ratingsBasic Accounting: Service Business Study Guide Rating: 5 out of 5 stars5/5
Accounting & Bookkeeping For You
The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5Financial Feminist: Overcome the Patriarchy's Bullsh*t to Master Your Money and Build a Life You Love Rating: 5 out of 5 stars5/5Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes Rating: 5 out of 5 stars5/5The Tax and Legal Playbook: Game-Changing Solutions To Your Small Business Questions Rating: 3 out of 5 stars3/5Bookkeeping For Dummies Rating: 5 out of 5 stars5/5Die With Zero: Getting All You Can from Your Money and Your Life Rating: 4 out of 5 stars4/5Accounting For Dummies Rating: 5 out of 5 stars5/5The ZERO Percent: Secrets of the United States, the Power of Trust, Nationality, Banking and ZERO TAXES! Rating: 4 out of 5 stars4/5Profit First for Therapists Rating: 0 out of 5 stars0 ratingsThe Nonprofit Fundraising Solution: Powerful Revenue Strategies to Take You to the Next Level Rating: 5 out of 5 stars5/5How to Start a Nonprofit Organization: The Complete Guide to Start Non Profit Organization (NPO) Rating: 4 out of 5 stars4/5The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors Rating: 4 out of 5 stars4/5Start, Study and Pass The CPA Exam FAST - Proven 8 Step CPA Exam Study Playbook Rating: 5 out of 5 stars5/5QuickBooks 2023 All-in-One For Dummies Rating: 0 out of 5 stars0 ratingsProfit First (Review and Analysis of Michalowicz's Book) Rating: 5 out of 5 stars5/5QuickBooks: A Beginner’s Guide to Bookkeeping and Accounting for Small Businesses Rating: 0 out of 5 stars0 ratingsFull Charge Bookkeeping, For the Beginner, Intermediate & Advanced Bookkeeper Rating: 5 out of 5 stars5/5Accounting for Non-Accountants: The Fast and Easy Way to Learn the Basics Rating: 4 out of 5 stars4/5Overcoming Underearning(TM): A Simple Guide to a Richer Life Rating: 4 out of 5 stars4/5All About Asset Allocation, Second Edition Rating: 4 out of 5 stars4/5Taxpayer's Comprehensive Guide to Llcs and S Corps: 2016 Edition Rating: 5 out of 5 stars5/5Profit First For Minority Business Enterprises Rating: 5 out of 5 stars5/5
Related categories
Reviews for Bookkeeping And Accountancy Made Simple
0 ratings0 reviews
Book preview
Bookkeeping And Accountancy Made Simple - Peter Osalor
BookkeepingAndAccountancy MadeSimple
ForOwnerManagedBusinesses,StudentsAndYoungEntrepreneurs
PeterOsalor
Contents
INTRODUCTION
CHAPTERONE
DefinitionofAccountingTerms
CHAPTERTWO
PrinciplesofAccountsandConcept
CHAPTERTHREE
PurposeofBookkeeping
CHAPTERFOUR
BasicofBookkeeping
DoubleEntryBookkeeping
PrinciplesofDoubleEntry
DoubleEntrySystemrules
FinancialdocumentsBooksoforiginalentryand Ledgers
1. TYPESOF BOOKSOF ORIGINALENTRY
2. DETAILSTOBEENTEREDINTHESE BOOKS
3. TYPESOF LEDGER
4. TYPESOF ACCOUNTS
DiagramofthisBooksofcommonlyused
AccountingProcess/Phases/Stages
ProcessofBookkeepingsystem
Step8–StatementofFinancialPosition(Balancesheet)
DocumentsinBookkeeping
Thebasis forRecordingfrom sourcedocuments
CHAPTERFIVE
Bookkeepingfromsourcedocuments
AccountingforCashandCreditsales
EnteringCreditsalesintosalesdaybook
Example3–EnteringSalesinvoicesinSalesDayBook
PostingcreditsalesintoCreditsalesledgerandgeneralledgerfromthesalesdaybook(fromsales daybooktoaccountofcustomerinsalesledger)
TradediscountsandCashdiscounts
Accountingforsalesreturns(Returninwardsand Credit note)
Example4-EnteringCreditnotesinSalesReturnsDay Book
PostingfromsalesreturnDaybooktoSalesLedger and General Ledger
DoubleEntryforSalesandTradereceivables
TradeDiscount/SettlementDiscount/BulkDiscount
AccountingforaCashandCreditPurchase
• ENTER INVOICES INTO THE PURCHASE DAYBOOK
Example5–EnteringPurchaseinvoicesinPurchase Day Book
PostingCreditPurchasesintoCreditPurchase LedgerfromthePurchaseDaybook(fromPurchaseDaybooktoaccountofsupplierinPurchaseLedger)
Accounting for Purchase Returns (Return Outwards)andCreditNote
EnterCreditNoteinPurchasesReturnDayBook
Example6-EnteringCreditnotesinPurchaseReturns Day Book
PostingfromPurchasesReturnDayBookto PurchasesLedgerandGeneralLedger
Double Entry for Purchases and Creditors (Payables)
ProcessforCashbook
AccountingforCashbook
• CASHBOOKDEBITSIDERECORDS:
• CASHBOOK(CREDITSIDE)
• DISCOUNT
• ACCOUNTINGFORDISCOUNTALLOWEDAND RECEIVED
DoubleEntryforCash/BankreceivedfromTrade receivables(Customers/TradeDebtors)
EXAMPLE7–Cashreceiptfromtradereceivables (customers)
EXAMPLE9
DoubleEntryforCash/BankpaymenttoTrade Payables(Suppliers/TradeCreditors)
ProcessforPettyCashbook
BookingandAccountingforPettyCash
DoubleEntryforPettyCashpayments
Example 14 – Enteringpetty cashexpenditures
■ BALANCINGOFACCOUNTS
■ DEBITBALANCE
■ CREDITBALANCE
Balancingoffaccountstodeterminethebalances
1. SALESLEDGER
2. PURCHASESLEDGER
3. SALESACCOUNT
4. SALESRETURNACCOUNT
5. PURCHASESACCOUNT
6. PURCHASESRETURNACCOUNT
7. CASHBOOK
8. PettyCashbook
BankReconciliation
ReconcileCashbookbalanceswiththeBank Statementbalances
• BANKRECONCILIATION
HowtoprepareBankReconciliation
Format1forBankReconciliationStatement
Format2forBankReconciliationStatement
Three–ColumnAccounts
BankReconciliation(CashbookBankAccount/ Bank Statements)
EXAMPLE–15BANKRECONCILIATION STATEMENT
CHAPTERSIX
ControlAccounts
PrinciplesofControlAccounts
SalesLedgerControl(DebtorsControl/Account Receivable)
PurchaseLedgerControl(Creditors/Account Payable)
TradeReceivables(TradeDebtorsControl Account)
CHAPTERSEVEN
Preparing Financial Statement from Incomplete records
PreparingaStatementofAffairs(SOA)
StepsinvolvedinpreparingaStatementofAffairs
Introducing Cash Book in the Single Entry Accounting system
RelationshipbetweenMark-UpandMargin
AdvantagesofDoubleEntryoverSingleEntry
DisadvantagesofSingleEntry
CHAPTEREIGHT
TrialBalance
HowtoprepareaTrialBalance
ErrorsinTrialBalance
CHAPTERNINE
IncomeStatement(ProfitandLossAccount)
NetSales
CostsofGoodsSold
DoubleEntryforIncomeStatement
IncomeStatement(ProfitandLossAccount)
CHAPTERTEN
StatementofFinancialPosition(BalanceSheet)
DoubleEntryforStatementofFinancialposition
CHAPTERELEVEN
VAT
DoubleEntryforsale
DoubleEntryforExpenditure(Purchaseand Expenses)
DoubleEntrywhereVATcannotberecoveredor BusinessnotregisteredforVAT
VATAccountformat
Example12-VATanddouble-entrybookkeeping
Example14–ComplicationinVATcalculation (to determine vat from gross)
Example15–VATanddiscount
CHAPTERTWELVE
Payroll
AccountingforPayroll
Analysis of PayrollRecordingofPayroll
EmployersTaxJournal
PaytheemployeetheNetPay
PaytheTaxtotheTaxAuthorities
Payoverthedeductions
Postingfor Employee NetPay
PostingofTaxtoTaxAuthorities
CHAPTERTHIRTEEN
CapitalandRevenueExpenditure Capital Expenditure
RevenueExpenditure
ImportanceofclassificationasRevenueandCapital Expenditure
CapitalreceiptsandRevenuereceipts
CHAPTERFOURTEEN
AccountspreparationsfromSourceDocuments
Invoicemethod
Cashmethod
Cashandinvoicemethod
StepsinPreparingAccounts
I. Planning
• The Addressofthebusiness
• Companyregistrationnumber ofthebusiness
• Thenameoftheshareholdersandtheirshareholding inthe company
• Theprincipalactivitiesofthebusiness(Themain activity ofthe business)
• The accountingperiod ofthebusiness
• Source documents
II. Preparing theaccounts
1. Procedure1- Checking for completeness andextractinginformationfrom previousaccounts
2. Procedure 2– Enter thedetailsofthecompany
3. Procedure 3– Openingbalances
4. Procedure4–Analyseandsummarisethe Cashbook (banktransactions)
AnalysisofBankPayments:
AnalysisofBankReceipts:
Bankreconciliation:
5. Procedure 5–AnalysisofPettycashbook
6. Procedure 6–AnalysisofCreditCardStatements
7. Procedure 7–AnalysisofSales andPurchaseDay books
8. Procedure 8–AnalysisofVAT
9. Procedure 9–AnalysisofPayroll
10. Procedure 10–FixedAssetSchedule
11. Procedure11–HirePurchaseandLongtermloan interest
12. Procedure 12– Journals
13. Procedure 13–ControlAccounts andLead Schedules
CHAPTERFIFTEEN
BusinessPlan
Beforeyoustartyourbusinessplan:
Aboutyourbusinessorganisationorstructure
Writingthebusinessplan
1. Title PageandTableofContents
Concludingthebusinessplan
SAMPLEQUESTIONS
BOOKSBYTHEAUTHOR
INTRODUCTION
Most small and medium scale businesses fail because of either no records or incomplete records.
Our target in this manual is to ensure that at the end of carefulstudy of this material, readers should be able to appreciate theimportance of keeping proper accounting or business records andbe able to:
✓ Prepare a simple financial statement of a business,
✓ Know how to keep complete records of business events,
✓ Prepare monthly payroll for staff salaries,
✓ Account for value added tax or sales tax
✓ Differentiatebetweencapitalexpenditureandrevenue expenditure
✓ Etc.
At last, the non-accountant entrepreneurs will now find easy thepreparationofaprofitstatementfromthesourcedocumentsthrough various books of prime entry to ledger, trial balance andfinancial statement.
The main essence of preparing a financial statement for an entityistoreportontheentity’sfinancialperformanceorresults,financial position and the cash flow to the management of theentity and other interested users to enable them to make soundeconomic decisions. To do this, a business owner needs to put somany controls in place (financial or otherwise) to establish fullrecord keeping.
This manual will also assist numerous business owners, who arewillingly to pay income taxes but due to their inability to keeprecords for the ascertainment of profit or loss, they default in thisresponsibility.
Many business owners have not been able to apply for short termfinance because of no accounts or financial statements. Banks and other lenders want to see a business financial statement that willgive them information about the ability of the entity to pay backthe loan and interest when they fall due. Nobody will give a short term loan to a business that keeps no records.
Some business owners keep track of transactions by collectingnotes, receipts, invoices and the like in a shoebox. At the end oftheyeartheyhandtheshoeboxovertotheiraccountantand probablypaylargeamountsforthefinalaccountstobeextracted. Thereisabetterway.Bookkeepingistheskillofkeeping track of all transactions as they occur in a logical andsystematic way.
A good bookkeeper will:
1. Make use of an appropriate bookkeeping package such as expressaccounts(seenotebelowforthemeaningofexpress accounts)
2. Understand transactions and know how they should beentered.
3. Enter transactions on a regular basis.
4. Reconcilestatementsastheyarereceived.Themostimportant of these statements are the bank statements.
5. Prepare reports as and when they are required.
6. Retainoriginaldocumentation(invoices,etc.)ina systematic way.
7. Understand the big picture and recognize problem areas.
Note: Express Accounts is a professional business accountingsoftware, perfect for small businesses needing to document andreport on incoming and outgoing cash flow including sales,receipts, payments and purchases.
Easilytrackpaymentsanddeposittransactions
Viewbalancesandreportstoseehowyourbusinessisdoing
Emailorfaxreportsdirectlytoyouraccountant
Basic bookkeeping involves transactions, accounts and reports.
✓ A transaction is an exchange of value – for example, the sale of an ice-cream is a transaction.
✓ Anaccountisacollectionofsimilarrecords.Forexample, all sales for cash might be recorded in the CashAccount.
✓ A report is a statement that summarizes certain accountsor transactions at a certain time or for a certain period.
✓ Accounts, transactions and reports will be dealt with ingreater detail in this manual. There will also be manyexamples given.
Bookkeeping Conventions
DoubleEntryBookkeeping
Every money transaction is recorded in two different accounts inthe ledger. This is recognition of the fact thatthere are alwaystwo sides to every transaction. If Malabo lends me $5 then mycash account will increase by $5 and the Malabo account mustshow that I owe her $5. By convention the two entries have to bemade on opposite sides. If the entry in the cash account is on theleft-hand-side (LHS) then the entry in the Malabo account mustbe made on the right hand side (RHS). At any stage the totals ofall of the entries into the LHS must be the equal to the totals of all the entries into the RHS. The system must be in balance.
Fortunately,thedoubleentrysystemisvastlysimplifiedbyaccountingsoftwarepackagesincluding-ExpressAccounts.
Normallyasingleentryinanappropriatejournal
isallthatis
required when using software.
• Debit and Credit.
The money entries in an account can be entered in either the lefthand column or the right hand column. Beginners often find itdifficult to understand in which column to place an entry.
The left hand column in an account is called the Debitcolumn and the right hand column is called the Creditcolumn.
Money that you receive goes on the debit column of thecash account. Money that you pay goeson the creditcolumn ofthe cash account. The debit/creditnature of all other transactions can be determined by comparingtheir similarity to this simple transaction. IfI sell goodsto John for $10 cash. I would receive $10 and my cashaccount would be debited. Sales would be credited. Notethat in this case I do not have to record anything underJohn's name as he paid in cash. If, however, he bought on account, the transaction would be similar in that Saleswould be credited and John would be debited. Thus itturns out that people who owe me money have mainlydebit entries in their account.
DifferentViewfromDifferentColumnConfusion.
When we receive our Bank Statement each month, it will show a credit balance if we have money in the bank. This is from the bank's viewpoint. The bank sees us as theircreditor because they