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THE NATURE AND CONTEXT OF ACCOUNTANCY
  • Brief history of Accounting:-
Early references to the subject of accounting may be found in the works of certain ancient oriental writers. However, the systematic approach to double entry system of book keeping and accounting as we know today has dated back to the late thirteenth century. In 1494, Luca Pacioli a Franciscan Monk living in Italy, published his well known work, Summa de Arithmetical, Geometric, Proportion, Promortionalita. It was Primary a study of mathematics but it also included a section on bookkeeping procedures.
  • The Meaning of the term “Accounting”:
What is accounting?
Is the art of recording, classifying and summarizing in a significant manner in terms of money transaction which are financial character and interpreting the results.
  • Branches / fields of Accounting:-
There are three major fields of Accounting which are:-
1. Financial Accounting.
2. Management Accounting.
3. Government Accounting.
1.Financial Accounting:-
This is an accounting field which concern with the provision of financial information about the business firm mainly to external users.
2. Management Accounting:-
This is an accounting field which concern w
ith the provision of accounting information to internal users, which is the management of the firm. The kinds of financial reports and data which management accounting offers are aimed to help management in planning and controlling business operations and in decision making.
3. Government Accounting:-
This is an accounting field counter parting for the government sector. There are however, basic differences between the two which explain why government accounting has come to be considered as a separate area of accounting.
ILLUSTRATION
In July 2009 a Rajabu started a tailoring shop. The following are his transactions for the first week.
July 1: He opened the shop with invested capital consisting of sewing machine of 50,000/= and 3,000/= in cash
July 2: He bought tread, needles and other sewing supplies costing 500/=
July 3: He completed a shirt for a customer and received 400/= for his Services.
July 4: His neighbor Mr. Jumanne asked him to repair 2 pairs of trousers which he has done. He was promised to be paid 300/= at the end of the month.
July5: He sewed a baby’s and was paid 200/= by the baby’s mother.
July 6: He bought chairs for his shop from Mwenye Furniture for 2,000/= on credit.
POINT TO NOTE:-
1. We DR: What comes in
CR: What goes out
2. We DR: received
CR: giver
  • Requirement:
1. Journalise
2. Open relevant ledger a/c
3. Draw a trial balance
ANSWER
JOURNAL ENTRIES
EcoleBooks | ACCOUNTANCY As LEVEL(FORM FIVE) NOTES - THE NATURE AND CONTEXT OF ACCOUNTANCY(1)

LEDGERS
DR. SEWING MACHINE A/C CR
July 1: Capital
50,000
July 31st: Bal. C/d
50,000
50,000
50,000
August 1: Bal b/d
50,000

DR CASH A/C CR
July 1: Capital
3,000
July 2nd Sewing equipment
500

3rd July Sales
400
5th July Sales
200
31st July 2009 Balance c/d
3,100
3600
3,600
August 1: Bal b/d
3,100
DR CAPITAL A/C CR
31st July Balance c/d
53,000
1st July Sewing machine
50,000
1st July Cash
3,000
53,000
53,000

1st August Balance b/d
53,000

DR SEWING SUPPLIES A/C CR
2nd July: Cash
500
July 31st Bal. C/d
500
500
500
1
st August Balance b/d
500
DR. SALES A/C CR
31st July 2009 Shirt Bal c/d
900
3rd July Cash
400
4th July Debtors
300
5th July
200
900
900
1/1/2010Balance b/d
900

TRIAL BALANCE AS AT 31ST DECEMBER 2009
DETAILS
DEBIT
CREDIT
Cash
Sales
Capital
Sewing equipments
Debtors
Chairs
Sewing machine
Mwenge Furniture
3,100
500
300
2,000
50,000

55900
900
53,000
2,000

55900
DR. TRADING, PROFIT AND LOSS A/C FOR THE YEAR ENDED 31ST DEC 2009 CR
Purchases
500
Sales
900
Gross profit c/d
400
900
900
Net profit
400
Gross profit b/d
400
BALANCE SHEET (EXTRACT)
Capital
53,000
Fixed Assets:-
Add: Net profit
400
Machine
50,000
53,400
Chairs

2,000
Liabilities:-
Current Assets:
Trade creditors
2,000
Debtors
300
Cash
3,100
55,400
55,400
EXAMPLE
Record the following transaction in journal entries,open ledgers,close ledgers,prepare trial balance :-
1. Purchase of Tshs. 100,000/= of goods on credit.
2. Withdrawal of Tshs. 10,000 cash by the owner for his birthday party.
3. Collection of Tshs. 10,000/= from Imamu Jones who is a credit customer of the firm.
4. Return of 10,000/= of goods to a supplier because there are faulty. The original purchase was on credit terms
5. Payment of Tshs. 150,000/= by the business to a supplier or account of an amount due to the supplier.
6. Purchase of machinery for Tshs. 300,000/= on credit
7. Additional cash of Tshs. 100,000 invested in the business by the proprietor
8. Payment of Tshs. 120,000/= in cash for goods supplied
9. Got a loan of Tshs.1,000,000/= from NBC through a bank account at Ubungo branch.


JOURNAL ENTRY
EcoleBooks | ACCOUNTANCY As LEVEL(FORM FIVE) NOTES - THE NATURE AND CONTEXT OF ACCOUNTANCY(1)


LEDGERS

DR CASH A/C CR
July 1st Imamu Jones
10,000
July 2Drawing
10,000
July 7Capital
100,000
July 5 Creditor
150,000
July 9 Loan(NBC)
1000,000
July 8 Purchases
120,000
July 31 Balance c/d
830,000
1,110,000
1,110,000
Aug 1 Balance b/d
830,000
Balance b/d
DR PURCHASES A/C CR

DR CREDITORS A/C CR
Returns
10,000
100,000
Cash
150,000
Machinery
300,000
Balance c/d
250,000
Cash
10,000
410,000
410,000
Balance b/d
250,000
TRIAL BALANCE EXTRACT
DETAILS
DEBIT
CREDIT
Cash
830,000
Purchases
220,000
Creditors
250,000
Loan (NBC)
1,000,000
Machinery
300,000
Return outward
10,000
Capital
100,000
Drawings
10,000
1,360,000
1,360,000
EXERCISE
Daktari Jaribu , DDS , her own dental practice . Her books had the followings accounts and balances as of 1st October.
Cash Tshs. 341,200/=, Debtors Sh. 597,500/=, office supplies Tshs. 39,000/=, Equipment Tshs. 3,012,500/=, Surgery supplies Tshs. 155,000/=, Creditors Tshs. 96,500/=, Capital Tshs. 4,048,700.
Following are the transactions in the practice of her profession during October.
Oct. 1: Paid office rent for October Tshs. 80,000/=
2: Purchased equipment on credit Tshs. 290,000/=
3: Purchased X – ray film and other surgery supplies on credit Tshs. 25,000/=
5: Received cash on account from patients Tshs, 472,500/=
9: Paid cash to creditors Tshs. 175,000/=
14: Paid cash for renewal of insurance policy Tshs. 51,000/=


EcoleBooks | ACCOUNTANCY As LEVEL(FORM FIVE) NOTES - THE NATURE AND CONTEXT OF ACCOUNTANCY(1)

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