Share this:


INTRODUCTION OF BOOK KEEPING

Book keeping: can be defined as the art of recording financial business transaction in the set of books in terms of money or money’s worth.
Objectives of Book keeping.
The following are the major objectives of book keeping;
1. To ascertain/determine the amount of profit or loss arising in the course of business.
If the business man/woman keep records by all means he/ she should know whether they run business into profit or losses.
2. Knowledge of Credit dealing.
To know the amount of debtors and creditors and (customers and suppliers respectively)
A business Man/ Woman obtained the knowledge of Credit dealing.
3. Business control
A business man / woman can be able to control his /her business as required by the principle, because he /she would be able to follow the proper records.
4. Fair tax assessment
The income tax department requires proper records in order to determine a fair [reasonable] tax charge
5. To determine the financial position of the business
In order to know the value of property and the amount of capital and capital efficiency, the business man/woman need to keep the record of book keeping, the owned and their capital increase or decrease.
COMMON BOOK KEEPING TERMS
1. Business; Is an undertaking / activities/ process involved in buying and selling goods and services on profits. Or
Is an activity carried out with an intention / aim of making profit.
2. 2. Capital Capital may be defined as amount of money which a trader begins his business.Or
Is amount of money on money worth which owner provides to start business.
3. 3. Proprietor: – is an owner of business who provides capital to his business.
4. 4. Goods: – Things which can seen and touch whereby a business can buy or sell.
5. 5. Services: – Is an activity done by the business man/ woman in order to get money e.g Shoe shining, teaching,
treatment, transporting, clearing. Etc.
6. 6. Profit: – Is the excess of income over expenses/ (income – expenses). Occurred when the income is greater/higher than expenses.
7. 7. Loss: – is the excess of expenses over income/(Expenses – income), it occur when the expenses is higher than income
(Expenses > income).
8. Transactions: – is the movement of money or money’s worth (value) from one person to another.
Example: Juma paid sh 1000/= to Hamis. This is transaction because
Tshs 1000/= have been move from Juma to Hamisi.
9. 9. Debtor:- is a person who owes money to the business usually is the customers who receive service on credit from the business.
1010.Creditor:- is the person to whom money is owing by the business.
The one who supply/sell or render service on credit to the business.
BU BUSINESS TRANSACTIONS
Business transaction refers to movement of money or money’s worth from one person to another or from one part to another.

Money’s worth means anything of money value i.e anything which can be bought or sold like soda, house, sugar, shoes etc.
For something to be a transaction there must be at least movement of either money, goods or service from one part to another.

Example of business transactions are:

1. Business bought goods and pay cash Tshs. 9,000/=

The above statement is a transaction because it carries movement of money from the business to the
supplier of goods and movement of goods from the supplier to the business.

2. Business paid cash Tshs. 500 for transport.
The above statement is a transaction because it carries movements of money from the business to the
transporter and movement of service from the transporter to the business.

NB: Not necessary for a single transaction to have two movements at one time.
Single transaction can have movement of money and goods or money and service, money only, goods only or service only.

ANALYSIS OF BUSINESS TRANSACTIONS.
(i) Each transaction has two aspects, that of giving and that of receiving. These aspects may be represented by the movements discussed above.
These aspects are the ones recognized and recorded in the books of accounts.

(ii) Each transaction has two parties involved and one of these two parties is always the business because
it is the business dealing with other parties. in teaching, the actor in each transaction is the business.
Examples:
From the following transactions, identify the two parties and two aspects involved.
Transaction 1
May 1. Business purchased goods for cash Tshs. 6000.
Solution.
– The action word in the above transaction is purchase and therefore the business is one which made the purchase.
– The individual or business from whom goods are purchased are called suppliers.
Two parties involved in the above transaction are Business and Supplier. The above task can be summarized as follows:
May 1.
Giving aspect by the business
Re Receiving aspect by the business.

NB: Whenever goods are purchased by the business for cash, the business will receive the goods and pay money.

Transaction 2
May 2. Business sold goods for cash Tshs. 9,000

Solution
– The action word in the transaction is sale and therefore it should be assumed that the business is the one which has made the action of selling.

– Those people to whom goods are sold are called customers.

The two parties involved in the above transaction are Business and the customer. Th above task can be summarized as follows:

May 2.
Giving aspect by the business


Receiving aspect by the business.
Transaction 3

May 4. Business paid cash Tshs. 1000 for transport.
– The action word there is pay-meaning that the payment was made by the business.
– Those individuals who provide transport may be called transporters.
Two parties involved in the above transactions are the Business and transporter. The above task can be summarized as follows:

Giving aspect by the business


Receiving aspect by the business.

NB: Whenever the business pay for something which cannot be seen or touched, that thing is a service.
The answer from the three transactions may be presented without narrations as follows:


Activity
Answer the following questions:
1. Briefly explain what is meant by the term transaction.
2. Give three examples reflecting business transaction.
3. Indicate with tick which of the following are not business transactions. Give reason for stand.
(a) Juma sold goods worth Tshs. 4000.
(b) Marketing officer attended a meeting of board of directors.
(c) The business bought goods for cash.
(d) Human resource manager wrote a warning letter to a worker.
4. For each of the following transactions indicate the two parties involved
and the two aspects carried. The first one is done for you.
(a) The business bought goods for cash.
(b) Business paid salary in cash.
(c) Paid insurance.
(d) Business made a cash sales.
Solution:
(a)





Share this:

EcoleBooks | BOOK KEEPING O LEVEL(FORM ONE) NOTES - INTRODUCTION OF BOOK KEEPING

subscriber

Leave a Reply

Your email address will not be published. Required fields are marked *

Accept Our Privacy Terms.*