MODULE THREE CONSTRUCTION MANAGEMENT COURSE OUTLINE AND KEY

POINTS

MODULE THREE CONSTRUCTION MANAGEMENT

CONSTRUCTION MANAGEMENT II

INTRODUCTION;

This module unit involves the study of management techniques in the building
industry. It is designed to provide the trainee with essential knowledge, skills and
attitude in management.

Before going through this module unit, the trainee should have covered general
building technology in module 1.

General objectives;

By the end of the module unit, the trainee should be able to;

a) Appreciate the importance of management in the construction industry

b) Apply management techniques in the supervision of construction work
c) Understand the role of the building team
d) Understand the legal requirement involved in the building process
e) Understand the procurement procedures

Module unit summary and time allocation (55 hours)

Code Sub module Content Total hours
units
36.3.01 Project - Management cycle 17
management - Work study
- Contract planning
- Material procurement

36.3.02 Law - Structure and 18

jurisdiction
- Sources
- Law of tort
 - Implication of
trespassing
- Types of nuisance
- Forms of defamation
- Vicarious liability
- Land ownership
- Mortgages and charge
- Arbitration
36.3.03 Human resource - Personnel 10
management management concept
- Labour relations
36.3.04 Financial - Accounting concepts 10
accounting - Book of accounts
- Final accounts

55
TOTAL
TOPIC ONE
PROJECT MANAGEMENT
Theory
Specific objectives;
By the end of the sub module unit, the trainee should be able to;
a) Explain the project management cycle
b) Understand the concepts of work study
c) Explain the stages of contract planning and programming
d) Outline the procedure of procuring materials

Competence

The trainee should have the ability to;

i) Apply project management processes in a given project

ii) Develop construction programmes
iii) Prepare calculation sheets
iv) Efficiently procure materials

Content
Project phases

- Initiating
- Planning
- Executing
- Controlling
- Closing
Work study
- Meaning
- Method study
- Work
- Measurement
- Material handling
- Site layout
Contract planning
- Planning stages
- Pre-tender
- Pre-contract
- Contract programme
- Calculation sheets
- Based on BQ
- Based on actual measurement
- Programming methods
- Bar charts
- Critical path network
- Pert
Material procurement
- Materials computation
- Ordering
- Supplying
- Documentation
- Storage
- Control and security
 Practice
Specific objectives;
By the end of the sub module unit, the trainee should be able to;
a) Develop a construction programme cycle
b) Prepare calculation sheets Efficiently
Content
- Contract planning
- Materials
- Procurement

TOPIC TWO

LAW

Specific objectives;

By the end of the sub-module unit, the trainee should be able to;

a) Outline the structure and jurisdiction of law courts in Kenya

b) Identify the sources of law
c) Outline the law of tort
d) Explain the various implications
e) Distinguish types of nuisance
f) Explain forms of defamation
g) Interpret vicarious liability
h) Outline the law governing land ownership in Kenya
i) Outline types of mortgages and charge
j) Describe arbitration procedure
Competence
The trainee should have the ability to;
- Interpret the law of tort
- Understand the structure of law courts in Kenya
- Distinguish types of mortgages and charges
- Appreciate the land laws
Content
 Structure and jurisdiction of law
- Introduction to law
- Classification of law courts in Kenya
Sources of law
- Constitution
- Statutes
- Judge made law books
- Customary law
- Islamic law
- International treaties
Law of tort
- Definition
- Nature
- General defenses to an action in tort
- Trespass to land and goods
- Plaintiff
-
- Remedies
- Conversion
- Defiant
Negligence
- Definition and characteristics
- Honours of the plaintiff
- Duty of care
- Standard of care
- Defence
- Contributory negligence
Nuisance
- Public
- Private
Defamation
- Libel
- Slander
Vicarious liability
- Servant
- Independent
- Contractor
Land law
- Ownership of land
- Nature of property of land
- Nature of property
- Definition of land
- Leasehold
- Periodic tenancies
- Determination of lease
Mortgages and charge
- Definitions
- Types of mortgages
- Equitable mortgage
Arbitration
- Terms
- Procedures of arbitration
Practice
Specific objectives;
By the end of the sub-module unit, the trainee should be able to;
- Develop a construction programme cycle
- Prepare calculation sheets
- Efficiently procure construction materials
Content
- Law of tort
- Law courts of Kenya
- Mortgages and charges
- Land laws
 TOPIC 3
HUMAN RESOURCE MANAGEMENT

PERSONNEL

Specific objectives

At the end of this topic the trainee should be able to ;

- Explain the recruitment procedure

- Explain training techniques
- Explain procedure in discipline and termination of employment
- Explain staff appraisal methods
- State different methods of remuneration
- State the importance of good human relations in an organization
- Explain leadership styles and their application
- Explain the procedure of handling industrial disciplines

Recruitment
- Sources of labour
- Job description
- Job specification
- Interviewing and selection

Training techniques
- Lecture
- Demonstration
 - Discussion
- Text reading
- Seminars
- Field works

Staff appraisal
- Meaning
- Purpose
- Methods

Staff welfare health and safety

- Meaning and importance

- Different methods
- Human relations
- Meaning and importance
- Improving human relations
Leadership styles
- Meaning of leadership
- Function of a leader
- Leadership styles

Industrial relations
- Meaning and importance
- Causes of disputes
- Grievances procedures
 TOPIC 4

FINANCIAL ACCOUNTING

Specific objectives;

At the end of this topic the trainee should be able to;

a)Explain concepts of accounting

b)Describe types of business organizations
c)Identify book of accounts
d)Describe the final account
e)Describe sources of business capital
f)Explain the methods of determining depreciation
concept of accounting
- Accounting records
- Annual accounts
- Prepayments
- Accrued expenses
- Stocks
- Working progress
- Money measurement concept
- Business entity concept
- Going concern concept
- Cost concept
- Realization concept
- Accrued concept
- Double entry concept
Types of business organizations
- Sole traders
- Partnership
- Private limited companies
Book of accounts
Ledger
- Sales
- Purchase
- Nominal
- Cashbook
- Sales day book
- Purchase day book
- Return day book
- Journal
Final account
- Trading, profit and loss account
- Balance sheet – assets , liabilities
Business capital
- Capital terminologies
- Authorized/ nominal/ registered capital
- Issued capital
- Subscribed capital
- Called up capital
- Paid up capital
- Uncalled capital
Sources of capital
- Shares and debentures
- Cumulative preference shares
- Preference shares
- Participation preference shares
- Redeemable preference shares
- Ordinary shares
- Preferred ordinary shares
- Deferred/ confounder shares
Methods of depreciation
- Straight line
- Double rate
- Declining balance
- Approximate diminishing
- Sum of number of years
 MODULE THREE CONSTRUCTION MANAGEMENT NOTES

TOPIC ONE;
PROJECT MANAGEMENT

Management cycle

- Initiation
- Planning
- Execution
- Controlling
- Closure

Initiation

Steps for the project initiation phase may include the following;

- Undertaking a feasibility study: Identify the primary problem your project

will solve and whether your project will deliver a solution to that problem.
- Identify a scope: define the depth and breadth of the project
- Identifying deliverables: define the product or service to provide.
- Identifying project stakeholders: figure out whom the project affects and
what needs may be.
- Developing a business case: use the above criteria to compare the potential
costs and benefits for the project to determine if it moves forward
- Developing a statement of work: document the project’s objective, scope
and deliverables that you have identified previously as a working
agreement between the project owner and those working on the project.

Planning
- Creating a project plan: identify the project timeline including the phases of
the project, the tasks to be performed and possible constraints.
- Creating work flow diagrams: visualize your processes using swim lanes to
make sure team members clearly understand their roles in a project.
- Estimating budget and creating a financial plan: use cost estimates to
determine how much to spend on the project to get maximum return on
investment.

- Gathering resources
Build your functional team from internal and external talents pools while
making sure everyone has the necessary tools (software, hardware e.t.c) to
complete their tasks

- Anticipating risks and potential quality road blocks

Identify issues that may cause your project to stall while planning to
mitigate those risks and maintain the project’s quality and timeline.

- Holding a project kick-off meeting

Bring your team on board and outline the project so they can quickly get to
work
Controlling
This is aimed at defining the sources of problems in plan implementation
and removing them. During the control stage the developers usually
conduct product testing.
Execution
Steps for the project execution phase may include the following:
- Creating tasks and organizing work flows: assign granular aspects of the
projects to the appropriate team members, making sure team members are
not overworked.
- Briefing team members on tasks: explain tasks to team members providing
necessary guidance on how they should be completed and organizing
process-related training if necessary.
- Communicating with team members, clients and upper management:
provide updates to project stakeholders at all levels.
- Monitoring quality of work; ensure that team members are meeting their
time and quality goals for tasks
 - Managing budget: monitor spending and keeping the project on track in
terms of assets and resources

Closure
Steps for the project closure phase may include the following;
- Analyzing project performance; determine whether the project’s goals
were met (task completed, on time and on budget) and the initial problem
solved using a prepared checklist.
- Analyzing team performance; evaluate how team members performed,
including whether they met their goals along with timeliness and quality of
work.
- Documenting project closure: Make sure that all aspects of the project are
completed with no loose ends remaining and providing reports to key
stakeholders
- Conducting post-implementation reviews; conduct a final analysis of the
project, taking into account lessons learned for similar projects in the
future.
- Accounting for used and unused budget : allocate remaining resources for
future projects
WORK STUDY
Work study is a means of enhancing production efficiency (productivity) of the firm by
elimination of waste and unnecessary operations. It is a technique to identify non-value adding
operations by investigation of all the factors affecting the job.
Advantages of work study
It helps to reduce the cost of the product by;
- Eliminating waste and unnecessary operations.
- Better worker-management relations.
- Meets the delivery commitment
- Reduction in rejections and scrap and higher utilization of resources of the organization
History of work study
The development of “work study” has been a constant process over the centuries with man
endeavoring to find and improve ways of doing his daily work. Many of these developments did
not cause great benefits on their own but have, with the passing of time been collected and used
by men with wide vision to produce results and labour conditions of a very high order.

The work study man

The work study engineer when called in often encounters a resentful atmosphere from
management and workers alike. This feeling is generally caused by the lack of understanding the
workman‟s job. He is seen as someone out to check-up”- no one likes being watched and the
thoughts of interference in our own little niche is very disconcerting. It is therefore the duty of
management and supervisory staff at all levels to assist in any way possible, and by showing a
hopeful attitude, the men will follow their example. To do this a supervisor must have an
understanding of the operations and aims of work study; this is necessary to satisfy the workers
as to the beneficial results of work study:

Benefits;
To the organization
- The reducing of costs resulting in bigger profits
- More competitive tendering
- Better control of the management
- Better use of resources
- Collectively a better service to clients

To the supervisor
- More efficient planning
- Better control
- Fewer bonus target disagreements
- Easier overall supervision
- A more rewarding job
To the operative
- Better working conditions
- Satisfactory bonus targets- steady high income
- Less fatigue
- Happier atmosphere and site relationship with foreman
- More security- company successful

Generally work study is considered under one method study and two work measurement as
illustrated in figure one

Work study

Method study Work measurement

Land Plant Material Labour

METHOD STUDY
This in simple terms, is the study and recording of an existing or proposed way of doing work
and by careful and critical examination of the recording produces an easier and more effective
way of doing it. Figure two shows the outline of the procedure with various stages in order of
study.
 1. Select the work or activity to be studied

2. Record the existing or proposed methods of work are observed and data recorded by :

(a) String diagram (b) Process chart (c) Flow diagram (d) Multiple activity chart

3. Examine – the data collected critically examined by the questioning techniques to

eliminate unnecessary activities and delays

- what is achieved purpose

- Where is it done or obtained from place
- When will it be required sequence
- who should do it persons
- How should it be done means

To all these questions ask why?

4. Develop – from the examination of results the most economical and efficient method
best suited for the particular situation

5. Define- make clear what is to be done

6. Install – new method into operation making sure everyone knows their new role

7. Maintain- make sure system does not slip back into old method.
= ALL THESE IS GEARED AT HIGHER PRODUCTIVITY

TECHNIQUES OF METHOD STUDY:

a) Scale models; these can be applied to various situations in the building industry, a typical
application would be in the positioning of site huts on a scaled site plan, models of scaled cut
outs can be used to find a satisfactory layout without a lot of penciling and rubbing out every
time an unsuitable position was chosen
String diagrams
Again using a scaled diagram placed on a suitable board, and with aid of pins or tacks and a reel
of cotton or similar, movements within a given length of time can be plotted and will show on
completion by unwinding the thread and measuring as per scale, the length of journey of plant,
material or operative. It will also show crossing of paths and congestion bottle necks. A number
of paths can be plotted by using different coloured threads.

Process chart
This is a form of recording information by use of five easily understandable symbols. The
symbols represent the activities of procedure or work method and show quite simply a visual
step in a present or proposed method work.
Types of charts using these symbols are;
a) Outline process charts
This chart is used as the name suggests to record a broad outline of a procedure, especially useful
in showing the collection of material or procedures to makeup a whole unit as in fig 5 only
operation and inspection are shown
b) Flow process charts
These are used to develop and expand the problems with the aid of the other symbols; transport,
delays, storage, a typical example is shown in fig 6. This chart can be made to record the
movement of men or material
c) Flow diagrams
Drawn on a scaled plan and used as a supplement of the flow process chart, show the path of
material or operatives by the use of a line joining the process symbols together. A simple
diagram can be seen in fig 7 and shows how it could supplement fig 6.
 Fig 4 SYMBOLS USED IN METHOD STUDY
RECORDING
SYMBOL ACTIVITY MEANING
Operation A productive activity that will bring completion
nearer e.g. laying a brick, knocking in a nail.
Inspection Examining – checking quantity or quality. E.g.
measuring opening, plumbing up.
Transport A movement of plant, labour or material. e.g. pushing
a barrow, hoist by crane.
Delay A delay or temporary storage when next operation
cannot take place e.g. hoist waiting to be loaded.
storage Material kept and protected until wanted for use.
e.g. cement in silo, brick stacks
Combined activity Two activities performed at the same time or by the
same operator e.g. loading aggregates, into weigh
batches
 Fig 5
Outline process chart
 Study no ……… charted by …………….. Date ……………………
 Sheet no ………
 Operation description; batching & mixing concrete
 Chart ends; mixed materials (concrete) discharge
 Man Material, equipment

Water tank Cement in site Fire Aggregate coarse aggregate

Stock pile stock pile

3-5
5-4 2 1
Water to Fill & weigh Load hopper Load hopper
mixer check
guage
1
Check weight Check weight

Charge
4 drum

6 Mixing time

5 Check mix

7 Discharge

Summary : Operation 7
Inspection 5
 Flow process chart
Study no ………… chartered by …………………. Date ………………..
Sheet no ………….
Operation description; offloading of sinks into storage compound
Man/material/equipment
Present/proposed method

description quantity distance time operation inspection transport storage delay Remarks

Labourer walk 36 60m /m labourer

from bdg
Collects barrow

Unload from lorry

Takes to stores

Checked

Unload & stack

In stores
Return to lorry

Repeat 3/7 “ times

Return barrow

Walk back to bdg

WORK MEASUREMENT
This is used to establish the time taken to do a specific task and is a complimentary technique of
method study. The aim is to cut ineffective time, with the workers effort, production and
conditions of work being related to the necessary relations allowances to ensure that undue
fatigue does not occur. It is believed by many that work measurement cannot be operated on the
building site because of the many variables that occur such as the changes in climatic conditions,
different types of materials, varying conditions of work and so on.
This is not the case for there are many occasions when, by work measurement, operatives‟
ineffective time can be shown to exist and a new system developed also the time studied
operations provide an excellent base for competitive estimating, planning, costing and the
forming of sound incentive schemes.
Fig 8
OUTLINE PROCEDURE OF WORK MEASUREMENT

WORK MEASUREMENT

1 select- the work that has to be measured

2.measure – all the relevant data after break down into elements

Time Study Synthesis Analytical Estimating

3.Examine- data critically to get rid of unproductive time

4. Compile- times for each operation with all the allowances added.

Work Unit Value

5.Define – Activity covered and give allowed time to complete it.

6. Install Unit

7. Maintain
 NB: All these efforts are geared at a highest productivity
Time study this can be carried out quite often by the use of an ordinary wrist watch or stop watch
and is possibly the most useful form of work measurement used in the building industry, it can
be used on both single operations or gangs as required. Stages in time study are;
(i) Timing
(ii) Rating
(iii) Normalizing
(iv) Allowances
Timing – the actual taking of the time to complete an operation. The degree of accuracy in
timing will depend upon the task being recorded. The operations are first broken into
elements (operating parts) and the time to do each separate element is recorded on prepared
sheets

Time study form

Operation description ……………….. Study no ……. Date ……..
Sheet no ………………
Operatives Time start ……………….
Plant /equipment Time finish …………..
conditions Lapsed time ……………
Observed time ……………..
Difference ……………….

Checked ……………….
Element W O B Element W O B
description R R T T description R R T T

R.- Rating WR – Wrist Watch OT – Observe time BT- Basic Time

Rating- this is the allocating to a worker a relationship to me. Average “ does not exist, an
accepted rate is applied or in other words a standard is given. There are several standard scales in
use. The one mainly used are;
- 125- fast, skilled performance of necessary quality and accuracy
- 120
- 115
- 110
- 105
- 100 – represent a motivated qualified worker, working normally.
- 95
- 90
- 85
- 80
- 75
- 70 – very slow, no interest
- 65
- 60
- 55
- 50
By observing a worker, the time study man can relate his effort to the scale, so that slower
workers will be given a figure below 100 and the skilled efficient man can achieve over 100,
considerable skill is required to give a true rating. For example, a bricklayer knocking down a
brick may calculate the correct thickness of mortar bed so that the bricks only require placing.
This is the effectiveness of a worker and will relate to his skill in doing work.
Normalizing – this is the time that in the judgment of the work study man an element should be
performed. To obtain this normalized time, a simple formula is used.
 Normalized time / basic time = Observed time x observed rating
Standard rating

This means that every element is converted by multiplying the appropriate rating to a normal
time.
Example; if an element took 1.4 min and was given a rating of 90, the basic time would be:
1.4 x 90 ( scale 0/100)
100

Basic time = 1.26 min

This time of 1.26 min represents the time it would take if the operator was working at a normal
rate “Mr. Average”
Allowances – these allowances can be divided into two groups;
a) Process allowances
b) Rest allowances
A process or unavoidable delay allowance is given so that the worker will not lose earnings due
to an enforced delay over which he has no control, eg. The cleaning of tools or plant
Rest allowances vary with every performance and conditions of work, and psychologically fit to
perform an operation for the allocated time. The allowance is in fact sometimes timed “fatigue
allowance”
Contingency allowance
This is a special allowance applied to various tasks that have to be carried out by the worker who
will not be doing a productive job; as an example, a joiner to sharpening saw or chisels.
These allowances should not exceed 5% and should only be applied to justifiable cases
Allowed time;
A final time allowance for a task can now be ascertained by the simple calculation shown;
Example;
Basic time - 1.26 min
RST allowance - 30%
Contingency allowance - 2%
Standard time = basic time x (100 + total% allowance)
100
= 1.26 x 132 = 1.66 (say 1.7) Standard minutes
100

CONTRACT PLANNING
SPECIFIC OBJECTIVES;
At the end of this topic, the trainee should be able to;
a) Explain the planning stages involved in the construction process
b) Use calculation sheets in programme preparation
c) Prepare construction programmes
Planning stages involved in the construction process
i) Pre-tender planning
ii) Estimate build up
iii) Decision to tender
iv) Site to site report
v) Enquiries to sub-contractors and supplier
vi) Method statements
vii) Pre-tender programme
viii) Preliminaries build up
ix) Estimate adjudication
x) Analysis of results

i) Pre-contract planning
 Pre-tender planning
 Estimate build up
 Decision to tender
 Site visit report
 Enquiries to sub-contractors and supplier
 Method statements
 Pre-tender programme
  Preliminaries build up
 Estimate adjudication
 Analysis of results

ii) Pre- contract planning

 pre-contract meeting
 pre-contract checklist
 sub-contract orders
 site layout planning
 Requirement schedules
 Master programme
 Commencement arrangements
 Preparation of contract budgets

i) Contract planning
 Monthly and six week planning
 Weekly planning
 Daily planning
 Progress reporting
 Updating of progress
Programme calculation sheets
i) Calculation sheets based on bill of quantities
ii) Calculation sheets based on act of measurement
Construction programming methods
i) Need for programme charts
ii) Programmed operations
iii) Ban charts
iv) Critical path network
Pre-tender planning
Much of the builders work is obtained through the process of tendering and if a builder is to stay
in business, his estimates have to be competitive and in good number for them to be successful.
In the estimation of work, all facts that are possible to gather should be collected and critically
examined for the project to be achieved.
Pre-tender planning needs to be planned so that a systematic approach can be made to ensure that
all information and facts are gathered on time. A typical example of this procedure is as follows;
1. The pre-tender report (site investigation)
2. Method statement
3. Plant schedule
4. Site organization on costs
5. Sub-contractors and supplies
6. Outline programmes
7. Final estimates (for board‟s decision)

Pre-tender report
A document complied to show in as comprehensive form as possible all information regarding
the area and general site conditions. A report is shown and is usually carried out under the
control of the planning department.
The estimates may of course add questions that he deems necessary relating to a particular
project onto the standard document which is usually used and developed by the individual
company. This is a task that can be carried out in a gurry and great care is necessary to ensure
that facts are reported and that waiting is overlooked.
Example of a pretender report
MUGOYA CONSTRUCTION CO LTD
PLANNING DEPARTMENT
SITE INVESTIGATION REPORT
PROJECT CONSTRUCTION OF NYAMBENE TEA FACTORY
Prepared by …………………………………………….…… DATE ……………………
1. SITE;
 General description
 Local authority
 Access
 Crossovers
 Temporary roads
 Distance of site from main road
 Working space for sitting offices, etc.
 Trespass precautions

2. SUB-STRATA
 Types of soil
 Stability
 Anticipated water table
 Source of water
 Pumping
 Disposal of water

3. SERVICES AUTHORITY NEAREST SUPPLY

Water …………………………….. ……………………………..
Electricity …………………………….. ……………………………..
Gas …………………………….. ……………………………..
Telephone …………………………….. ……………………………..
4. LABOUR
 Availability
 Cost of labour/labour type
5. TIPPING FACILITIES
6. LOCAL SUB-CONTRACTORS
7. OTHER SPECIAL DETAILS

METHOD STATEMENT
Basically this indicates how the project is to be built, what plant is to be used and so on. Each
stage of the operations is studied to find the best method of completing it, carefully weighing the
various alternative methods that could be adopted. Consideration has to be given as to whether
we require the cheapest or the fastest method, very often not one or the same, for it may be
expedient to spend a little extra at one stage to finish early so that other operations can be started.
METHOD STATEMENT

CONTRACT………………….. PREPARED BY …………...

CONTRACT NO …………….

SHEET NO ………………. DATE …………………….

ACTIVITY METHOD PLANT REMARKS

OUTPUT
EXCAVATION Bulldozer 20 m3/hr Soil to be
Site stripping moved
Foundation and drain J.C.B 0.25M3 bucket load approximate
trenches direct into 0.5m3 dumper 10 m3/hr 50m

T N T mixer with loading Cart to spoil

Concrete foundations hopper concrete discharge heaps at north
direct to barrows 12 m3/hr of site

Only required
for first 10
weeks
 PLANT SCHEDULE
This is carried out on the completion of the method statement and is a detailed summary of all
the plant and equipment required to build a project, giving as much relevant details as possible.

PLANT SCHEDULE
CONTRACT …………………….…….. PREPARED BY ………………
CONTRACT NO …………………..…..
SHEET NO ………………………….….. DATE ……………………

NO Description weeks Own hire maintenance remarks

1 Tractor type D4 bulldozer 1 No Yes No

1 J.C.B 0.25M3 1.5 Yes No Daily and weekly

routine

1 TNT Bedford 10 Yes No - DO-

SITE ORGANISATION AND ON-COST

These are the site overheads that will have to be charged to the subject. They are in fact items
that cannot be charged to the project. They are in fact items that cannot be priced in the cause of
normal productive work and will include; the site staff requires for administration, temporary
roads and hoardings; site huts, offices and stores, power and water, telephone etc.
SUB-CONTRACTORS AND SUPPLIERS;
On most projects today, sub-contractors are to be found. It is of great importance in this
pretender stage that full list of required sub-contractors and suppliers are drawn up. It will then
become necessary to send out an enquiry form not only to obtain quotations but to ascertain
whether or not the sub-contracted can be available on dates required and can complete work in
whatever time has been roughly allocated on the pre tender programme.
 OUTLINE PROGRAMME
Often referred to as pre-tender programme plan. This is not a detailed plan but outlines the main
operations and sub-contractors‟ work. The plan will enable all parties concerned in the pre-tender
preparation to coordinate their activities and to assess time required for plant, use of site huts and
supervisors‟ duration on site.
PRE-TENDER PROGRAMME
CONTRACT ………. FOR …………. PLANNING DEPT
SINGLE STOREY STORES BLOCK DATE………… SHEET
NO……………
PREPARED BY ……….
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Site preparation
and setting out
EXC. Fdn/drains
drainage
Site work to
d.p.c
Frame and brick
structure
Roof
Int. 1st fix/plaster
2nd fix/
decoration
services

Ext. work -clear

Estimate; with all the information now available, the estimator can begin to allocate prices to
items in the bill of quantities, estimating not only to direct cost e.g. site supervisory staff, general
overheads etc.
Upon the completion of the estimate, the estimator will prevent persons concerned with
finalizing the tender, e.g. board of directors, construction manager, with a summary of the
estimate with costs, enabling them to give approval or otherwise.
After the final completion and vetting of the estimate, a figure is agreed and submitted. The
estimated price can now be put forward as the tender figure. This price when received by the
architect is not in any way a form of contract but will be referred to as the contract figure when
the successful builder has been selected.

Pre-contract planning
If the builder is successful in his tender and is asked to undertake the project, upon signing the
contract documents he will be allowed a short period of time to make preparation and organize
his resources before actual commencement of work. This period of time is called pre-contract
period and will vary in time with the size and nature of the project.
Meetings become the order of the day within this period; meetings between architect, client and
builder between planning department and other departments within the organization and so on.
The new service site supervisor will be concerned with most of them for he is the one who will
have to deal with all parties and problems on site. If he can get to grips with things before work
gets underway, many of these problems may never arise.
Major items dealt with at pre-tender planning would include;
i) Site layout and general organization
ii) Labour and plant requirements finalized
iii) Contract programme prepared

Contract programme
An essential detail of any project is to ensure completion within the time specified. The more
complex the job, the more difficult this becomes as so many more things can go wrong. To help
prevent problems arising in the form of delays and general coordination a master plan is prepared
to show all the concerned with the project what should happen , when it should happen and by
whom it is carried out. This master plan can be prepared by the use of several forms of planning
techniques and will result, whatever method is adopted in a visual diagram of project activities
and other related information.
The outline programme (pre-tender plan) worked out in the pre-tender stage will be used as a
foundation in the preparation of the more detailed master plan. The decision and careful
examination of all aspects of work at this stage will most certainly result in the saving of money
and time in the project period.

Preparation of programme
To access the duration of an element, the itemized details produced by the quantity surveyor in
the bill will be collected under a general heading. For example, under the heading of “BRICK
WORK” would also be collected damp proof course reveals to openings, placing of airbricks and
lintels etc. It will be realized that these items will have an effect on the output per hour in laying
bricks and it is the planners job to assess this output. This will occur for all project elements and
takes the form of a calculation sheet.

CALCULATION SHEET
CONTRACT …………………………….. PREPARED BY …………………..
CONTRACT NO ……………………..….
SHEET NO ………………………………. DATE ……………………………..
Activity Quantity Output Production Lab/plant Duration in Remarks
hours requirements days
Concrete 58m3 1.2m3/hr 48 7NT mixer
6
foundations 6 labourers

Concrete 48m3 1.2m3/hr 40 7NT mixer 5

Bases 6 labourers

Concrete 82m3 1.2m3/hr 68 7NT mixer 8.5

oversite 6 labourers

NB/ Great care must be exercised when considering outputs so that realistic targets can be set.
An invaluable guide is the information obtainable from records of past work of similar nature,
alternatively work study figures.
Cost must also be considered when method of work is being decided upon to ensure that the
method chosen is the most economical in the circumstances.
Information
To enable the planner to make realistic assessment of the operation, he will call upon the
historical information and records obtained from past projects ( this is one of the main reasons
for information being fed back to head office). Having determined the element time, starting and
finishing date, is necessary to communicate this information. This is generally done by setting
out the master programme in the form of;
1. Bar or Gantt chart
2. Arrow network ( critical path diagram)
Whichever method is used, certain characteristics of a good plan are essential to both;
- It should be based on clearly defined objectives
- It should be simple to understand
- It should be flexible, so that alterations and alternatives can be made
- It should provide standards so that control can be maintained
- It should provide standards so that control can be maintained
- It should provide a suitable balance of work, so that labour once off the job need not to
return.
- All resources should be used to their fullest extent and not left standing waiting for other
activities to be completed.

Bar or Gantt chart

These are used widely in the industry and have proved to be a successful means of
communication. A typical example of a bar chart is shown under the pre-tender programme.
(see)
NB/ Check all the information listed on this chart.
The difference between target completion date and actual completion date will vary from job to
job. A general figure for projects up to 1 year duration would be about 10% of project time, this
acts as a buffer period. If a builder aims to finish on target time and does, he will also be able to
re-use men, plant and equipment on other work. If he finishes on completion date, no advantage
has been gained.
If however, the project takes larger than completion date, extra cost will be involved, profit loss
and also there may be a time penalty clause in the contract.
NETWORK ANALYSIS (critical path method)
INTRODUCTION;
The essential differences between analyzing a production problem by network as against linear
or parallel linear methods lies in the identification of the dependency between operations. These
approach leads to inter related works through which certain sequences can be seen to be
“critical” to the unanticipated outcome in that they occupy the longest irreducible time necessary
to execute the project or part of the project to which they are necessary.
These network techniques were introduced in the construction site in the 1950s thereby
superseding the bar charts.

The use of these network techniques is mainly limited to the more complex construction projects
to which the major firms appear to be more successful in tendering. The application is far
reaching and can be applied to the simplest of work but which unfortunately to few individuals
have attempted to apply in a real situation, the attitude being that the bar chart is an easy
technique to learn and to apply to those at site level.

The most cost conscious managers see the critical path network as a superior control document
to the bar chart because the effect of a delay in one activity over successful ones can be seen
more readily.
SYMBOLS USED IN NETWORK: CRITICAL PATH METHOD
1. Activities or operations
These are denoted by arrows, the length of which generally is immaterial. One activity which
takes two days could have a representative arrow which is the same as an activity requiring 20
days to complete. Usually the activity name is printed above the arrow, while the realistic
expected duration is shown or printed below.

(ACTIVITY) EXCAVATE FOUNDATION

(DURATION) 2 DAYS

2. NODES OR EVENTS
These denote the start and finish of a planned activity and are shown at the beginning and end of
each arrow. In order that an activity can be identified, each node/event is allotted a number.

(ACTIVITY) EXCAVATE FOUNDATION

3 4
(DURATION) 2 DAYS

3. THE DUMMY ARROW

The dummy is a dotted arrow which is not allocated duration and which is not an activity. It is
used; in the main, to ensure that no (2)two activities have the same identification numbers, or
where one activity relies on another been completed before it is started in a parallel route
situation.

3 5
The use of a dummy is given in the example below where two activities have identical reference
number i.e. drains activity (3-4) excavate foundations (3-4)
Drains

3 4
Excavate Foundations

This could lead to confusion, so an alternative better system is by the use of a dummy

3 4

Also considering the example below in this diagram, the activity (18-20) cannot commence until
activity (17-18) finishes, also activity (16-19)

17 18 20

16 19 21

NETWORK PREPARATION
As in bar charts, it would be advisable to prepare a method statement to show at least the job
broken down into operations which would indicate the extent of work to be undertaken.
Similarly durations of each of the operations would be determined by the preparation and use of
a calculation sheet. The queries which should be asked when setting out the network of a project
are:
 1. What controls the start of each activity?
2. What controls the finish of/the end of the project?
3. What job(s) can be done before the next activity starts?
4. What job(s) must follow the activity?
5. What job(s) can run concurrently?
The following are typical examples of the sequences which may be found in network analysis
and should be thoroughly understood before attending arrow diagrams in full.
1. Activity X depends upon activities A&B

2. Activity X and Y depend upon activities A&B

A X

B Y

3. Activity X depends upon A&B and activity Y depends upon B only

A X

B Y
4. Activity Y depends upon activities A&B and activity X depends upon A only
A X

B Y

5. Activity X depends upon A&B activity Y depends upon B&C

A X

C Y

6. Activity X depends upon A&B, activity Z depends upon activities B&C and activity Y
depends upon B only

A X

B Y

C Z
 7. Activity Z depends upon activities A,B&C activity X upon A only and activity Y upon
A&B

A X

B Y

C Z

8. Activity Y depends upon activities A,B &C, activity X depends upon A only and
activity Z depends upon activity C only.

A X

B Y

C Z

PREPARATION OF NETWORK ANALYSIS

STEP 1: Using logical reasoning and arrow network which represents all the activities relating to
the contract, network analysis is drawn bearing in mind the sequence in which the work could be
done and not how it should be carried out by the contractor.
The programming officer lists the operations in order in which they are to be executed to suite
the firm‟s resources. Operations are considered according to which should be completed first
before another one can be started.
Generally, drainage operations may be delayed until most of the structural works have been
completed.
 Act. C

Act.A Act.B Act. D Act. F Act. G

Act. E

Step 2: when logical satisfactory network has been complied, the event numbers are inserted to
identify each activity. Also the duration in (days, weeks, months, or years) are extracted from the
calculation sheet along with the proposed gang and plant, and these are included to the
appropriate activity.
Earliest starting time
Latest starting time

Earliest finishing time Earliest

finishing Latest
Latest finishing time finishing
time
time

4
C
4

.A .B .D . F G
1 3 2 6 3 2 5 3 67 7

E
6
KEY
EST - Earliest Starting Time EFT- Earliest Finishing Time
LST - Latest Starting Time LFT – latest Finishing Time
Step 3: it is now essential to calculate the earliest starting time for each activity by commencing
at activity one and two:
(a) The earliest starting time is the beginning of day one which is 0. This is inserted in the left
hand box above the first event. Therefore the earliest finishing time for activity (1-2) is
calculated by adding its duration and earliest starting time i.e. earliest finishing time =
0+3=3 days (insert this in second event)
(b) Earliest starting time for activity (2-3) is the earliest finishing time of the preceding
activity, which is day 3. Therefore earliest finishing time=3+6=day 9.
(c) The earliest starting time for activity (3-4)is the earliest finishing time for the preceding
activity which is day 9. Therefore earliest finishing time=9+4=day 13.
(d) The earliest starting time for activity (3-5) is the earliest finishing time for the preceding
activity which is day 9. Therefore earliest finishing time = day 11
NB/ As activity (5-6) cannot start until after both activities (3-4) and (3-5) have been completed,
the earliest starting time that activity (5-6) can commence is day 13. This is inserted in the event
for the earliest finishing time for activity D.
Bearing this example in mind, one always considers the longest route which has to be taken until
the last activity is reached.
Step 4: now calculate the latest starting and latest finishing times by commencing at the last
activity and working back to the first activity, remembering this time that the shortest route back
should be taken as follows
Earliest starting time
Latest starting time

Earliest finishing time Earliest

finishing Latest
Latest finishing time finishing
time
time
13 13

4
C
4

0 0 3 3 9 9 13 13 16 16 23 23
.A .B .D . F G
1 3 2 6 3 2 5 3 67 7

E
6

(a) The latest finishing time for activity (6-7) will be the same as the earliest finishing time
i.e. day 23. Therefore the latest starting time of activity (6-7) will be the duration
deducted from the latest finishing time i.e. day 23-7=16
(b) The latest finishing time for activity (5-6) will be the latest starting time for activity (6-7)
therefore the latest starting time for activity (5-6) is the latest finishing time less the
duration which is day 16-3=day 13
(c) The latest finishing time for activity (3-5) will be the latest starting time for activity (5-6)
therefore the latest starting time for activity (3-5) is the latest finishing time less the
duration which is day 13-2=day 11
NB/ Activity (3-6) has the latest starting time for the day which is 16-6=day 10 activity (3-4) has
the latest starting time which is day 13-4=day 9 this figure fixes the latest starting time above
event 3. Bearing this in mind, one always considers the shortest route back until the first activity
is reached.
Step 5: The critical path can be drawn on the chart through the arrows whose starting and
finishing times are the same. The “darker” line. The darker line on the network denotes the
critical path. It is the route which shows the activities or operations on a job which are critical
under no circumstance must there be delays in completing these activities otherwise the
contractor‟s duration will be extended.

FLOATING TIMES
From the diagrams and the analysis, it will be seen that, if the earliest starting times are deducted
from the latest finishing times, some activities have a greater length of time for carrying out the
activity than the work quantities required. The spare time in each case is called the “TOTAL
FLOAT”. The total float for each activities is calculated as follows:

Latest finishing time – earliest starting time -

Duration of the activities

F(T) = LFT - EST – D = LFT – (EST + D)

CRITICAL PATH
Where there is a 0 float against an activity, this activity will be a critical item. This means that
such an item must not be delayed otherwise it will delay the whole project. This activities will
form a continuous chain through the network and this chain is called “THE CRITICAL PATH”.
There may be more than one critical path in a network.
 ACTIVITY SHEET
ACTIVITY DURATION EARLIEST LATEST TOTAL CRITICAL
Starting Finishing Starting Finishing FLOAT ACTIVITY
A (1-2) 3 0 3 0 3 0 
B (2-3) 6 3 9 3 9 0 
C (3-4) 4 9 13 9 13 0 
D (3-5) 2 9 13 9 13 2 X
E (3-6) 6 9 16 9 16 1 X
F (5-6) 3 13 16 13 16 0 
G (6-7) 7 16 23 16 23 0 

ASSIGNMENT 1:

1. Complete the diagram

2. Draw an activity sheet
3. Determine the critical path
D
29

B 3 F
10 13

A E H I
1 2 5 6 7
15 14 14 2

C 8 G
12 28
ASSIGNMENT 2:
Seven operations A, B, C, D, E, and F&G are to be programmed in a network diagram. From the
following example, construct a network showing their sequence
Activity E relies on A
B relies on A
C relies on B
F relies on E
D relies on E & C
G relies on D & F
If the time for the activities are:
A=3WKS, B=4WKS C=4WKS D=3WKS E=10WKS F=1WK G=2WKS
1. Calculate the total float and determine the critical path

MATERIAL PROCUREMENT

Specific objectives
At the end of this topic, the trainee should be able to;
a) Calculate amount of material to be ordered
b) Prepare documents used in ordering and supply of materials
c) Identify correct methods of storing materials
d) Maintain proper records for the purpose of material control
e) Exercise proper control in the use of materials
f) Maintain security in connection with materials

Materials computation from

- Drawings and specifications
- Bill of quantities
Ordering and supplying materials
- Requisition
- Payment vouchers
- Advice note
- Order
- Delivery note
- Invoice

Records of materials
- Materials record book
- Materials transfer forms
- Inventories
- Materials delivery board

Storage of materials
- Timber
- Cement
- Sand and ballast
- Pipes
- Sheet metal
- Scaffold tubes and fittings
- Small articles
- Reinforcements
Materials control records
- Issue of materials
- Schedules

Control in materials used

- Wastage
- Cleanliness
- Pilfering and theft

Security of materials
- Stores
- Watchman
- Fencing and hoarding
- Site lighting
- Security alarms

Materials computation
The materials used in construction work are usually calculated from the following;
- Drawings and specification
- Bill of quantities

Ordering and supplying materials

No construction project can proceed without satisfactory supply of raw materials;
so that besides the careful phasing and planning of materials required by the
builder it is to his advantage to foster a good relationship with his suppliers. Many
suppliers will have been selected due to their fulfillment of orders to the standard
required and meeting of delivery times over a number of years.
Besides the builders‟ own suppliers the architect may specify a certain supplier
must be used and these are termed NOMINATED SUPPLIERS. Whatever the type
of suppliers to be used, the information passed to them and received from them is
the same, and in all but the smallest firms, these information and documentation
will pass through the buyer/procurement officer. It is also the responsibility of the
buyer to ensure that the architect receives any samples from the suppliers in the
very early stages of contract procedure to satisfy him of the relative merits of the
material.it may for example, not be possible to obtain the specified material in time
in conjunction with the building programme but by obtaining samples of similar
product, the architect may decide on a new form of construction or design to
prevent holdups.
In most cases, a buyer/procurement officer will send enquiries to two or three
suppliers or in some cases direct to manufacturers for such items as sand, gravel,
bricks, cement, etc. regarding price, delivery dates and such, for use at the
estimating stage of the project.
This will enable the estimator to use the figures obtained in the preparation of the
tender figure. If the builder is then successful in his bid for the work, he will place
his orders with the suppliers of his choice by comparing the various quotations
received in relation with the following:
i) Has the supplier been used before?
ii) If so, was he reliable?
iii) Is the material suitable for the project?
iv) Can the material be obtained in quantity?
v) Delivery dates
vi) Price including;
- Trade discounts
- Bulk discounts
- Cash discounts
vii) Do materials come up to Kenyan building standards or other tastes that may
be required?
viii) Any special consideration
Upon these points providing satisfactory, a definite order will be placed and upon
acceptance, a contract is formed.

Ordering procedure
Documents relating to ordering should always be in triplicate or even more
depending on the system;
- top copy – to supplier
- second copy- either to yard store man or to site
- third copy – retained for filing by the purchasing department
- fourth copy- may be sent to the account‟s office for checking invoices

Documentation in supply of materials

Advice note – this is sent by works or supplier to site stating date, method of
transport and description of goods dispatched. This will enable site supervisory
staff to make adequate preparation for unloading and storage
- Delivery note – this is the document that must be signed by the foreman when
he has unloaded the goods stated in the note and is satisfied with their
condition. Careful check must be made to ensure that goods are not only there
but are also in good order and are not damaged. Often goods arrive in
packaging cases or crates and it is not possible to examine the contents; if this
 happens, upon signing the delivery notes, the foreman should also write across
it (not examined). Two delivery notes will be supplied by the transport driver:
one for himself as a check to his employer that he has made the delivery
satisfactorily and one for site reference.
- Invoice- these are very similar to delivery notes much as they state the same
information, the only difference being that the price of the goods is now clearly
shown for payment. This document is sent to the head office where it is checked
against the delivery note which has been sent from the site. If they agree,
payment will be made.
- Requisition – this is a document used by the site to obtain sundry items from
the central stores on a day to day basis
- Materials record book- this is a complete record of all materials received on
site and must be filled in before delivery notes are sent to head office. Entries
must be made on the day of delivery. This document is also referred to as daily
return.
- Materials delivery board- often used on site to show clearly when deliveries
are due, general bulk phased deliveries, quite often simply a ruled blackboard
on which is chocked amount and date of delivery.
- Material transfer- this document is a company document for internal use when
materials are moved from one side to another for any reason. Its correct use
ensures that charges for materials can be made to the receiving project and
deducted from the site supplying the goods. In the accounts, the site will be
credited, the site receiving will be debited.
STORAGE OF MATERIALS
Timber
Much timber delivered to site is only partially seasoned. It should therefore be
stacked flat and self-crossed, i.e. each layer placed at right angles to the one
beneath. The timber should be kept off the ground and protected from the rain and
particularly strong rays of sunlight. A tarpaulin cover should be arranged so as to
be clear of the stack; it can be harmful if it stops air circulation. The timber should
always be stacked flat to prevent warping. Warped timber can be selected for
cutting into short lengths.

Cement
Cement in bags absorb moisture if not stored well in a dry, airtight place. Water
absorption leads to loss of strength. A good cement which still retains its maximum
strength is warm to the touch and contains no lumps of hardened powder. A lump
of cement should not be crushed into powder and used for concrete because it has
already lost its original strength.
Cement should therefore be stored well and the following methods should be
adopted
i) Store all bagged cement in a water-tight shed with a sound, dry floor. If
the floor is not dry as is the case on most sides, construct a floor raised on
bolds standing on building blocks so as to raise the cement bags above
the moist ground. In a large shed, cover the cement with plastic sheeting.
Make sure the roof of the shed does not leak.
ii) On small jobs, cement may be stored in the open. Ensure that the cement
is raised on timbers clear off the ground and covered in tarpaulin sheet
iii) Nowadays, large contractors benefit from the use of cement silos for bulk
storage of cement on site. The silos are portable and offer ease of
 handling. Silos are completely weather proof, wastage due to broken bags
is eliminated and pilfering, which has always been a major concern of
builders become impossible.

Sand and ballast

Stock piles of sand and ballast should be as large as possible and the bottom
500mm should not be used. The materials should not be dumped straight on the
ground. Laterite soil creates stains in the concrete which show in the finished work.
If a hard surface is not available, then a thin concrete slab should first be laid. The
sand and ballast should be separated by a barrier of stout planks or concrete block
work.
On large works, especially in hot sunlight or during the rainy season, it pays to
erect a large single-pitch open shed or roof cover the stock pile and the concrete
mixer. Hot materials make poor concrete. Apart from keeping the materials cool
and dry, a cover provide welcome shade for the concreting team.
Pipes
These can be divided into:
i) Soil/waste pipe/drainage pipes
ii) Service pipes

Soil/waste pipes
These are pipes which are used to drain used water from houses. Soil water is that
which carries human waste (urine& faeces) and waste water is the one which
carries used water from the kitchen and washing areas. The pipes are made from
different types of materials including;
a) Cast-iron
b) Clay
 c) Pvc
d) Pitch-fibre
e) Concrete etc.
NB/ It is only pvc drainage pipes which are commonly available in the market.
They are available in a number of sizes and it is good to store them in a rack
according to their sizes. This is important so as to be able to retrieve them easily.

Service pipes
These are basically pipes used to convey water to houses. They are chiefly
available in two categories:
i) Mild steel
ii) Pvc
It is good to store them in a rack raised above the ground and according to their
sizes

Sheet metal
These are either plain or corrugated and are chiefly used for roof work. They are
best stored in a rack for plain sheet and on an inclined surface for corrugated
sheets.
Glass
As in plain sheet, store in an inclined surface.
Small articles
Include boxes of tiles, screws, nails, clips etc. store under lock and key
Scaffold tubes and fittings
-Store as in pipes
- Reinforcements
-Store as in pipes but according to their sizes for ease of retrieval.
Control in material used
Wastage – a big problem in most building sites is the large amount of material that
due to varying circumstances become classed as waste. Basically this is the
problem of the site supervisory staff to control and whenever possible eliminate; it
requires a supervisor to be constantly on the lookout for loss.
A little success will be achieved if the operatives do not play their part and so it
should constantly be impressed upon them the importance and value of all
materials. How then can waste be reduced?
a) Ensure that materials are delivered as required so that site storage time is cut
to a minimum. This requires careful phasing of deliveries between site and
supplier.
b) Ensure that materials delivered are those specified for the job.
c) Issue just the right amount of materials with only a reasonable allowance for
wastage to workmen.
d) Ensure that workmen are not producing excessive amounts of (offcuts).
e) Allocate and prepare storage areas this can be done by marking on the site,
plan the exact layout of all materials storage areas; giving each a code
number or letter; and then marking this area out on site with pegs or similar
showing the equivalent code/letter
f) Make sure that when materials are stored they do not deteriorate
g) Collect waste, e.g. half bricks and use to prevent more cutting- a few by each
brick layers‟ spot will suffice
CONTROL
The prime function here is to ensure that materials are ordered in good time and
that, a very close watch is kept upon planned delivery dates. Schedules are required
here that quick reference can be made as to when and from whom deliveries are
required.
Materials in short supply or late delivery should be chased up immediately, with
possible alternative material or supplies being sought.
Control on site must be exercised in respect of waste, deterioration, pilfering and
misuse. Careful checks should be made to ensure correctness of orders and that
materials delivered can be properly stored and unnecessary handling avoided.
Standard quality of materials should be maintained through checking against
samples or specifications. Many materials used on site can be tested quite simply
without the use of expensive laboratory facilities.

Acceptable wastage
Although a form of waste can be considered detrimental, it is inevitable on site that
we cannot avoid them. Examples of wastages on site are;
a) Cement- loss during mixing and placing
b) Timber – loss when cutting to size
c) Paint – loss in part used tins
d) Floor tiles- loss in cutting and fitting
These can be termed acceptable wastage and allowance made in estimating and
purchasing. Some control is possible to ensure a minimum waste occurs, thus:
- Control deliveries to avoid accumulation
- Avoid double handling
- Control issue of materials to exact amount
- Mark out storage and stacking areas
 - Keep the site tidy so that discarded materials or items do not show up on
untidy site. Anything could be waste
- Protect materials against deterioration
- Organize collection and re-distribution of offcuts

Unacceptable wastage
Loss by pilfering or theft is waste, proper security is essential. Control is key factor
in prevention;
a) Keep small expensive items in lockable stores in charge of a store keeper
b) Keep records of delivery and stock
c) Keep records of issue and names of persons using materials
d) Maintain regular stock checks
e) Compounds and sheds kept locked
f) Check vehicles in and out
g) Control private car packing
h) Provide Flood lights and askaris at night
i) Come up with a method of controlling keys

General site security

Many items of building materials are stolen by outside persons and these reflects in
general overall site security. Also much materials and hand tools are lost to the
builder through pilfering by the operatives; this is easier to control than outside
theft by adopting the following procedures:
a) Items that are small for example door furniture should be issued by store men,
foreman or the like and record kept
b) Accurate stock control must be maintained with regular checks
c) Compounds and storage sheds should be kept locked after issue of materials
 d) Cars, wherever possible should be allocated space away from the construction
(loot) cannot be quickly hidden in car boots
e) Site supervisors must set an example by practicing what is preached.
Other measures to enhance security of materials;
Watchman- provide watchmen and guard dogs to patrol the site
Fencing and hoarding- either of them will do to restrict entries of unauthorized
persons/thieves
Site lighting- flood lighting will do to ward off thieves at night
Security alarms- these are essential to be used by watchmen whenever there is a
threat by thieves. They are used to convey message to backup e.g. security
companies.

TOPIC: LAW

Structure and jurisdiction of law

- Sources of laws of Kenya
In Kenya, the laws have been derived from the;
- Constitution
- Statutes
- Judge-made law
- Books
- Customary law
- Islamic law
- International treaties
 Classification of law courts in Kenya
There are 2 levels of courts;
- Superior courts (consists of supreme court, court of appeal and high court)
- Subordinate courts (resident magistrate courts, kadhi courts, court martials,
tribunals, district magistrate courts classes(1st ,2nd , 3rd )
Law of tort
Introduction;
The word tort has been derived from the latin tortious which means crooked
or twisted. In certain civil wrongs, It means, a tort is a civil wrong. Sir F.
Pollock has defined tort as “An act which causes harm to a determinate
person, whether intentionally or not, not being a breach of a duty arising out
of a personal relation or contract, and which is either centrally to law, or an
omission of a specific legal duty, or a violation of absolute right”.
Functions of the law of torts.
The primary function of the law of torts is to compensate persons injured by
the civil wrongs of others, by compelling the tort feasor to pay for the
damage occasioned by this tort. Besides this, there are certain other functions
and these include the following;
1) To determine rights between parties to a dispute.
A party to a dispute may being an action for a declaration of his rights
and once the court makes a declaration, the rights of the parties is
determined.
2) To prevent a continuance of repetition of harm
When the injury complained of is of a continuous nature or likely to be
repeated by the tortfeasor, the injured party may be granted an injunction
to prevent its continuous or repetition e.g. in cases of trespass to land.
 3) To protect certain rights recognized by the law.
There are certain rights which every individual is entitled to and which
are recognized by law of torts e.g. a person‟s reputation or rights to good
name is protected by the tort for negligence which imposes a duty of
care on every other person.
4) To restore property to its rightful owner
Where property is wrongfully taken away from its rightful owner or
otherwise at least with contrary to his rights, he may seek a restitution of
the property or its value hence the wrongful act amounts to the tort of
trespass to goods (or land)

NATURE OF TORTIOUS LIABILITY

Every person is under a duty to compensate for his wrongful acts which have
resulted in injury to another person. It is this duty to compensate that determines
his liability in tort. Generally, the plaintiff must prove that he has suffered harm
and that there has in consequence been a violation of his legal right. Some civil
wrongs are actionable even if no damage is suffered e.g. trespass to land. Whether
the plaintiff has any remedy in some cases of tort depends on the following two
principles of general application.
- Damnum sine injuria
Literally translated, this means “harm without legal injury.” It refers to a
circumstance where a person has suffered actual harm without any violation of
his legal right. A person aggrieved in this way has no legal remedy.
 - Injuria sine dumno
This refers to a situation where a person suffers a violation of his right
without any actual loss or damage sustained by him. This is especially so in
the case of torts which are actionable (i.e. without proof of any damage) e.g.
trespass to land, libel etc.

The fault principle.

Most torts are based on the fault principle, under this principle, it is
necessary to establish some fault on the part of the wrongdoer before he can
be made liable in tort. A person is said to be at fault where he fails to live up
to some ideal standard of conduct set by law. Three elements are relevant in
the determination of fault and any one of them may be relied upon;
- Intention
Where a person does a wrongful act desiring that its consequences should
follow, he is said to have intended it and to that extent there is some amount
of fault on his part.
Recklessness
An act is said to be done recklessly where it is done without caring whatever
its consequences might be. Recklessness as such constitutes fault on the part
of the wrong doer.
Negligence
A person is also at fault where he does a wrongful act negligently i.e. where the
circumstances are such that he ought to have foreseen the consequences of his acts
and avoided it altogether. (here we are concerned with negligence as an element of
fault)
DISTINCTION BETWEEN TORT, CRIME AND BREACH OF
CONTRACT.
- Tort and crime
A crime is a breach of public rights whereas a tort is a civil wrong. The main
object of criminal proceeding is the punishment to the criminal persons but the
object of proceedings in tort is not punishment. Its main aim is the compensation
to the plaintiff for the loss or injury caused by the defendant i.e. damages. Some
cases may be actionable under criminal law and law of torts e.g. if “A” assaults
“B” there is both a crime and a tort.
- Tort and breach of contract
In contract, the duties are fixed by the parties to a contract. But in tort, the
duties are fixed by law (common law or statute). In some cases, a breach of
contract and tort may take place simultaneously. We assume “X” employs a
private surgeon to operate his wife. If “Y” fails to perform his duty properly
then “X” has a cause of action against “Y” for breach of the contracted duty
of care and the tort of negligence.

GENERAL DEFENCE IN TORT.

A person sued in tort has at his disposal certain defences, some of which are
restricted to particular torts (eg. Contributory negligence is a defence only to
the tort of negligence) while others are of general nature. The following
general defences are available to a defendant in every action for tort where
they are appropriate.
- Violenti non fit injuria
Violenti non fit injuria is also known as the voluntary assumption of risk.
Where a defendant pleads this defence, he is in effect saying that the plaintiff
consented to the act which is now being complained of. The plaintiff‟s
consent maybe either expressed or implied from his conduct. Before “violenti
can be upheld as a defence, it must be proved that the plaintiff was at the
material time aware of the nature and extent of the risk involved, for a
person cannot consent to what is not within his knowledge.
Violenti non fit injuria means no injury can be done to a willing person. For
example, a footballer cannot complain for being injured while in the game.
- Inevitable accident
An inevitable accident is one which cannot be prevented by the exercise of
ordinary care, caution and skill. It therefore occurs only where there is no
negligence on the part of the person whose act is complained against. Since
the law of tort is generally based on the fault principle and since an inevitable
accident does not impose fault on the part of the alleged wrongdoer, it
follows that an injury which has resulted from an inevitable accident is not
actionable in tort.
- Act of God
An act of God is also an inevitable accident caused by national forces
unconnected with human beings e.g. storm, flood, earthquake, thunder etc. in
this case also any resultant injury is not attributable to anyone‟s fault and is
therefore not actionable in tort.
- Necessity
A person may sometimes find himself in a position whereby he is forced to
interfere with rights of another person so as to prevent harm to himself or his
property. For instance, if he is about to be shot he may feel constrained to use
the person next to him as a shield against the gunmen or being hungry he
may steal food in order to survive or being about to fall into a pit he may grab
another person for support, in the process taking the latter with him into the
pit. In all these cases he may seek to justify his action as a matter of
necessity.
- Self defence
It is sometimes said that a person who is attacked does not owe his attacker a
duty to escape. Everyone whose person is threatened is entitled to defend
himself and he may do so by using force. Force, however, may only be used
where necessary, otherwise the person claiming to defend himself might find
himself might liable to his alleged attacker. Thus, where a person is assaulted
i.e. threatened with immediate harm, but no harm is actually inflicted on him,
he should not himself use force in an effort to defend himself. Where force
has actually being applied(i.e. where there has been a battery the person
attacked has a right to defend himself in the same way i.e. by applying force.
But the force used in self defence must be reasonable and proportionate to
that used in attacking him, otherwise if it is unreasonable or excessive in the
with a fist, pocket knife or small stick may respectively defend himself with a
fist, pocket knife or a small stick may respectively defend himself with a fist,
pocket knife or small stick or he may even use a lesser force.
 Mistake
The general rule is that a mistake is no defence in tort, whether it is a mistake
of law or of fact. Mistake of fact may be relevant as a defence to any tort in
exceptional cases. This could arise in cases of malicious prosecution, false
imprisonment and deceit. For example, where a police officer arrests a person
about to commit a crime but the person arrested is innocent then the police
officer is not liable. In this case, the mistake is reasonable ground for the
defence in the tort. Mistake cannot be a defence in actions of conversion or
defamation.

Statutory authority
Where a statute authorizes a particular act, a person who does it is not liable in tort.
The authorization of an act is also an authorization of its natural consequences. But
the person acting must do so in good faith and within the scope of the powers
conferred by the statute, or else it will not be protected. Where the person acting
exceeds the powers conferred by the statute, the compensation payable by him to
the injured party cannot be more than what is provided by the statute itself. The
statute may stipulate a definite sum, or it may give powers to certain officials to
assess the loss suffered by the injured party. Thus, where a person has acted in
pursuance of the provisions of a statute, he may plead statutory authority in this
defence and where statute doesn‟t protect him from liability (e.g. where he has
exceeded the powers) and the injured party claims by way of compensation a sum
in excess of that stipulated by the statute, he may plead the statute in mitigation.
This is especially so in what are known as statutory torts.
Exemption clauses (or disclaimers)
As already seen, torts are common law wrongs based on certain duties imposed by
law. This is different from contract where the duties imposed on the parties are
created by the parties themselves. For this reason a strict construction is imposed
by common law on any exemption clause whose support is to displace a duty of
case created by law. Thus, under the “contra proferentem rule” an exemption
clause which does not expressly cover negligence can not protect the party seeking
to rely on it an action based on negligence. But where the exemption clause is
phrased in such a way that a duty imposed by law is expressly displaced, then the
exemption clause may be relied upon as a defence to an action brought in tort.

Trespass
There are 3 types of trespass;
- Trespass to land
- Trespass to the persons
- Trespass to goods
Trespass is actionable per i.e. without proof of any damage- once it is established
that a trespass has been committed, the plaintiff is entitled to legal redress, whether
or not he has suffered damage, the actual damage suffered (if any) merely gauges
the extent of the redress entitled to. Trespass, as such is a classic damno”. It is in
this fact that distinguishes it from negligence which is actionable only upon proof
of damage.
Trespass to land
Trespass to land is committed where the plaintiff‟s possession of land is
wrongfully interfered with. It is the fact of possession rather than ownership that
is important as such the plaintiff may be anyone in possession of the land,
whether he is the owner or tenant. Wrongful interference with possession in
relation to the plaintiff‟s land may take the form of wrongfully remaining on it,
or wrongfully placing or projecting any material object on it.

Trespass by wrongfully entry

This is committed where there is physical contact with the plaintiff‟s land,
however slight. It includes acts like encroaching on the land or walking through
it without authority, sitting on the plaintiff‟s fence or putting a hand through the
window etc. also an abuse of a right of entry may constitute a trespass e.g. a
person authorized to enter a premise for the purpose of repairing them becomes a
trespasser when he picks and eats fruits on the premises without authority.

Trespass by remaining on land

This type of trespass is commited by a person who, having been originally
authorized to enter upon a land is subsequently asked to leave, such a person
becomes a trespasser when he fails to leave the land within a reasonable time.
 Trespass by placing things on land
Trespass by placing things on land is committed by him who places any material
thing or noxious substance to come into contact with (or cross the boundary of)
the plaintiff‟s land. This type of trespass is similar to nuisance but the two are
different in the following respects;
- In trespass the injury is direct since it affects the plaintiff‟s possession but in
nuisance the injury is indirect because it is the plaintiff‟s comfort and
convenience in the use and enjoyment of his land that is affected, rather than
its possession.
- Another distinction arising from the explanation given above is that while
trespass relates to possession of land, nuisance relates to the use or enjoyment
of land: in trespass the plaintiff‟s possession is at stake while in nuisance it is
the use and enjoyment of the land that is at stake.
- Trespass is actionable perse whereas nuisance just like negligence is only
actionable upon proof of damage.
Is trespass a crime ?
Trespass to land is normally a civil wrong, but it may give rise to criminal
proceedings in some cases. The trespass act (cap.294) states that a trespasser can
be prosecuted criminally if he enters on somebody‟s land with an intent to steal
goods or commit any other offence. Otherwise a trespass to land is a tort and it is
actionable perse i.e. without proof of special damage.
Defences
- Prescription; land acquired by possession is also said to have been acquired
by prescription. The new owner may plead title by prescription a defence to
an action brought by the previous owner to recover the land. A defendant
may also plead prescription as by proving a right of common grazing or a
right of way over the plaintiff‟s land.
 a) Act of necessity- the necessity may be pleaded as a defence to an action of
trespass to land e.g. entry to put out fire for public safety.
b) Statutory authority- where the authority is conferred by law, whether by
statute or court order, this is also an available defence e.g. the authority of
a court broker.
c) Entry by licence- an entry authorized or licensed by plaintiff is not
actionable in trespass unless the authority or licence given is abused.

Remedies
- Damages ; the plaintiff may recover monetary compensation from the
defendant the extent of which depends on the effect of the defendant‟s act on
the value of the land in question.
- Ejection ; we saw earlier on that a person is entitled to use reasonable force to
defend his property. Thus, where a person wrongfully enters or remains on
another‟s land, he may be ejected using unreasonable force may entail
liability for assault. An ejection may also be based on a court order (an
eviction order)
- Action for recovery of land- the plaintiff may bring an action to recover his
land from the defendant where there has been a wrongful dispossession. It is
common for such action to be coupled with the above two remedies.
- Injunction – in addition to the above remedies an injunction may be obtained
to ward off a threatened trespass or to prevent the continuous of an existing
one.
- Distress damage feasant- in the case of trespass by placing things on land (or
in the case of chattel trespass the plaintiff has a right to detain the defendant‟s
chattel or animal which is the cause of the trespass in question.
 Trespass to goods (chatttels)
A trespass to goods is committed by a person who directly and intentionally
interferes with goods in the possession of another without lawful
justification. The plaintiff may be a person either in possession or entitled to
immediate possession of goods. The wrongful interference may be
constituted by removing the goods from one place to another (e.g. wearing
the plaintiff‟s shirt) or destroying or damaging the goods (e.g. tearing the
plaintiff‟s shirt)
Conversion
Like trespass to goods, conversion is based on possession and is actionable
only if the defendant‟s act was intentional but not where the defendant was
merely negligent. Conversion is constituted by dealing with goods in a
manner that is inconsistent with the rights of the person in possession of the
goods or entitled to their immediate possession, e.g. where A intentionally
sells B‟s goods to C without any authority from B or where A intentionally
delivers B‟s goods to some other person without any justification at all.
Every person is presumed to intend the natural and probable consequences of
his intentional acts, and it follows from this that where a person used the
property of another in such a way as to risk its confiscation he is liable for its
conversion.
- A borrows a car from B
- A uses the car to smuggle contraband watches
- He is arrested and the car confiscated
- A is liable for conversion of the car because he had intentionally acted in a
manner that was most likely to lead to the confiscation.
 NEGLIGENCE
The omission to do something which ordinarily regulate the conduct of
human affairs, would do, or doing something which a prudent and reasonable
man would not do.
As a tort, negligence consists of the following 3 elements;
- The duty of care
- The breach of the duty of care
- Injury to the plaintiff
These 3 elements must all be established before the defendant can be made
liable.
The duty of care
This is the duty to take reasonable care to avoid acts or omissions reasonably
foreseeable as likely to cause injury to your neighbor. This raises the
question; who is my neighbor? A neighbor in law is a person who is closely
and directly affected by your act that you ought reasonably to have him in
your contemplation. In the case of a driver, every other road user (including
his own passenger and also a pedestrian) is his neighbor in law, the driver
owes all these others a duty of care, the duty to have regard to them and to
drive or use his vehicle safety, e.t.c
Breach of the duty
The duty of care, as we have seen answers the question whether the defendant was
under any legal obligation towards the plaintiff. The standard of care, on the other
hand, is a yard stick by which the defendant‟s conduct is measured. It answers the
question whether the defendant did what a reasonable man would have done in the
circumstances. Thus, the standard of care required of every person is that of the
reasonable man.
- Who is a reasonable man?
- Ordinary person in a city bus
- Qualified driver an advocate or doctor

Injury to the plaintiff

Proof of the existence of a duty of care on the part of the defendant, is not
enough to establish liability in negligence. The plaintiff must go further and
prove that he has suffered damage, or injury as a result of the defendant‟s
breach of his duty of care. But even then, the plaintiff can only recover
damages for injuries suffered if a reasonable man in the defendant‟s position
ought to have foreseen that his act or omission would result in injury to the
plaintiff. The test applied is therefore that of foreseeability. An injury that
was not reasonably foreseeable is said to be too remote and cannot be
recovered by the plaintiff.
Contributory negligence
Contributory negligence means any act or conduct of the party injured which
may have contributed to the injuries he received. Previously, where the
plaintiff party contributed to his own injury in addition to the defendant‟s act,
the plaintiff thereby lost his right of action and could not sue the defendant.
Presently, the law provides where any person suffers damages as the result
partly of his own fault of any other person or persons a claim in respect of
that damages shall not be defeated by reason of the fault of the person
suffering the damage, but the damages recoverable in respect thereof shall be
reduced to such extent as the court thinks just and equitable having regard to
the claims share in the responsibility for the damages.
 Estates in land
The term estate is used to describe the nature of a person‟s ownership interest
in real property. Estates in land can be classified as being either freehold
estates or non-freehold estates. Non-freehold estates or leasehold estates are
those held by persons who lease real property. Freehold estates are ownership
interests in real property that are uncertain duration. The most common types
of freehold estates are fee simple absolute and life estates.
Fee simple absolute
A person who owns real property in fee simple absolute has the right to
possess and use the property for an unlimited period of time, subject only to
governmental regulations or private restrictions.

Land law
Co-ownership of real property
Co-ownership of real property exists when two or more persons share the
same estate (the same type of ownership interest) in the same property. The
co-owners do not have separate rights to any portion of the real property,
each has a share in the whole property.
Types of co-ownership of real property
- Tenancy in common- people who own property under this arrangement have
undivided interest in the property and equal rights to possess the property.
When the property is transferred to two or more people without a
specification about their form of co-ownership, there is a presumption that
they will take the property as tenants in common do not have a two thirds
ownership interest in the property and the other tenant could have a one third
interest. Each tenant in common has the right to possess and use the
property. However, she cannot exclude the other tenants in common from
also possessing and using the property. If the property is rented or otherwise
produce income, each tenant has the right to share income in proportion to
her share of ownership. Similarly, each must pay her proportionate share of
the cost of taxes and necessary repairs. A tenant in common can dispose of
her interests in the property during life and at death. When the tenant dies,
her share passes to her heirs or if she has made a will to the person or persons
specified in her will.
Tenants in common can sever the co-tenancy by agreeing to divide up the
property or if they are unable to agree, by petitioning a court for partitioning
of the property. The court will physically divide the property if court will
physically divide the property if that is feasible , so that each tenant will have
proportionate share. If physical division is not appropriate, the court will
order the property sold and divide the proceeds.
Joint tenancy
A joint tenancy is created when equal interests in real property are conveyed
to two or more people by a single document that specifies that they are to
own the property as joint tenants. The rights of use, possession, contribution
and partition are the same for joint tenancy in common tenancy is that it gives
the owner the right of survivorship. This means that upon the death of one of
the joint tenants. This means that upon the death of one of the joint tenant,
that person‟s interest automatically passes to the surviving joint tenant(s). this
feature makes it easy for a person to transfer property at death without
making a will.
A joint tenancy may mortgage, sell or give away his interest in the property
during his life time. For that reason, a joint tenant‟s interest in property is
subject to the claims of his creditors. When a joint tenant transfers his
interest, the joint tenancy is served and a tenancy in common is created as to
 the share affected by the transaction. When a joint tenant sells his interest to a
third person, the third person becomes a tenant in common with the
remaining joint tenants.
Community property
This type of co-ownership is based on the theory that marriage is a
partnership in which each spouse contributes to the property base of the
family. Property that is acquired during the marriage through a spouse‟s
industry or efforts is classified as community property, in which each spouse
has an equal interest. This is love regardless of who produced or earned the
property. Since each spouse has an equal share in the community property
neither can convey the property without the others joining the transaction.
Not all property owned by a married person is community property, however
property that a spouse owned before marriage or acquired during marriage by
gift or inheritance is separate property. Property exchanged for separate
property also remains separately owned.
Tenancy in partnership
When a partner takes title to property in the name of the partnership its form
of co-ownership is called tenancy in partnership.

Types of leases
A lease is a contract by which an owner of property conveys to another the right to
possess the leased premises exclusively for a period of time. The interest conveyed
to the tenant (lessee) is a leasehold estate. There are four different kinds of leases,
each of which differs in the duration of the tenant‟s right to posses the property and
in the manner in which that right terminates.
- Tenancy for a term- results when the landlord and tenant agree on a specific
duration of the lease and fix the date on which the tenancy will terminate.
 The tenant‟s right to possess the property ends on the date agreed on without
any further notice, unless the lease contains a provision that permits
extension.
- Periodic tenancy- is created when the parties agree that rent will be paid in
successive intervals until notice to terminate is given, but do not agree on a
specific duration of the lease. If the tenant pays yearly, the tenancy is from
year to year. To terminate a periodic tenancy, either party must give advance
notice to the other. The precise amount of notice required is defined by the
law (rent tribunal)
- Tenancy at will; occurs when property is leased for an indefinite period of
time and is terminable at the will of either party. Generally, tenancies at will
involve situations in which the tenant does not pay rent or does not pay it in
any certain intervals. Although the tenancy at will is terminable by either
party at will. Most authorities require that the landlord given advance notice
to the tenant before terminating the tenancy.
- Tenancy in sufferance; this tenancy occurs when a tenant remains in
possession of the property after the expiration of a lease. The landlord has the
option of treating the tenant as a trespasser and bringing an action to eject
him as a tenant and collecting rent from him. Until the landlord makes his
election, the tenant is a tenant at sufferance.
MORTGAGES AND CHARGES
An owner of property may use it as a security for his indebtedness to some other
person. The mortgage is the name given to the transaction by which a borrower
(mortgager) obtains a loan from another person (mortgagee) on the security of his
property. A charge is a legal interest which entitles the mortgagee to sell the
mortgaged property to recover his debt in case the mortgage fails to repay the
borrowed money on due date.
Types of mortgage
There are 2 main types of mortgage. These are legal mortgages and equitable
mortgages.
Legal mortgages
In Kenya, the legal mortgage may be created under section 58 of the indian transfer
of property act 1882. According to this act, the following four classes of legal
mortgages may be created;
- Simple mortgages
- Usufructuary mortgages
- Mortgages by conditional sale
- English mortgages
In a simple mortgage, the borrower binds himself to repay the loan and in
case of default, the lender can use the security to recover his money.
In case of a usufructuary mortgage, the lender takes possession of the
mortgaged property and repays himself either wholly or partially from the
rents, rates and proceeds from the land.
A mortgage by conditional sale is that type of arrangement where the
borrower sells the property to the lender subject to the following conditions;
- On the default of payment the sale shall become absolute or
- On payment of the mortgage debt the sale becomes void
- On payment of the debt, the property will be re-transferred to the borrower.
An English mortgage is that type of mortgage when the mortgage binds
himself to repay the mortgage money on a certain date and transfers the
mortgaged property absolutely to the lender, subject to this provision that he
will re-transfer it to the borrower upon repayment of the mortgage money.
NB/ The English mortgages are more valuable as compared to other types of
legal mortgages.

EQUITABLE MORTGAGES
These mortgages are created in accordance with the provisions of the
equitable mortgages act (cap 291) together with the relevant sections of the
government land act and the land titles act. In the case of an equitable
mortgage, the mortgager deposits with the lender (mortgagee) the title deed
of the property as security for the loan. When the loan has been repaid, the
lender returns the title deed to the borrower.
Rights of mortgagees in the two types of mortgages.
a) Foreclosure- under this, the mortgage may obtain a court order
extinguishing the mortgager‟s equitable right to redeem the property. This
can be obtained if the mortgagor fails to pay the sum due for an
unreasonable time. This order is made in two stages;
- The borrower is given time within which to repay the debt so as to redeem
his property.
- If the borrower is unable to repay the mortgage money as ordered then
absolute order of closure is made. In this case, the full estate is vested in the
name of mortgagee. After this order, the card can be offered by the
mortgagee for sale
 Sale
This is an alternative remedy to that of foreclosure. In this case, a mortgagee
may sell the mortgaged property upon an order of court. A sale of the
property may also be effected without an order of court, but only when the
mortgagee expressly gives powers to the mortgagee to sell without applying
to court. The sale must take place by public auction.
The proceeds of sale must be applied in the following orders;
- In payment of all expenses property incurred or incidental to the sale.
- In payment of all sums due to the mortgagee and to pay any other
encumbrances
- In payment in the order of priority of any encumbrancers subsequent to the
mortgagee and
- The residue if any, in payment of the mortgagor.

Suit on personal covenant

In every mortgage, the mortgagor covenants among other things, to repay the
principal sum plus interest on a definite date. This is personal covenant which
he enters into with the mortgagee. Once the date of repayment has passed,
the mortgagee may sue on their personal covenant.
Under the limitation of actions act (cap 22) a suit to recover the principal sum
will be barred if instituted after 12 years from the date of the accrual of the
right to receive it. Only six years interest is recoverable under the act.

Appointment of a receiver
The appointment of a receiver is one if the ways in which the mortgagee may
realize his security. Such appointment may be made by the mortgagee under
an express power provided in the mortgage in which case it must be done in
 writing, or it may be made by the court upon an application by the
mortgagee. A receiver is appointed by the lender in writing, but he is deemed
to be the agent of the borrower. The receiver is responsible to collect rents,
profits and income relating to the property. The money received must be
applied in the following orders;
- In discharge of any prior encumbrance free from which the property was sold
- In paying the receiver‟s own commission insurance premiums and the cost of
repairs (if any)
- In payment of interest accruing in respect of the principal due including the
mortgage.
- In discharge of the mortgage debt if so directed by the lender.

Rights to take possession

A mortgage may also realize his security by entering into possession of the
mortgaged property. Where the mortgagee chooses to realize his security by taking
possession of the mortgaged property, he becomes a mortgagee in possession. In
this case, the mortgagee is responsible for;
- Any failure to be diligent in realizing any sum due to him from the
mortgaged property.
- An occupation rent if he occupies all or part of the mortgaged land at the fair
market value.
- An unreasonable injury to or neglect of the mortgaged land cause by his
willful or negligent act or omission.
- Repairs and improvements to protect the value of mortgaged land. In this
case, he is allowed to charge reasonable cost of repairs and improvements
made.
 Rights of the mortgagor
The main right of the mortgagor is his right to redeem the mortgaged
property on payment of the principal sum borrowed, plus interest. At
common law, if a borrower didn‟t repay the mortgage debt on due date (i.e.
legal date of redemption) his right to redeem the mortgaged property was
extinguished. But the equity of redemption was allowed to the mortgagor.
The term “equitable right of redemption” was based on the following two
equitable principles;
- Once a mortgage always a mortgage.
- Equity looks at the intent rather than the form
According to the principle of “equitable right of redemption” the mortgagor
has the right to repay the debt plus interest even after the date of redemption.
Equity treats the right of redemption with special care. Any term in a
mortgage deed which greatly benefits the mortgagee at the expense of the
mortgagor should be viewed carefully. The right of redemption exists as long
as an order of foreclosure has not been issued by court.
In addition to the “equitable right of redemption” the mortgagor has the
following rights;
- The appointment of a receiver
- The statutory power of sale of land
- The action in the personal covenant to repay the money rent
- The improvements to the mortgaged property
- The payment of public charges in respect of the mortgaged property.
 TOPIC: HUMAN RESOURCE MANAGEMENT
LABOUR RELATIONS
Specific objectives
At the end of this topic, the trainee should be able to;
a) Explain the role of trade unions in the construction industry
b) Explain the importance of industrial training
c) Explain the regulations governing employment in the construction industry
d) Explain the importance of factories act and building code regulations with
regard to the construction industry.

Role of trade unions in construction industry

- Definition of trade unions
- Need for trade unions
- Function of trade unions social function, industrial function.
- Advantages and disadvantages of trade unions
- Causes of industrial disputes
- Kenya building construction and allied workers unions
- Settlement of industrial disputes role of Kenya industrial disputes, ministry of
labour, C.O.T.U
Industrial training
i. Need for training
ii. Apprenticeship
iii. In-house training (on job) D.I.T Training programmes
iv. Training institutes
v. National polytechnics
Regulations governing employment in the construction industry
- Contract of employment
- Redundancy
- Duties of employees
- Duties of employers

Factories act and building code

- Health provision
- Welfare
- Safety
- Notification of accidents and industrial diseases

Definition of a trade union

Is an organized association of workers in a trade, group of trades or profession
formed to protect and further their rights and interest.

Need for trade union

Workers join trade unions to achieve certain objectives that they may not be able to
achieve in their person capacity. Trade unions are necessary to ensure job security
and right pay for members: One of the basic needs for employees is the security for
service.

Other attributes of trade unions;

- Bargain for wages, benefits and work rules.
- Act as a bridge between its members and employer so that negotiations could be
done early enough to avert strikes/crisis.
- Set standards of work for its members thereby adhering to professional ethics.
- Discipline errant members who perform their duties against the laid down rules
and ethics.
- Organize educational seminars for its members to enlighten them on the current
trends in the profession.
- Seek industrial redress if an agreement between it and the employer is not
honored or if a member is wrongly dismissed.

Advantages of trade unions

Workers join a trade union because they believe that a union can;
- Negotiate better pay
- Negotiate better working conditions
- Have more holidays
- Have improved health and safety
- Provide training for new skills.

Disadvantages of trade unions

- Fees and dues- the financial cost of union membership include dues and in
many cases fees for joining.
- Loss of freedom- if u belong to a union, you lose the ability to negotiate pay or
benefits for yourself.
- Sometimes they are unrealistic in their demands. Unions may be used to cause
misunderstanding against workers.
- Unions may be used to cause misunderstanding between workers and their
bosses.
- May be used by bad elements to cause industrial strive with the aim of bringing
down the government of the day.
Causes of industrial dispute
- Low pay or wage demands
- Bad working conditions i.e. unsafe working places, exposure to health hazards
etc.
- Poor communication between managers and workers- management demand too
much from workers.
- Lack of working incentives
- Job security- uncertainty in the assurance of job continuity.
- Political interference- bad political elements influence trade unions to engage in
national wide strikes for the purpose of bringing down the government of the
day.
- Unfair labour practices
- Union rivalry

Kenya building construction and allied workers union

This is the labour union that caters for the construction industry in Kenya.
Membership is drawn from junior members eg. Craftsmen, clerks, operatives etc.
NB/ Most construction companies employ workers on casual basis and this has
contributed to low enrollment in this union.

Role of the Kenya industrial disputes court

Its roles are as follows;
- Settles dispute between employees and employers
- Better pay
- Good working conditions
- Wrong dismissals
Ministry of labour
- Ensure that workers get the pay they deserve
- Ensure that safety is guaranteed in working places
- Ensure that workers remittances are forwarded to respective agencies
- Ensures compensations to workers in case of injuries are honoured.
- Restricts employment of vulnerable people e.g. children, people of unsound
mind , etc.

Central organization of trade unions ( C.O.T.U)

The central organizations of trade unions is a national trade union centre in kenya.
It was founded in 1965 upon the dissolution of the Kenya federation of labour and
the African workers‟ congress. It currently closely liaises with non-governmental
organizations of East Africa trade unions.

Industrial training
Need of training arises due to improvement in technology, need for getting better
performance or as part of professional development. Benefits of training are
intangible and investing in training benefits both organizations and employees for a
long period. Training enhances a workers‟ level of skill.

Apprenticeship
It is a job with training, been an apprentice means that you have a job that includes
gaining recognized qualifications and essential skills whilst you are working and
earning a wage.
In-house training
This kind of training is offered by national industrial training authority.
Training of employees may also be offered in tertiary institutions e.g. training
institutes, national polytechnics

Assignment
i) List at least 5 training institutions and 5 national polytechnics.
Regulations governing employment in the construction industry

Contract of employment – terms and conditions

A contract of employment is a contract of service (s). as per the employment act,
such contracts may be oral or in writing. The contract is further an agreement
whether expressed or by implication to employ or to serve an employee for a
period of time and it includes contract of apprenticeship. Employment act further
defines a contract of employment so as to exclude foreign contract of employment.
It is accepted that parties to the contract of employment are unlikely to spell out all
the terms which will cover every eventuality. The law adds clear agreement on
terms which the parties may be taken to intend to be legally binding. At this time,
there should be some consideration advancement by each party to the contract and
the promise to work in return for the promise to pay wages/salaries.

- A contract of service for a period of six months or for a period of working days
which amounts in the aggregate to the equivalent of six months or more shall be
in writing.
- A contract of service for the performance of any specified work which could
not reasonably be expected to be completed within a period or a total of
working days in aggregate amounting to six months shall be in writing.
NB/ It is the employers‟ responsibility to draw up a reasonable contract of
employment. Employee signifies his/her consent to the contract by either:
a) Signing his/her name to the written contract
Or
b) Imprinting their own impressions of thumb or any one of his fingers.

These significations of consent by employee must be done in the presence of other

person apart from employer to avert undue influence on the employee by the
employer.

The minister may prescribe particulars to be contained in all written contracts of

service. If any such particulars is omitted from any contract, it shall never the less
be deemed to have been included and form part of the contract.
The law also makes special provision to the employment of women, children and
young persons.
- A child is defined as a male or female under 15 years of age, a young person is
defined as an individual male/female who has attained the age of 16 years but
under 18 years of age.
- A woman is defined as a female of 18 years and above.
NB/ a) No person shall employ a child, whether gainful or otherwise in an
industrial undertaking viz mines, quarries, factories, constructional work, rails,
roads repair work etc. but this excludes a child employed in apprenticeship, so long
as the deed is lawfully entered under the industrial training act.

b. women and young persons

the law prohibits their employment in an industrial undertaking between the hours
of 6:30pm to 6:30am
Exemptions
- Emergences
- Those employed in responsible positions (managerial) or technical nature or
those employed in health or welfare services.

Redundancy
Where employee is to be terminated employment on grounds of redundancy, union
of which employee is a member or labour officer shall be informed of the reason
for or extent of the extended redundancy.
No employee shall be placed at some disadvantage for being or not being a
member of a union. Any leave due to a member being declared redundant shall be
paid in cash. An employee is entitled to one month of notice in lieu of redundancy.
An employee declared redundantly shall be entitled to severance pay at rate of 10
days for each completed year of service.

Rates and obligation of parties to a contract.

Employer’s duty
He is under an obligation to;
- Pay the agreed wage/salary
- Take a reasonable care to provide a safe system of work
- Reimburse the servant for expenses in the proper performance of his/her orders.
- Avoid orders to do unlawful acts
- Not to provide work so long as he does not pay the agreed wage
Employees duty
- To obey reasonable lawful orders
- Exercise reasonable care and such skill as he should possess
- Act in good faith and fidelity
- There are many aspect of this role:

An act amounting to breach of this obligation would include;

- Disclosing confidential information
- Taking a secret profit
Duty of cooperation:
An employee may be obliged to accept considerable responsibilities in his own
employment term in order to accomplish improved business methods that promote
success of entrepreneurship e.g. an employee may be asked to acquire basic skills
in retrieving information or feeding information to computers

Factories act and building code

The health and safety work of 1974 lays down wide range duties on employers.
Employers must protect the health, safety and welfare at work of all their
employees as well as others in their premises, include temporary/casual workers,
the self-employed, clients, visitors and the general public.
Generally the factories act and building code dwells on the following;
- Health provisions
- Welfare
- Safety
- Notification of accidents and industrial diseases
Assignment Briefly explain how the above mentioned items in factory and building
code can be achieved
TOPIC 13: FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING
Specific objectives;
At the end of this topic the trainee should be able to;
g) Explain concepts of accounting
h) Describe types of business organizations
i) Identify book of accounts
j) Describe the final account
k) Describe sources of business capital
l) Explain the methods of determining depreciation
Concept of accounting
- Accounting records
- Annual accounts
- Prepayments
- Accrued expenses
- Stocks
- Working progress
- Money measurement concept
- Business entity concept
- Going concern concept
- Cost concept
- Realization concept
- Accrued concept
- Double entry concept
Types of business organizations
- Sole traders
- Partnership
- Private limited companies
 Book of accounts
 Ledger
- Sales
- Purchase
- Nominal
- Cashbook
- Sales day book
- Purchase day book
- Return day book
- Journal
Final account
- Trading, profit and loss account
- Balance sheet – assets , liabilities
Business capital
- Capital terminologies
- Authorized/ nominal/ registered capital
- Issued capital
- Subscribed capital
- Called up capital
- Paid up capital
- Uncalled capital
Sources of capital
- Shares and debentures
- Cumulative preference shares
- Preference shares
- Participation preference shares
- Redeemable preference shares
- Ordinary shares
- Preferred ordinary shares
- Deferred/ confounder shares
Methods of depreciation
- Straight line
- Double the rate
- Declining balance
- Approximate diminishing
- Sum of number of years
Concept of accounting; Accounting or accountancy is the measurement,
processing, and communication of financial and non-financial information about
economic entities such as business or corporations.
Financial accounting is the process of identifying, recording, classifying,
summarizing and reporting all the transactions in a business.
Objectives of accounting
- To attain the profit or loss of a business. It helps in identifying the business
profit or losses for the purpose of decision making.
- To ascertain the financial position of a business. This identifies the total assets,
liabilities and capital in a business.
- To keep systematic records. Accounting involves book keeping which records
every business transaction.
- To ascertain the tax liability. It identifies the amount of tax to be paid by the
business to the government
- Providing financial controls. This is the process of proper planning and
budgeting which is done through the accounting process
- Facilitates decision making. The owners of the business are able to make
financial decisions out of the accounting reports.
Qualities of a good accounting information
1. Relevance ; the information should satisfy the needs of the users without
misstatement or omission
2. Reliability ; the information is reliable if it is true, complete and properly
presented
3. Understandable ; the information should be easy to understand and translate
towards the users
4. Comparable; the information is used to compare performance in different
years. This helps in trend analysis
5. Accuracy ; it should be free from errors and any misstatement is enable
accurate decisions.

Terms used in financial statement

1. Income statement/ trading profit & loss account
This is a statement prepared to show the business profit/loss for a
given trading period. It records the business revenue and the trading
expenses.
- Revenue – these are the amounts generated from the business activities or other
business income sources.
- Expenses – This is the expenditure incurred in the trading activities of the
business.
2. Balance sheet ( statement of financial position)
It is a statement that shows the financial position of a business as at the end
of a given period.
It records assets, liabilities and capital.
- Assets – These are the business resources obtained by the business for the
purpose of generating revenue for the business.
Assets are classified into two;
a) Non- current assets ; they are assets to be used in a business for a period
more than a year. They will therefore support revenue generation for a
long period of time. e.g. property and equipment, land and building,
furniture and fittings etc
b) Current assets; these are assets which are used in generating revenue in a
period less than one year. E.g. stock, debtors, cash in hand, cash at bank
etc.
Liabilities – this is the amount borrowed by the business for the purpose of
trade/business expansion.
They are classified into two;
a) Long term liabilities; they are liabilities with a repayment period of more
than one year. Eg. Long term loans, mortgage or a debenture.
b) Short term liabilities; they are liabilities with a repayment period of less than
one year. e.g. creditors, bank overdraft etc.
1. Capital
This is the shareholder‟s investment in the business, it is the amount of
ownership to a shareholder in a business.
The capital is used in the acquisition of assets.
2. Cash flow statement
This is the statement that is prepared to show the cash inflow, cash outflow and
cash equivalent in a business.
3. Retained earnings statement
They are profits that remain in the business after the payment of tax and
shareholder business. They are used to expand the business or to acquire more
assets.
Accounting equation
This is an equation that shows the financial position of a business. it is presented
through a balance sheet. It therefore has the assets, liabilities and capital.
A= C+L
ASSETS= CAPITAL + LIABILITIES
BALANCE SHEET FORMAT
BALANCE SHEET FORMAT
ABC Co. Ltd
Statement of financial position
As at 31/12/xxxx
Non-current assets shs shs
shs
Land and building
xxx
Plant and equipment
xxx
Motor vehicle
xxx
Furniture and fittings
xxx

Xxx
Current assets
Stock xxx
Debtors xxx
Cash in hand xxx
Cash at bank xxx

Xxx
Current liabilities
Creditors xxx
Bank overdraft xxx (xxx)
xxx

xxx

financed by:
capital xxx
less drawings xxx
xxx
long term liabilities
long term loan xxx
debentures xxx
mortgages xxx

ABC has the following assets and liabilities as at 31st dec 2011.
Item Amount
Creditors 15,800
Equipment 46,000
Motor vehicle 25,160
Stock 24,600
Debtors 23,080
Cash at bank 29,120
Cash in hand 160

During the week of Jan 2012, the following transactions took place.
- Bought extra equipment on credit for 5.52m
- Bought extra stock by cheque shs 2,280,000
- Paid creditors by cheque shs 31,060
- Debtors paid 33,060 by cheque and 240,000 by cash
- ABC owner added 1M cash as capital
Required;
a) Determine the capital as at 31st Dec 2011
b) Draw a balance sheet for the business as at 31st Dec 2012

Item opening balance increase “000” decrease

“000” closing balance
Equipment 46,000 5,520
51,520
Creditors 15,800 5,520
18,160
Stock 24,600 2280
26,880
Cash at bank 29,120 2280+31060
27,040
Debtors 23,080 33,060 3360
19,400
Cash in hand 160 240
400
Capital 132,320 1000
133,320
Motor vehicle 25,160
ABC BALANCE SHEET
SHS SHS
SHS
Non-current assets
Equipment 51,520
Motor vehicle 25,160
76,680
Current assets
Stock 26,880
Debtors 19,400
Cash at bank 27,040
Cash at hand 400
73,720

Current liabilities
Liabilities 18,160 (18,160)
56,640

133,320

Financed by
Capital 133320
133,320
Types of business organizations
SOLE PROPRIETORSHIP
- Sole trader, A sole trader is a person running a business enterprise alone thereby
enjoying all the profits and incurring all the losses of the business.
- Sole proprietorship is a business owned and run by someone for their own
benefit. The business is entirely dependent on the owner‟s decisions so when
the owner dies so does the business.
Advantages of sole proprietorship
- All profits are subject to the owner
- There is very little regulation for proprietorships
- Owners have total flexibility when running the business
- Very few requirements for starting- often only a business license
Disadvantages
- Owner is 100% liable for business debts
- Equity is limited to the owner‟s personal resources
- Ownership of proprietorship is difficult to transfer
- No distinction between personal and business income
PARTNERSHIP
A partnership is a form of business where two or more people share ownership as
well as the responsibility for managing the company and the income or losses the
business generates.
The partners in a business partnership invest in the business and each
investor/partner has a share in the profits and losses.
There are two forms of partnerships;
- General partnership
- Limited partnership
There are three essential elements to a general partnership
- Sharing of profits and losses
- Joint ownership of the business
- Equal right in the management of the business
In a limited partnership, there is one general partner and one or more limited
partners. The general partner assumes the responsibility for the management of the
business and the limited partner contributes only assets to the business, while
having no role in the company‟s management.

Advantages of a partnership
- Two heads (or more) are better than one
- Your business is easy to establish and start- up costs are low
- More capital is available for the business
- You‟ll have greater borrowing capacity
- High caliber employees can be made partners
- There is opportunity for income splitting, an advantage of particular importance
due to resultant tax savings
Disadvantages of a partnership
 The liability of the partners for the debts of the business is unlimited
 Each partner is „jointly and severally‟ liable for their share of the partnership‟s
debts; that is each partner is liable for their share of the partnership debts as
well as being liable for all the debts
 There is a risk of disagreements and friction among partners and management
 Each partner is an agent of the partnership and is liable for actions by other
partners
 If partners join or leave, you will probably have to value all the partnership
assets and this can be costly
Private limited company
This is a type of privately held small business entity, in which owner liability is
limited to their shares, the firm is limited to having 50 or fewer shareholders, and
shares are prohibited from being publicly traded.
A company becomes an independent legal structure when it incorporates
Advantages of a private limited company
 Separate legal entity, an entity means something which has a real existence, a
thing with distinct existence
 Uninterrupted existence – a company has „perpetual succession‟ that is
continued or uninterrupted existence until it is legally dissolved. A company
being a separate legal person, is unaffected by the death or other departure of
any member but continues to be in existence irrespective of the changes in
membership.
 Limited liability – this is the status of being legally responsible only to a
limited amount for debts of a company. In a limited company the liability
company, the liability of the members in respect of the company‟s debt is
limited only to the extent of the face value of shares taken up by them.
Therefore ehen a company is limited by shares, the liability of the members on
a winding up is limited to the amount unpaid on their shares.
 Free and easy transferability of shares – shares of a company limited by shares
are transferable by a shareholder to any other person. The transfer is easy as
compared to the transfer of interest in a business run as a proprietary concern
or a partnership.
  Owning property – a company being a juristic person, can acquire, own, enjoy
and alienate property in its own name. no shareholder can make any claim
upon the property of the company so long as the company is a going concern.
 Capacity to sue and be sued - a company being an independent legal entity
can sue and also be sued in its own name.
 Dual relationship – it is possible for a company to make a valid aand effective
contract with any of its members. It is also possible for a person to be in
control of a company and at the same time be in its employment. Thus a
person can at the same time be a shareholder, creditor, director and also an
employee of the company.
 Borrowing capacity – a company enjoys better avenues for borrowing of
funds. It can issue debentures, secured as well as unsecured and also accept
deposits from the public.

Disadvantages of private limited company

 Original owners lose control and ownership of the business
 Professional directors and manager appointed to run the business may have
different aims to those of the shareholders
 Must disclose all main accounts to the public
 Company can be taken over if a majority of shareholders agree to bid.

Books of accounts
There are two main books of accounts; ie. Journal and ledger. Journals are used to
record the economic transaction chronologically. A ledger is used to classify
economic activities according to nature
Ledger account is a journal in which a company maintains the data of all the
transactions and financial statement.
There are 3 types of ledgers namely;
Sales ledger
Purchase ledger
General ledger

1. Sales ledger
This is a ledger in which the company maintains the transaction of selling the
products, service or cost of goods sold to the customers. This ledger gives the idea
of .sales revenue and income statement.
2. Purchase ledger
This is a ledger in which the company organizes the transaction of purchasing the
services ,products or goods from other businesses. It gives the visibility of how
much amount the company paid to other businesses.
3. General ledger
General ledger is divided into two types; nominal ledger and private ledger.
Nominal ledger gives information on expenses, income, depreciation, insurance etc
A private ledger gives private information like salaries, wages, capitals etc. private
ledger is not accessible to everyone.
- Cash book
This is a financial journal that contains all cash receipts and disbursements,
including bank deposits and withdrawals. Entries in the cash book are then posted
into the general ledger.
- Sales day book
Also known as sales book or sales journal. It is a subsidiary book i.e. a book of
original entry. It is a manually maintained account, with the purpose of recording
all credit sales of the business in one place.
This means all the sales of the firm done on credit are recorded in the sales day
book. No cash sales will be recorded here , they will be recorded in cash book.
- Purchase day book
This is the book of original entry in which all the transactions relating to only
credit purchase are recorded.
Cash purchases are not recorded in the purchase day book but are recorded in the
cash book.
- Return day book
Purchase returns day book
Also referred to as the purchase returns journal or the returns outwards journal is
simply a chronological list of all the purchases returns credit notes and is used to
save time, avoid cluttering the general ledger with too much details.
Sales return day book
Also referred to as the sales return journal or return inwards journal is a special
journal used to record sales returns.
The sales return day book is simply a chronological list of the issued credit notes
and is used to save time, avoid cluttering the general ledger with too much detail.
A journal entry is the act of keeping or making records of any transactions either
economic or non- economic. Transactions are listed in an accounting journal that
shows a company‟s debit and credit balances.
Final account
Financial account gives an idea about the profitability and financial position of a
business to its management, owners and other interested parties. All business
transactions are first recorded in a journal . they are then transferred to a ledger and
balanced.

Trading, profit and loss account

In order to arrive at the balance sheet of a business, one needs to prepare the
trading account and profit and loss account first. This account is prepared in order
to arrive at the figure of revenue earned or loss incurred during the period.
A trading account helps in determining the gross profit or gross loss of a business
concern made strictly out of trading activities.
In the trading account, cost of goods sold is subtracted from net sales for the period
to calculate gross profit.
Trading account is mainly prepared to know the profitability of the goods bought
by the businessman.
The difference between selling price and cost of goods sold is the earning of the
business man which is also known as gross profit. Whereas, net profit means all
revenues minus all expenses and the non-operating expenses.
Gross profit = sales – COGS (Sales+ Closing stock) – (stock in the beginning +
purchases + direct expenses)
Items included on the debit side are opening stock, purchases, and direct expenses
and on the credit side are sales and closing stock. The resultant figure is either
gross profit or gross loss.
Format of an income statement

ABC Ltd
INCOME STATEMENT
FOR THE YEAR ENDED 31/12/XXXX

SHS SHS
SHS
SALES XXX
Less Return inwards (xx)
XXX
Less COST OF SALES
Opening stock XXX
Add purchases XXX
Add carriage inwards xx
Less return inwards (xx) XXX
Cost of goods available
For sale XXXX
Less closing stock (xx)
(xxx)
Gross profit (loss)
xxx

Add other income;

Rent income XXX
Dividend income XX
Interest income XX
 Discount received XX
XXXX
Less Operating expenses
Salaries and wages XX
Rent expenditure XX
Discount allowed XX
Stationery expenses XX
Depreciation XX
Bad debts XX
Fuel expenses XX
Repairs and maintenance XX
(XXX)
NET PROFIT(LOSS)
XXXX

From the following trial balance of Embu stationery, prepare;

- Income statement for the year ended 30th sept 2011
- Balance sheet as at 30th sept 2011

Particular a/c Dr
Cr
Stock (1st oct 2010) 23,680
Carriage outward 2000
Carriage inward 3100
Return inwards 2050
Return outwards
3220
Purchases 118,740

Sales
186,000

Salaries and wages 38,620

Rent and expense 3040
Insurance expense 780
Motor vehicle expenses 6640
Office expenses 2160
Lighting and heating expenses 1660
General expenses 3140
Premises 50,000
Motor vehicle 18,000
Fixtures and fittings
3500
Debtors 38,960
Creditors
17310
Cash at bank 4,820
Drawings 12,000
Capital
126,360
The value of closing stock was 29,460

EMBU STATIONARIES
INCOME STATEMENT
FOR THE YEAR ENDED 30.09.2011

SHS SHS
SHS
Sales 186,000
Less return inwards (2050)
183,950
Less cost of sales
Opening stock 23,680
Add purchases 118,740
Add carriage inwards 3,100
Less return outwards (3,220) 118,620
C.G.A.F.S 142,300
Less closing stock (29,460)
(112,840)
Gross profit
71,110
Less operating expenses
Salaries and wages 38,620
Rent 3040
Insurance 780
Motor vehicle expenses 6640
Office expenses 2160
Lighting and heating 1660
General expenses 3140
Carriage outwards 2000
(58,040)

13,070
Prepare the balance sheet as at 30th sept 2011

EMBU STATIONARIES
STATEMENT OF FINANCIAL
POSITION
AS AT 30.09.2011
SHS SHS
SHS
Non-current assets
Premises
50,000
Motor vehicle
18,000
Fixtures and fittings
3500
 71,500
Current assets
Stock 29,460
Debtors 38,960
Cash at bank 4820
73,240
Current liabilities
Creditors (17,310)
55,930

127,430
Financed by;
Capital 126,360
Less drawings (12,000)
114,360
NET PROFIT
13,070

127,430

BUSINESS CAPITAL
Capital is wealth in form of money or other assets owned by a person or
organization or available for a purpose such as starting a company or investing .
- Authorized capital/Nominal/Registered capital – this is the maximum amount of
share capital that the company is authorized by its constitutional documents to
issue to shareholders. Part of the authorized capital can remain unissued. The
authorized capital can be changed with shareholder‟s approval.
- Issued capital – this refers to the number of shares issued by the company to the
shareholders. In other words, the shares allotted or subsequently held by the
shareholders is called issued capital.
- Subscribed capital – this is that part of issued share capital which has been
subscribed by investors. When a company issues a part of its authorized share
capital, investors may or may not subscribe for all of its shares.
- Called up capital – this is shares issued to investors, under the understanding
that the shares will be paid for at a later date or in installments. Shares may be
issued in this manner in order to sell shares on relaxed terms to investors which
may increase the total amount of equity that a business can obtain.
- Paid up capital – this is the amount of money a company has been paid from
shareholders in exchange for shares of its stock . paid up capital is created when
a company sells its shares on primary market, directly to investors.
- Uncalled capital-- this is that part of subscribed share capital which has not
been called for payment by a company. A company calls for only a part of
share‟s price at the time of allotment. The remaining part is called up at a later
date. This is called or remained part is known as uncalled share capital.

Sources of capital
- Shares and debentures
 Shares is the capital of a company but debenture is the debt of the company.
Shares represent ownership of the shareholders in the company. On the other
hand, debentures represent indebtedness of the company. The income earned
on shares is the dividend but the income earned on debentures is interest.
- Cumulative preference shares
This gives the shareholder a right to dividends that may have been missed in
the past. Dividends are paid by companies to reward shareholders.
- Preference shares
These are shares in a company that are owned by people who have the right
to receive part of the company‟s profit before the holders of ordinary shares
are paid. They also have the right to have their capital repaid if the company
fails and has to close.

- Ordinary shares
These are shares in a company that are owned by people who have a right to
vote at the company‟s meetings and to receive part of the company‟s profits
after the holders of preference shares have been paid.
- Preferred ordinary shares
Are hybrid securities with both equity and fixed income characteristics.
Similar to an equity security, a preferred share represents an ownership
interest, generally does not have a maturity date and is recognized on the
equity side of a company‟s balance sheet.
- Deferred/confounder shares
This is a share that does not have any rights to the assets of a company
undergoing bankruptcy until all common and preferred shares are paid.
Methods of depreciation
-straight line method
This is charging depreciation on an equal depreciation over all the years of
the asset.
It is calculated by getting the cost of the asset minus the residue value over
the useful life.
Depreciation = Cost – Residue value
Useful life
The main disadvantage of this method is charging equal depreciation over all
the years of the asset.
Illustration
A business imported a motor vehicle and incurred the following costs;
Purchases cost 650,000
Importation duty 50,000
Importation insurance cover 75,000
Transport to the business 25,000
The economic life of the motor vehicle was 5years after which it was
disposed at a value of 200,000
Required; calculate depreciation for each of the 5years and the net book
value for each year.
 Depreciation = Cost – Residue value
Useful life

800,000 – 200,000 = 120,000

5
N.B.V = Cost – Accumulated depreciation

Year cost depreciation p.a accumulated

depreciation N.B.V
1 800,000 120,000 120,000
680,000
2 800,000 120,000 240,000
560,000
3 800,000 120,000 360,000
440,000
4 800,000 120,000 480,000
320,000
5 800,000 120,000 600,000
200,000

Sum of digit method

This is a method which allocates depreciation based on a digit calculated by
getting the number of years over the total accumulated years.
The digit is calculated as;
Digit = n + 1 – i
n = no of years
i = year of depreciation
Illustration
An asset was acquired at a cost of 450,000 and has had a useful life of
5years. Identify depreciation for each year and net book value using sum of
digit method

Year cost depreciation N.B.V

1 5 5/15*450,000=150,000 300,000
2 4 120,000 180,000
3 3 90,000 90,000
4 2 60,000 30,000
5 1 30,000 0
DOUBLE DECLINING BALANCE (DDB) DEPRECIATION
METHOD

This is also known as the reducing balance method.

This is a method where the value of depreciation is more in the early years
of an asset than in the later years. This means that a higher depreciation is
charged in the cost of an asset when the asset is new than when the asset is
old.
The subsequent years of depreciation is charged on the net book value of the
asset.
Illustration
A plant was acquired at a cost of 500,000 and installation cost incurred was
150,000. The business depreciates the plant at a rate of 10% p.a reducing
balance method.
The economic life of an asset is 5years.
Required; calculate the depreciation for each year and the net book value
YEAR COST DEPRECIATION ACCUMULATED N.B.V
(P.A) DEPRECIATION
1 650,000 65,000 65,000 585,000
2 650,000 58,500 123,500 526,500
3 650,000 52,650 176,150 473,850
4 650,000 47,385 223,535 426,465
5 650,000 42,646.5 266,181.5 383,818.5