Professional Documents
Culture Documents
Book Keeping Form One
Book Keeping Form One
Book Keeping Form One
CHAPTER ONE
INTRODUCTION TO BOOK – KEEPING
Page 1
Understanding Book-keeping Book one
Creditors, Bank and other investors will use this information before deciding whether to
invest in an organization or not.
(v) Assessment of fair tax: The income tax department will require the submission of proper
accounts in order to determine fair tax charge. Therefore, the financial records ought to be
accurate in order to avoid over charging or undercharging.
Accounting is a secondary function and it starts where the function of book-keeping ends.
In this process the following basic activities are considered essential:
(i) Summarization of the classified transactions in the shape of the final accounts
(ii) Analysis and interpretation of the results disclosed by final accounts and drawing
meaningful conclusions
(iii) Communicating the required information to all the concerned parties.
Page 2
Understanding Book-keeping Book one
Page 3
Understanding Book-keeping Book one
CHAPTER TWO
BOOKS OF PRIME/ORIGINAL ENTRY
In a business, many transactions take place daily. They make it necessary to make use of the books
of prime entry or original entry. Some of the transactions are buying of goods on cash or on credit,
selling of goods are on cash or credit and paying for goods using cash or cheque.
Definition: A book of original entry or subsidiary or prime entry is a book in which transactions
are recorded as they occur on a daily basis in chronological order, before they are posted to the
relevant accounts in the ledger. In these books of original entry information that is posted to the
ledger in Summary form is recorded in much more detail.
Page 4
Understanding Book-keeping Book one
2. Credit note.
This is a document drawn by the supplier / Seller to correct an overcharge on the original
invoice or to certify the credit or set-off value for the return of goods by the buyer. It usually
issued when some goods are returned by the buyer.
3. An invoice
This is a written demand for payment of goods purchased and sold on credit. It is served to
the credit customer (Debtor) by credit supplier (Creditor) and shows of:
❖ Date of issue
❖ Qualities and Quantities supplied
❖ Description, Price and Value of goods
❖ Terms as to period of credit and trade discount
❖ Net amount to be paid.
As most business transactions involve buying and selling of goods, an invoice is a very
important document and it provides the source for information during the period as such;
i) Credit sales
ii) Credit purchases
iii) Credit customer
iv) Credit supplier
This information is then recorded in the relevant books.
Page 5
Understanding Book-keeping Book one
Example: 1
The following transactions belong to Kunduchi Girl’s Ltd which was carried out in the month
of September 2011.
Page 6
Understanding Book-keeping Book one
Answer
KUNDUCHI GIRL’S LTD’S
PURCHASES DAY BOOK
Example 2
The following transactions were obtained from the books of Jasmine enterprises for the month of
May 2014.
1stMay 2014, Bought stationary for Tshs 7,500 and 6 dozens of text books @ Tsh 10,000 from
Double G Stationary Ltd.
4thMay 2014, Bought 6 boxes of Colgate @ 3,000 and 4 cartons of MaQ @ 1,500 from Mzome
cleaners Ltd.
6thMay 2014 Bought Kitchen untensils: 4 dozens of cups @ 5500 8 dozens of plates @ 2000 and
5 carton of spoons @ Tshs 5000 from Fahad General Suppliers Ltd
27thMay 2014, Bought more goods on credit from Kigoma Quality products Ltd 6 Jericans of
cooking oil @ 12,500, 3 roll Sackets of Onga mchuzi mix @ 5,000.
Page 7
Understanding Book-keeping Book one
Answer
JASMINI ENTERPRISES
PURCHASES DAY BOOK
Date Details F Invoice Details Invoice Total
st
1 May 2014 Double G. stationary Ltd
Stationary of Shs 7500 7,500
6dozens of text books each 10,000 6 x 10,000 =60,000
67,500
th
6 May 2014 Fahad general suppliers Ltd
4dozens of cups each 5500 4 x 5,500 =22,000
8 dozens of plates each 2000 8 x 2,000 =16,000
5 cartons of spoons each 5000 5 x 5,000=25,000
63,000
th
4 May 2014 Mzome cleaners Ltd
6boxes of Colgate each 3,000 6x3,000 = 18,000
4 cartons of maQ each 1500 4 x 1,500 = 6,000
24,000
th
27 May 2014 Kigoma quality products Ltd
6Jericans of cooking oil each 12500 6 x 12,500 = 75,000
3roll sackets of onga mix each 5000 3 x 5,000 = 15,000
90,000
th
30 May 2014 Transferred to Purchases Account 244,500
Example 3
The following transactions belong to Mwamgongo Company Ltd which was carried out in the
month of 1st November 1998.
1st November 1998. Bought goods from Vikundi R.Kikwale general suppliers
12 Charcoal each Tshs 4,000
20 Typewriter Tshs 4,200 @
10 Carpet at shs 2000 per carpet.
20th November 1998. Bought goods from Khalfan J.Rashid suppliers in Kigoma
13 Bags of soap each at Tshs 9,000
80 Tray of eggs for Tshs, 5000 per Tray
10 Cartons of Kimbo each 5500
Less 20% Trade discount
25stNovember 1998.Bought the following goods from Matatizo Juma Tabu companies.
50 Bunches of banana at Tshs 700 per bunches
24 pairs of shoes Tshs2,000 per pair
40 Cartons of exercise book Tshs 1,000
Less 30% Trade discount
Required: Prepare the purchases day book for the month of 30th November 1998.
Page 8
Understanding Book-keeping Book one
Answer
MWAMGONGO COMPANY LTD’S
PURCHASES DAY BOOK
Date Details F Invoice Details Invoice Total
st PL
1 Nov1998 Vikundi R.Kikwale G.Supplier 1
12 Charcoal each Tsh 4000 12 X 4,000 = 48000
20 Typewriter each 4200 20 X 4,200 = 84000
10 Carpet @ 2000 10 X 2000 = 20000 152000
Khalfan J.Rashid supplier PL2
20th Nov 1998 13Bags of soap each at 9000 @ 13 X,9000 = 117000
80 Tray of eggs at 5000 per Tray 80 X 5000= 400000
10 Carton of Kimbo @ 5500 10 X 5500 = 55,000
572000
Less 20% Trade discount (114400) 457600
Example 4
On 1st May 1995 Mrs. Moshi Rashid started the business with the following information
May 1st Bought the following goods from Mwanza Huduma companies.
5 Crown colour each Tshs 7,000
11 Cement each Tshs 22,000
4 Cartons of Nyati cola each Tshs 11,000
10th May 1995.Purched the following goods from Kasim Akibu Ltd
6 Boxes of cigarette @ 5000
9 Carton of shoes shs 4500 per carton
10 Boxes of Tanga milk shs 9000 @
16th May 1995, Bought the following items from Kikwale General Supplier
15 Boxes of shoes @ Shs 12,000
60 Crates of Coca-Cola @ 23,00
10 Breads @ 850 and 6 cakes @ 2,500.
Page 9
Understanding Book-keeping Book one
Required: Enter the above transactions in the purchases journal and there after post to their
respective ledger Accounts.
GENERAL LEDGER
CREDITORS’ ACCOUNT
Page 10
Understanding Book-keeping Book one
EXERCISE 2.1
1. Record the following transactions in the Purchases day Book of Ally Mohammed Rugwe
A general merchant for the month of 30th July 1992:
July 1 Bought goods from Hamidu ltd
60 Carbon paper at 8000 @
300 Office Laptop each shs 10000
90 Boxes of pencil at sh 500 per box
2. Record the following transactions in Purchases day Book of Shamsi Jumanne Kikwale
Ltd company for the month of 30th June 2013
June 1st Bought goods from Great Britain Trading Corporation, Shs. 3,200, less 25% trade
discount their invoice No. 65789.
5 Bought goods from National Textiles Co. Shs. 1,250 less 20% trade discount see their
Invoice No. 762.
10 Bought goods from Manchester Textile Mills, Shs. 2,400 less 30% trade discount, see
invoice No. 123412.
15 Bought goods from Lancashire Clothing Factory, Shs. 500 less 20% trade discount,
see invoice No. 89645.
20 Bought goods from Cool Cotton Mills, Shs. 1,340 net, vide their invoice No. 76576.
25 Bought goods from Star Shirting’s Co. Shs. 1,800, less 33.3% trade discount, see
invoice No.34257.
30 Bought goods from Wosley Woollen Mills, Shs. 2,100 net, see their invoice
No.71020.
Page 11
Understanding Book-keeping Book one
4. The following transactions belong to Islam Moshi Company Ltd which was carried out
in the month of 1st August 1993.
st
1 August 1993. Bought goods from Tatu Sadick general suppliers
12 Cret of Pepsi each Tshs 4,000
20 Typewriter Tshs 4,200 @
10 Bags of wires at shs 2000 per wire
45 Pairs of socks @ 820 per socks
20th August 1993. Bought goods from Jumanne Said Mkuyu suppliers in Dar es Salaam
12 Bags of clothes each at Tshs 9800
50 Tray of cup for Tshs, 4500 per Tray
10 Cartons of Kimbo each 6530
25 Boxes of cowbell at 7200 @
Required: Prepare the purchases day book for the month of 30th August 1993.
Page 12
Understanding Book-keeping Book one
(iv) In case when goods are sent in excess of what was ordered, the excess goods may be
returned.
(v) When goods sent are of wrong size or quality.
(vi) When goods are of wrong colour.
Example 1
In the month of March 2008, the following items were returned to the supplier by Musa a
retailer at Mabatini Mwanza.
5th March 2008, Returned 15 boxes of Azam Juice @ Shs 12,000 to TSS Co. Ltd
7th March 2008, Returned 6 crates of Pepsi @ 23,000 to Pepsi Company Ltd
20th March He returned 10 Breads to Victoria Bakery T. Ltd @ 850 and 6 cakes @ 2,500.
Required: Enter the above transactions in Returns outwards Journal.
Answer
MUSA’S
RETURNS OUTWARDS JOURNAL
Date Details F Invoice Details Invoice
Total
5th March2008 T.S.S Co. Ltd 12 x 12,000 = 144,000 144,000
12boxes of Azam Juice @ 12,000
th
7 March 2008 Pepsi company Ltd co. 6 x 23,000 = 138,000
20th March 6crates of Pepsi @ 23,000
2008 10 breads @ 850 10 x 850 = 8500
6 cakes @ 2500 6 x 2500 = 15000 1615,00
Page 13
Understanding Book-keeping Book one
EXERCISE 2.2
1. Record the following transactions in the Returns Outwards Book of Food Suppliers Ltd
4 Nov 1996, received credit note No. 41142 from London Flour Mills for Shs 84.40, being cost
of goods returned.
9 Received credit notes No. 7853 from Khyber Sugar Mills for Shs 90, being correction
of an error in an invoice received from them.
15 Received credit notes No. 642 from Manchester Spices Company for Shs 142.10,
being cost of goods returned.
21 Received credit note No 41179 from London Flour Mills being cost of 10 bags of
flour each costing Shs 5 invoiced by them that was never ordered or delivered.
27 Received credit note No. 5222 from Fresh Fruits Company for Shs 47.75, being cost
of goods returned.
Page 14
Understanding Book-keeping Book one
2. Record the following transactions n the Return outwards Book of Honest Medical Store:
3rd July 2010, An order was placed and delivery received 23 cases of medicine from Nature
Cosmetics Co. Invoice received was however for 32 cases at Shs 25 each, less 20% trade
discounts. They issued credit note No. 6502 to correct the error.
10 Received credit notes No. 1029 from Labour Laboratories Ltd for Shs 2310, being
cost of goods returned.
16 Received credit note 29101 from Hygiene Medicine Co. for Shs 1000, being
rectification of an over charge in an invoice received from them
22 Received credit note no. 30924 from Health Hazards Co. for Shs. 5560 being
allowance for goods received imaged from them.
29 Received credit notes No. 342 from High Proteins Co. for Shs. 1835, being cost of
goods returned.
3. Record the following transactions in the Purchase Returns day Book of Rugwe A general
merchant for the month of 30th March 1994:
March 1st Received goods from Hassan ltd
60 Carbon paper at 8000 @
41 Office Laptop each shs 1000
20 Boxes of pencil at sh 500 per box
This is also referred to as sales journal; it is a book of prime entry in which all goods sold on credit
are first recorded before posting to the ledgers. Sales day book records the name of the buyers
(Debtors) and the value of goods that have been sold on credit. The total of the Sales journal is
transferred to the credit side of the sales account at a specified period usually once in the month.
The transactions posted to the sales journal are from the sales invoice.
Page 15
Understanding Book-keeping Book one
As stated earlier, An invoice is a document issued when goods are sold or bought on credit it
records clearly the name of the supplier and the name of customer also it shows all the items sold
and their respective prices plus the terms such as discount if any.
2. Trade discount.
Is a discount given to a customer who buys the goods in large quantities
Example 1
The following are the transactions of Ununio Islamic High School. Ltd in the month of June 2000
.1st sold goods Hamis of Iringa; 13 cartons of Omo @ Tsh 2800, 9 boxes of soap @ 4,000 and 7
cartons of MaQ @ Tshs 2500.
5th Sold to Bwiru Girls canteen: 6 boxes of biscuits @ Tshs 5,900 and 3 boxes of sweets @ Tsh
4,000.
15th Sold Hardware materials to Ninga Ahmad Gilagiza schools; 12 boxes of pencils @ Tsh
4,500 30 dozens of Kasuku exercises books @ Tshs 7,500 and 15 boxes of pens @ 6,300.
19th Sold to Sume Ltd 6 cartons of Colgate @ Tsh 2,000 and 12 cartons of Delident @ Tsh
10,000.
29th Sold to Fausta general supplier 6 bags of wheat flour @ Tshs 8,500.
Required: a) Prepare Ununio Islamic High School Ltd’s Sales Journal
Answer UNUNIO ISLAMIC HIGH SCHOOL LTD
SALES JOURNAL
Date Details F Invoice Details Invoice Total
Hamis of Iringa
13 cartons of Omo @ 2800 13 x 2800 = 36400
1st June 2000 9 boxes of soap @ 4000 9 x 4000 = 36,000
7 cartons of maQ @ 2500 7 x 2500 = 17500 89,000
Sume Ltd
th
19 June 2000 6 cartons of colgate @ 2,000 6 x 2000 = 12000
12 cartons of Delident @ 10000 12 x 10000 = 120,000 132,000
Page 16
Understanding Book-keeping Book one
Example 2
The following Goods belong to Gombe National Park but during the month of April 2002 were
sold to the following customers
Answer
GOMBE NATIONAL PARK
SALES DAY BOOK
Date Details F Invoice Details Invoice Total
1st April 2002 Sikuyaomba General Supplier
12 Charcoal each Tsh 4000 12 X 4,000 = 48000
20 Typewriter each 4200 20 X 4,200 = 84000
10 Carpet @ 2000 10 X 2000 = 20000 152000
Kapipi Rashid company
23th April 2002 13Bags of soap each at 9000 @ 13 X,9000 = 117000
80 Tray of eggs at 5000 per Tray 80 X 5000= 400000
10 Carton of Kimbo @ 5500 10 X 5500 = 55,000
572000
Less 10% Trade discount (57200) 514800
Magogwa J. Tabu
50 Bunches of banana @ 7,00 50 x 700= 35,000
th
28 April 2002 24 Pairs of shoes @ 2,000 24 x 2,000 = 48,000
40 Carton of exercise book @ 1000 40 x 1,000 = 4,0000
123000
Less 15% Trade discount (18450) 104550
Page 17
Understanding Book-keeping Book one
Example 3
On 1stDecember 1990 Mr.Maombi Eliasa Kasoma started the business and the Transaction
during the year was as follows:
Dec 1stSold the following goods to Kimatah Gilagiza companies
5 Crown colour each Tshs 7,000
11 Cement each Tshs 22,000
4 Cartons of Nyati cola each Tshs 11,000
10th Dec 1990.Said Mrisho Kanyegeli supplier of Mwamgongo village received the following
item sold to him.
6 Boxes of cigarette @ 5000
9 Carton of shoes shs 4500 per carton
10 Boxes of Tanga milk shs 9000 @
16th Dec 1990, Sold the following items to Mwimbe General Supplier
15 Boxes of shoes @ Shs 12,000
60 Crates of Coca-Cola @ 23,00
10 Breads @ 850 and 6 cakes @ 2,500.
Required: Enter the above transactions in the Sales Journal and post to their respective ledger
Accounts.
GENERAL LEDGER
DEBTOR’S ACCOUNT
EXERCISE 2.3
1. Record the following transactions in the Sales day Book of Amri Idd, a furniture dealer,
assuming that the first invoice issued in May was Numbered 786;
May 1 Sold 40 chairs @ Shs. 45 , less 10% trade discount to Alimadi.
5 Sold 5 dining tables @ Shs 400, less 5% trade discount to Birir.
Page 19
Understanding Book-keeping Book one
2. Record the following transactions in the Sales day Book of H. Halima, a bookseller;
June 1 Invoice No. 6734 issued to Moshi for Shs. 7,800 less 5% trade discount.
6 Invoice No. 6735 issued to Islam for Shs. 5,400 less 3% trade discount.
11 Invoice No. 6738 issued to Aziza for Shs. 6,100 less 5% trade discount.
17 Invoice No. 6739 issued to Khadija for Shs. 4,800 net.
23 Invoice No. 6740 issued to Angel for Shs 9,600 less 3% trade discount
30 Invoice No. 6741 issued to Anuaryfor Shs. 2,400 net.
4. The following transactions belong to Rehema Hamad Bunyonyi Ltd which was carried
out in the month of October 2010.
1st October 2010. Sold goods to Kigoma general suppliers
7 Cartons of salt each Tshs 6,000
5 Boxes of soap each Tshs 4,200
th
17 October 2010. Sold goods f Alifa Enterprises of Dar es salaam
3Bags of sugar each Tshs 18,000
8 Bags of millet each Tshs 15,500
10 Cartons of Kimbo each 5500
21stOctober 2010.Sold the following goods to Buseke companies
5 Sackets of Nyati Nazi each Tshs 7,000
11 Boxes of Nyati Juice each Tshs 22,000
4 Cartons of Nyati cola each Tshs 11,000
Required: Prepare the Sales day book and post to its ledger.
This is also known as Returns inwards day books or Sales returns journal. It is a book of original
entry in which all goods returned by a customer to the business are first recorded before posting
to the ledgers. When a customer returns goods to the business, a credit note is issued to him.
Page 20
Understanding Book-keeping Book one
Example 1
Umbwe Companies Ltd received the following returns from customers for the month of May
2005.
3rdMay 2005, Unga Retail shop returned 4 bags of Dona @ Tsh 9000 and 8 cartons of
Azam Juice @ Tsh 6000.
8th May 2005, Nyakato boy’s traders returned 4 cartons of Bakhresa Cola @ Tsh. 11,000.
20th May 2005, Youth Management Ltd of Sumbawanga returned 9 boxes of Bakhresa
Blazi @ Tshs 1000 and 5 bags of rice @ Tshs 8000
Example 2
Kirumba General Traders received the following returns for the month of August 2012.
3rd F. John returned 2 boxes of Glasses @ Tshs 2000 and 9 cartons of salt @ Tshs 1950.
8th J. Paul returned 5 dozens of Toilet papers @ 3,500.
15th J. Surath returned maize flour valued at Tsh 6000.
21st G. Donald returned 6 bags of sugar @ Tshs 9000 and 4 bags of millet flour @ Tshs
8500 5 jerry canes of sunflower oil @ Shs 14,000.
Required: (a) Prepare the Sales Return day book and post to the ledger.
Page 21
Understanding Book-keeping Book one
GENERAL LEDGER.
EXERCISE 2.4
Page 22
Understanding Book-keeping Book one
April 8, M. Rashid received a credit note for goods returned by him worth shs 240000 not of the
sample
April 14, A credit note was sent to A.peter for goods received by him worth shs 420000 wrong
size
April 22, Chiza was given a credit note for goods valued at shs 320000 returned by him
received in bad condition
April 26, Returned of goods by Masota worth shs 220000 this was not of the sample odered
THE JOURNAL
Definition
The Journal is one of the books of prime entry in which all transactions which can not be
recorded in any other book of prime entry are recorded. It is also referred to as the General
Journal or Journal proper.
The word “Journal” is a French word meaning diary or daily book which records day to day
transactions.
The Narrative
NOTE: A student should note that the item to be debited must be entered first , followed by item
to be credited and then a brief explanation for your transaction.
Page 23
Understanding Book-keeping Book one
Required: Enter the above in the Journal and open up the relevant ledger Account.
Answer
THE JOURNAL
Date Details Folio DR CR
5th Feb 2004 Furniture Account 88,000
Kiza company Account 88,000
Being purchases of furniture on
credit.
13th Feb 2004 Motor vehicle Account. 44,000
Hassan show room T. Ltd Account 44,000
Being a purchase of motor van on
credit
LEDGERS
Page 25
Understanding Book-keeping Book one
Sales of fixed assets on credit
Example 2
On 15th Sep 2012 sold motor vehicle for Tshs 600000 on credit to S. Joseph Sep 30th Sold office
furniture to F. D Gosbert on credit worth Tsh 135,000/=.
Required: Prepare the journal to record the above transactions and complete the double entry
THE JOURNAL
Date Details F DR CR
15th Sept 2012 S. Joseph Account 600,000
Motor Vehicle Account 600,000
Being of motor vehicle sold on credit
30th Sept 2012 F.D. Gosbert Account. 135,000
Office furniture Account. 135,000
Being office furniture sold on credit
LEDGERS
Page 26
Understanding Book-keeping Book one
When preparing the journal under opening entries the student should note the following:-
(a) Assets Accounts are shown as a debit balance.
(b) Liabilities Accounts are shown as credit balance.
(c) Capital Account is also shown as a credit balance.
Example 1
T.B.L Co. Ltd had the following assets and liabilities as at 31st Dec 2009, Liabilities creditors
Rukia Mohamed Tshs 8,000, A. Ramadhani Tshs 4,500 and Loan from NMB Tshs 28,000.
Assets; Fixture and fitting Tshs 27,500, plant and machinery 14,000 Laptop Tshs 18,500, stock
Tshs 5000 and Debtor D. MagabeTshs 2,500 and V. Muhailwa Tshs 1,900.
Workings
Capital = Assets – Liabilities
Assets = 27,500 + 14,000 + 18,500, + 5,000 + 2,500 + 1900 = 69,400
Liabilities = 8,000 + 4,500 + 28,000 = 40,500
Capital = 69,400 – 40,500 = 28,900.
T.B.L. CO. LTD’S
THE JOURNAL PROPER
Date Details F DR CR
st
31 Dec 2009 Fixture and fitting 27,500
Plant and machinery 14,000
Laptop 18,500
Stock 5,000
Page 27
Understanding Book-keeping Book one
Example 2
Journalize the following closing entries given below and transfer the balances to the trading
Account and profit and Loss Account on 31st Dec 2007.
Sales Tshs 3,500
Purchases Tshs 5,000
Stock at start Tshs 1,650
Electricity bills Tshs 700
Commission received Tshs 1,000
Wages and Salaries Tshs 750
THE JOURNAL
Date Details F DR CR
31st Dec 2007 Sales Account 3,500
Trading Account 3,500
Being Sale transferred to trading Account.
Page 28
Understanding Book-keeping Book one
EXERCISE 2.5
1. From the following business information of “Mr. Moshi R.Kikwale super market” you are
required to enter into Journal Proper and then find the capital of the business.
• Inventor ( 1/1/ 2007) ----------------------- 10000
• Sundry Debtors ------------------------------ 20000
• Sundry creditors ---------------------------- 4000
• Cash in hand ---------------------------------- 20000
• Premises 30000
2. From the following figures prepare the Journal entry then find how much will be the capital for the
business.
Motor vehicle 28000
Stock 7000
Cash 6000
Creditors 19000
Buildings 14000
Debtors 2000
Bank 12000
Loan from CRDB 5000
Premises 23000
Furniture & Fittings 80000
Page 29
Understanding Book-keeping Book one
CHAPTER THREE
DOUBLE ENTRY SYSTEM
Definition of Double entry system
Double entry is a book – keeping principle which calls for the recording of each business
transaction twice. Thus every debit entry must have corresponding credit entry of the same
amount. The main book of account required to record transaction by double entry system is
Ledger. This book contains sections called account and each account has a title.
Division of ledgers
Accounts are grouped in several ledgers in order to simplify the accounting activity. The following
are the major groups:
(i) Purchases ledger: It is a ledger that consists of the accounts of suppliers of goods to the
business. Normally these goods are purchased on credit; therefore this is the ledger of
creditors.
(ii) Sales ledger: It consists of accounts of customers who buy goods on credit from the
business. Therefore this is a ledger of debtors.
(iii) General ledger: It is used for the impersonal accounts such as Assets, revenues, and
other income and expenses.
(iv) Cash book: This ledger contains the cash and bank accounts.
The fundamental rule of double entry is to debit the account which receives and credit the
account that gives.
Advantages of double entry system
(i) It gives complete records of all transactions.
(ii) It facilitates the construction of a trial balance.
(iii) It assists the preparation of final accounts.
(iv) It facilitates the detection of errors and frauds.
Transaction
A transaction is any dealing Made between two person which involve the exchange of money or
money worth from one part to another.
Page 30
Understanding Book-keeping Book one
The noun “transaction” implies the transfer of goods or services, however simple or complicated
from one person to another.
Types of transactions
The primary purpose of keeping record of transaction is to record the debts of other people to the
business and the debts of the business to other firms. Therefore we have two types of transaction
which are:-
1. Cash transactions: A cash transaction involves the Buying and salling of goods or
services and the payment is made on cash immediately after receiving the goods.
Example Annuary is a businessman dealing with selling mangoes the price per mango is
Tsh 500, Ada a customer bought six mangoes and paid Tsh 3000.
2. Credit transactions: A credit transaction involves the Buying and Salling of goods or
services and the payment is made later. Example. Vikundi Sold goods costing Tsh 3000
to Sikuyaomba on Credit they agreed with each other to effect the payment after two weeks.
After two weeks the payment was made.
Exercise 3.1
1. For questions (i-v) choose the correct answer among the four alternatives and write its letter.
(i) An art of recording financial business transactions in a set of book’s and in terms of money
or money’s worth is known as:-
A. Closing entries
B. A list of assets and liabilities
C. Book – keeping
D. Classification of business transactions
Page 31
Understanding Book-keeping Book one
v) Which of the following concepts distinguishes the business from the owner?
a) The cost concept
b) The dual aspect concept
c) The business entity concept
d) The money measurement concept
i) Cash transaction and Credit transaction. ii) Purchases and Sales iii) Drawings and Expenses
iv)Profit and Loss v) Book-keeping and Business.
LEDGER: Is the main book of account which records all transaction following principle of double
entry, it has Debit Side{this side is located on the left hand side of an account} and Credit
Side{this side is located on the right hand side of an account} and each side has four columns.
1. Date column: Is the column used to record the date at which the given transaction took
place.
2. Particulars/narration/details: Is the column used to record a short description of the
transaction that took place.
3. Folio column; Is the column used to record the reference page in books of account.
Page 32
Understanding Book-keeping Book one
4. Amount column; Is the column used to record the amount of money that used in
purchasing or selling the goods.
Format of accounts
DR TITLE OF ACCOUNT CR
Date Particular Folio Amount Date Particular Folio Amount
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/2/1992 Capital 2 80000 2/2/1992 Purchase 3 10000
6/2/1992 Sales 6 35000 3/2/1992 Transport 4 1000
12/2/1992 Sales 6 20000 4/2/1992 Packing material 5 2000
28/2/1992 Sales 6 50000 8/2/1992 Machinery 7 6000
Page 33
Understanding Book-keeping Book one
Example 2
Karim Suleiman Mwinyimbegu started business on 1st January 1996 with a capital of Tsh
200000.
Jan 2, Paid Cash for Electricity bill Tsh 5800
3, paid for water bill cash Tsh 3200
4, Bought typewriter costing Tshs 1200
6, Paid Cash for travelling expenses Tsh 4300
8, Cash Sales to date Tsh 16000
12, Purchased Motor cycles Cash Tsh 12000
16, Bought plant and Machinery Cash Tsh 12000
18, Sold goods for cash Tsh 80000
20, Paid for advertising charge Tsh 50000
Required: Prepare Cash account to record the transactions above as on 31st January 1996.
DR CASH ACCOUNT CR
Date Particulars Foli Amount Date Particulars Folio Amount
o
1/1/1996 Capital 2 200000 2/1/1996 Electricity bill 3 5800
8/1/1996 Sales 7 16000 3/1/1996 Water bill 4 3200
18/1/199 Sales 7 80000 4/1/1996 Typewriter 5 1200
6 6/1/1996 Travelling expens 6 4300
12/1/1996 Motor cycle 8 12000
16/1/1996 Plant& machinery 9 12000
0/1/1996 Advertising 10 50000
31/1/1996 Balance c/d 11 207500
296000 296000
1/2/1996 Balance b/d 207500
Page 34
Understanding Book-keeping Book one
Example 3
Moshi & his Son Islam started business with a capital of Tsh 60000, on 1st September 1998.
During the month the following transaction took place:-
Sept 2, Purchased of goods for cash Tsh 3000
Sept 4, Paid carriage charge Cash Tsh 2000
Sept 6, Paid Transport charge Cash Tsh 4000
Sept 8, Bought Motor Vehicle for cash Tsh55000
Sept 10, Cash Sales Tsh 44000
Sept 12, Paid Rent for Cash Tsh1500
Sept 15, Paid commission charge Tsh 1000
Required: Records the above transaction into Cash book account and bring down the balance as
on 30th September 1998.
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/9/1998 Capital 2 60000 2/9/1998 Purchases 3 3000
10/9/1998 Sales 7 44000 4/9/1998 Carriage charge 4 2000
6/9/1998 Transport charge 5 4000
8/9/1998 Motor vehicle 6 55000
12/9/1998 Rent 8 1500
15/9/1998 Commission 9 1000
30/9/1998 Balance c/d 37500
104000 104000
1/10/1998 Balance b/d 37500
Page 35
Understanding Book-keeping Book one
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/7/1999 Capital 2 30000 2/7/1999 Purchase 3 2500
10/7/1999 Sales 7 6500 3/7/1999 Furniture 4 4500
18/7/1999 Sales 7 12500 5/7/1999 Water bill 5 1500
27/7/1999 Sales 7 18500 7/7/1999 Telephone charge 6 500
9/7/1999 Purchases 3 3500
12/7/1999 Purchases 3 7500
14/7/1999 Motor vehicle 8 9500
25/7/1999 Furniture 4 15000
30/7/1999 Balance c/d 23000
67500
67500
1/8/1999 Balance b/d 23000
LEDGERS
19500 19500
1/8/1999 Balance c/d 19500
1500 1500
1/8/1999 Balance c/d 1500
500 500
1/8/1999 Balance c/d 500
Example 2
Jumanne R. Kikwale commenced a business with a capital of Tsh 75000 on 1st March 1997.
During the month the following transaction were occurred:
March 2, Bought shoes costing Tsh 6100
March 3, Bought Trousers costingTsh 8510
March 4, Paid Wages and salaries cash Tsh 6710
March 6, Bought Machinery for cash Tsh 8910
March 8, Purchased goods for cash Tsh 5100
March 10, Bought shoes for cash Tsh 4100
March 12, Cash Sales Tsh 21000
March 13, Bought goods for cash Tsh 11000
March 16, Bought trousers cash Tsh 12100
March 20, Sold goods on cash Tsh 51000
March 25, Purchased Motor van Tsh 8100
Required: Record the above transactions in a Cash account and post to its ledger account.
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/3/1997 Capital 2 75000 02/3/1997 Shoes 3 6100
12/3/199 Sales 8 21000 3/3/1997 Trousers 4 8510
7 Sales 8 51000 4/3/1997 Wages& Salaries 5 6710
Page 37
Understanding Book-keeping Book one
LEDGERS:
DR CAPITAL ACCOUNT (2) CR
Date Particulars Folio Amount Date Particulars Folio Amount
31/3/199 Balance c/d 75000 1/3/1997 Cash 75000
7 75000 7500
1/4/1997 Balance b/d 75000
97200 97200
1/4/1997 Balance b/d 97200
Page 38
Understanding Book-keeping Book one
Example 3
Mariam Juma Tabu started and business with Tsh 40000 in 1st Nov 2010.
The transaction during the month was as follows:-
Nov 2, Brought goods for cashTsh 5000
Nov 5, Purchases of Machinery cash Tsh 7000
Nov 10, Bought Machinery cost cashTsh 1000
Nov 12, Sold goods for cash Tsh 3000
Nov 15, Bought good for cash Tsh 4500
Nov 20, Sold goods for cash Tsh 3000.
Required: Record the above transactions in Cash account and the complete double entry.
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/11/2010 Capital 2 40000 2/11/2010 Purchases 3 5000
12/11/2010 Sales 5 3000 5/11/2010 Machinery 4 7000
20/11/2010 Sales 5 8000 10/11/2010 Machinery 4 1000
15/11/2010 Purchases 3 4500
30/11/2010 Balance c/d 33500
1/12/2010 51000 51000
Balance b\d 33500
Page 39
Understanding Book-keeping Book one
CREDIT TRANSACTION
Is the type of transaction which involves the buying and selling of goods and services on credit.
This means the transaction is done but the payment is made on future in a given period of time.
This transaction involves the buyer (Debtor) and the seller (Creditor).
Page 40
Understanding Book-keeping Book one
12th April, Paid wages and Salaries Tsh 3500
th
14 April, Bought goods from Khadija on credit Tsh 8000
16th April, Sold goods on credit to Vikundi Tsh 12000
20th April, Bought goods on credit form Khadija Tsh 6500
21st April, Paid Advertisement in cash Tsh 9000
24th April, Bought goods on Cash Tsh 10000
26th April, Sold goods on credit to Vikundi Tsh 13000
28th April, Sold goods on cash Tsh 64000.
Required: Record the above transaction into Appropriate ledger account and complete the
Double entry
DR CASH ACCOUNT CR
Date Particulars Folio Amount Date Particulars Folio Amount
1/4/1999 Capital 2 105000 3/4/1999 Stationery 3 2000
10/4/1999 Sales 7 15000 4/4/1999 Rent 4 4500
28/4/1999 Sales 7 64000 6/4/1999 Purchases 5 6000
8/4/1999 Plant&Machinery 6 10000
12/4/1999 Wages & Salaries 8 3500
18/4/1999 Advertisement 9 9000
24/4/1999 Purchases 5 10000
30/4/1999 Balance c/d 111000
184000
184000
1/5/1999 Balance b/d 111000
LEDGERS
DR CAPITAL ACCOUNT (2) CR
Date Particulars Folio Amount Date Particulars Folio Amount
30/4/1999 Balance c/d 105000 1/4/1999 Cash 105000
105000 105000
1/5/1999 Balance b/d 105000
Page 41
Understanding Book-keeping Book one
Page 42
Understanding Book-keeping Book one
Exercise 3.2
1. Fill in the blanks
(i) .................................................................. An Art of recording business transaction in the
books in monetary term.
(ii) ................................................................... Is any dealing made between two people that
involve the exchange of goods?
(iii) ................................................................. Is one of the importance of double entry system.
(iv) ................................................................... The system of recording transaction twice.
(v) ................................................................... Is the column used to show date?
iii) Mention and explain six{6} errors which do not affect the agreement of trial balance.
Page 43
Understanding Book-keeping Book one
6. Aziza Sadick Kasaku started business on 1st November, 1999 with capita in Cash 80,000
Nov 2, Bought Motor van for Cash 4000
3, Bought goods for Cash 25,000
4, Sold goods for Cash 71,000
5, Paid Transport charge 8500
10, Cash Sales 90000
15 Bought goods for Cash 25000
18 Paid Rent 11000
20 Paid for motor expense Cash 7500
Sold goods for Cash 15000
25 Cash Sales to date 20000
26 Paid Salaries 5000
27 Purchased goods for Cash 22000
28 Sold goods for Cash 14000
Required: Balance the Cash account as on 30th June 1999 and Complete Double entry system
and bring down the balances.
7. October1st, 2002, Mama Mahobhe started business with cash in hand 60000
2 Purchased furniture and fitting for cash 15000
3 Bought goods for cash 13000
4 Bought stationeries and paid Cash 25000
5 cash sales to date 80000
6 Bought goods for Cash 45000
8 Paid Rent 28000
12 Sold gods for cash 15000
18 Bought carbon paper for cash 400
22 Cash sales to date 17000
Required: Enter the above transaction into cash account and bring down balances
Page 44
Understanding Book-keeping Book one
Required: Post the above transactions in the cash account and balance the accounts at the end of
the month.
9. Masjid Taqwa commenced business on 1st January, 1995 with Tsh 120000 in Cash.
January 2 Bought goods for Cash 58000
3 Sold goods for Cash 92000
5 Paid Cash to cleaners 40000
8 Paid Cash for travelling expenses 20000
8 Bought goods for cash 55000
11 Purchased Premises for cash 16000 13
Sold goods and received cash 11000 18
Paid wages and salaries in cash 23000 21
Sold goods for cash 65000
28 Paid Rent and Rates in Cash 45000
31 Paid General expensed in cash 30000
31 Sold more goods for cash 86000
Required: Record the above transaction in double entry system. Balance of the accounts, clearly
showing the carried down and brought down balances.
10. Rehema Hamad Bunyonyi started and business with Tsh 965000 in 1st August 2012.
During the month the transaction was as follows:-
August 2, Purchased goods for cash Tsh 35200
5, Purchases of Building Cash Tsh 98700
10, Bought Motor vehicle Cash Tsh14620
12, Sold goods for Cash Tsh 67400
15, Bought good for cash Tsh 54300
20, Sold goods for cash Tsh 74500.
21 Sold goods for cash 65000
28 Paid Rent and Rates in Cash 45000
29 Paid General expensed in cash 30000
30 Sold more goods for cash 86000
Required: Record the above transaction into Cash book account and complete double entry
CLASSIFICATION OF ACCOUNTS
Classifying of account is concerned with the systematic analysis of account and the work of
classification is done in the book termed as “ledger”.
Accounts in the ledger are classified into two main types which are:-
1. Personal Accounts: These are accounts which have the name of people, firms, organizations
or institutions; they constitute either assets or liability to the business. These are either Sundry
debtors or Sundry Creditors.
Page 45
Understanding Book-keeping Book one
a) Debtors Accounts: These accounts record the account of people, firm or organizations
which buying goods on credit from the business. These accounts have debit balances.
b) Creditor Accounts: These accounts record the accounts of people, firm or organization
from which the business has bought goods on credit. This account has credit balance.
2. Impersonal Accounts: These are accounts which do not consist the name of people, firm or
organization. These account are subdivided into two:-
a) Real Accounts: These are account which represents all possessions of the business.
Example Bank, Cash, Motor cycle, furniture and fitting, premises, building, stock etc. This
account are normally have a debit balances in the ledger.
b) Nominal Accounts: These are account which records intangible items, which cannot be
seen. These account are divided into two:-
(i) Revenue Account: These are account which record all income received by the
business. Example Sales, dividend, Discount received, interest received. The
Revenue account is capital in nature and it has an increasing effect.
(ii) Expenses accounts: These are accounts which records all the expenses of the
business such as wages and Salaries, Transport charge, Advertising, insurance, Rent,
Carriage outward. In General the classification of account can be shown graphically
as follows:-
Accounts
Exercise 3.3
Page 46
Understanding Book-keeping Book one
vi) All business accounts can be classified into two main groups which are:
A) Real and Nominal account ( B) Personal and Impersonal account
C) Debtors and Creditor account (D) Sales and Purchases account
i) --- is an art of recording business transaction in the set of books in monetary terms.
ii) ------------------is a document issued by the seller when goods are sold on credit.
iii) ---------------- is the rules that govern the recording of business transaction twice.
iv) ----------------- is the money or wealth used in starting the business.
v) ----------------- is a book in which all accounts are kept.
3. Copy and indicate whether the following accounts are nominal, real or personal
S/N Name of account Classification
1 Motor van ……………….
2 Furniture ……………….
3 Sales ………………
4 Purchases ……………….
5 Capital ……………….
6 Cash ……………….
7 Bank ……………….
8 Islam ……………….
Page 47
Understanding Book-keeping Book one
9 Drawings ……………….
10 Insurance ………………..
CHAPTER FOUR
TRIAL BALANCE
Definition: A Trial balance can be defined as a statement which shows a list of debit and credit
balances of accounts extracted from the ledger to check the arithmetical accuracy of the double
entry recording of business transactions at any given date. When preparing Trial balance the Debit
side must be equal to the credit side.
We have six errors which can not affect the trial balance, these are:-
(i) Errors of omission: Means the amount has been completely omitted to be recorded in the books.
Example Sheda sold goods worth’s 4000 to Zuhaira but the transaction has been omitted to be
recorded in the books. In this case the transaction which will be entered in trial balance will cause
it to agree / to balance.
(ii) Errors of commission: Means an amount has been entered in wrong personal account.
Example The cash payment to Shakira Tsh 10000 has been entered in Shaukan account.
(iii) Errors of principle: Means an amount has been entered in the wrong class of account.
Example the purchase of Machinery Tsh 5000 has been entered in purchases account.
(iv) Errors of original entry: Means a wrong amount has been entered in the books from original
figure in the source of document. Example the Sale of Tsh 980 to Ahmed was recorded in the
books as 890.
(v) Compensating Errors: Means both debit and credit entries are offset each other. Example
Sales Tsh 600 is overcastted as well as Wages and Salaries.
(vi) Errors of complete reversal entry: Means the correct amount has been entered in the wrong
side of an account. Example the cash payment to Sharifa Tsh 2400 has been debited to cash
account and credited to Sharifa account.
Page 49
Understanding Book-keeping Book one
Example 1
Given the following information which are balances of accounts extracted from the books of
Ally enterprises as on 31st Dec 1998
Cash 50000
Insurance 100000
Wages & Salaries 300000
Capital 2000000
Purchases 900000
Debtors 450000
Stationery 800000
Bank 12000
Advertisement 24000
Creditors 36000
Sales 600000
Required: Prepare Trail balance as at 31st Dec 1998.
ALLY ENTERPRISES
TRIAL BALANCES AS AT 31.12.1998
Page 50
Understanding Book-keeping Book one
DETAILS DR CR
Insurance 100000
Wages & Salaries 300000
Cash 50000
Purchases 900000
Debtors 450000
Stationery 800000
Bank 12000
Advertisement 24000
Capital 2000000
Sales 600000
Creditors 36000
2636000 2636000
Page 51
Understanding Book-keeping Book one
LEDGERS:
DR CAPITAL ACCOUNT (2) CR
Date Particular Folio Amount Date Particular Folio Amount
31/1/1990 Balance c/d 40000 1/1/1990 Cash 40000
40000 40000
1/2/1990 Balance b/d 40000
Page 52
Understanding Book-keeping Book one
122000 122000
Example 3
Islam Moshi started a business on 1st September 2014 with Tsh 375000 as capital. The
following transaction took place during the month were:-
Sept 2, Paid commission in Cash Tsh 10000
Sept 3, Bought goods from Zamda on Credit Tsh 100000
Sept 4, Bought carbon paper for cash Tsh 2500
Sept 5, Paid Travelling Expenses in Cash Tsh 7500 Sept
6, Sold goods for Cash Tsh 12500
Page 53
Understanding Book-keeping Book one
Page 54
Understanding Book-keeping Book one
Page 55
Understanding Book-keeping Book one
429000 429000
Exercise 4.1
A. ltiple choice questions
1. The process of buying goods or services for the purposes of reselling them is known as:-
A. Customer C. Supplier
B. Purchasing D. Sales.
4. Which of the following is considered as part of purchases and it increases the cost of goods
Available for Sale
A. Carriage outwards C. Carriage inwards
B. Returns outwards D. Returns inwards
Page 56
Understanding Book-keeping Book one
Page 57
Understanding Book-keeping Book one
10.Transaction means
A. The movement of people from one place to another
B.The movement of goods or provision of services between two people
C.The movement of books in accounts
D.The movement of goods and service
12. Farida ltd company commenced business with capital in cash Shs. 24000 on 1st March,
1970.
March 1. Bought goods on Credit from RTD 15000
3. Bought goods from Mwamgongo village 40000
4. Paid RTD on Account 12000
9. Purchased weighing scales 80000
13. Cash sales to date 200000
15. Paid wages and salaries 40000
Page 58
Understanding Book-keeping Book one
19. Sold goods on credit to Emanuel. 24000
20. Paid Transport expenses 60000
25. Paid to Mwamgongo village on account 20000
Page 59
Understanding Book-keeping Book one
13. Kapipi R. Ltd Company commenced business with capital in Cash Shs 40,000 on 1st April
April 2. Purchased for cash a new machine 4000
5. Purchased building for cash 30000
7. Purchased cash goods 60000
8. Cash sales to date 14000
10. Wages and salaries paid to assistant 60000
15. Received a loan in cash from CRDB 20000
16. Sales for the day 680000
19. Purchases during the week 12000
20. Paid water bill 4000
21. Paid cash for stationery 20000
25. Repayment of loan in cash 20000
25. Interest paid in cash 30000
31. Rent paid during the month 26000
Required: Open the ledger accounts to record the above information and prepare a Trial balance
as at 30th April 2010
14. Halima Hemed Ltd company commenced business on 1st September with capital in
cash Shs. 50,000.
Sept. 1 Bought goods for cash 10000
1. Sold goods for cash 8000
2. Paid wages in cash 6000
3. Paid cash for goods bought 12000
4. Cash sales to date 12000
5. Sold goods for cash 4000
6. Paid carriage on goods 4000
8. Cash sales to date 6000
8. Purchased goods for cash 16000
9. Paid assistant in cash 7000
10. Cash sales to date 16000
11. Purchased goods for cash 13000
11. Paid carriage in purchases 3000
25. Cash purchases 12000
27. Cash sales to date 120000
30. Paid wages to assistant. 5000
Required: Balance the cash account and complete the ledger accounts as at 30th September 1983
and prepare the Trial balance.
Page 60
Understanding Book-keeping Book one
15. From the following business information of “Mr. Moshi R.Kikwale super market” you are
required to draw up a Trial balance as at 31st, Dec, 2007.
• Inventor ( 1/1/ 2007) ---------------------------1000
• Sales 6000
• Purchases 5000
16. From the following balances of an account found in the books of Mama Sikuyaomba,
Prepare the Trial balance as at 30th June 2014
Capital 1536000
Loan from NBC 2858000
Purchases 7360000
Sales 11904000
Motor van 1920000
Furniture 1024000
Cash 2560000
Salaries and wages 1280000
Rent 320000
Insurance 640000
Electricity 256000
Sundry expenses 832000
17. Prepare a Trial balance of Serengeti Educational Publisher as at 31st Dec 2012 given the
following list of balances
Page 61
Understanding Book-keeping Book one
✓ Capital 37500
✓ Opening stock 2000
✓ Motor cycle 9000
Page 62
Understanding Book-keeping Book one
✓ Purchases 15000
✓ Sales 42000
✓ Drawings 2000
✓ Closing stock 35000
✓ Premises 4000
✓ Fixture and fittings 7000
✓ Cash in hand 3000
✓ Cash at bank 8000
✓ Advertising 3300
✓ Motor expenses 3000
✓ Creditor 9200
✓ Rent and Rates 1500
✓ Insurance 500
✓ Interest received 300
✓ Wages and salaries 1000
✓ Debtors 5000
CHAPTER FIVE
ELEMENTARY FINANCIAL STATEMENTS
(TRADING, PROFIT &LOSS ACCOUNT AND BALANCE SHEET)
Financial statement: Is a formal record of the financial activities and position of the business,
person, or other entity. These are accounts which are prepared at the end of trading period in
order to determine whether the business if making profit or loss. It includes three accounts which
are:
(i) Trading Account Income statement
(ii) Profit and Loss Account
(iii) Balance sheet. Statement of financial position
Purpose of Financial statement
i) The objectives of financial statement is to provide information about the financial position
ii) Performance and changes in the financial position
iii) Making economic decision
Page 63
Understanding Book-keeping Book one
ii) Shareholder: Use financial statements to assess risks and return of their investment in the
company and take investment decision based on their analysis.
iii) Prospective investor: Need financial statements to assess the viability of investing in the
company. Investor may predict future dividends based on the profit disclosed in the financial
statement
iv) Financial institution: Use financial statement to decide whether to grant a loan or credit to
business
v) Suppliers: Need financial statement to assess the creditworthiness of the business and
ascertain whether to supply goods on credit or not.
vi) Employees: Use financial statement to assess the company profitability and its consequences
on their future remuneration and job security.
vii) Government: Require financial statements to determine the correctness of tax declared in
the tax return
TRADING ACCOUNT
A Trading Account is an account which is prepared at the end of trading period in order to
determine the Gross profit or Gross loss of the business.
Gross Profit: Is an excess of Sales over cost of goods sold.
GP = Sales – Cos of goods Sold.
Gross Loss: Is an excess of cost of goods over Sales.
GL= Cost of goods Sold – Sales
Importance of Preparing Trading, Profit and Loss Accounts
(i) It helps to make decision making for trade either to continue or to stop doing the
business.
(ii) It helps the trader to get loan from financial institution.
(iii) It helps the trader to get investors in business.
Items entered in Trading Accounts on Debit side.
(i) Opening stock/stock at start {inventory at start}: Is the stock in the business at the
beginning of trading period.
(ii) Purchases: These are the goods bought for reselling them in order to generate profit.
(iii) Carriage inward/ carriage on purchases: These are the expenses related with
purchases and are added to purchases.
(iv) Returns outward/ Purchases Returns: These are the goods returns to the supplier
either due to damage or expired or are not to the sample ordered and are deducted
from purchases.
(v) Drawing of goods: This are the goods drawn by the owner of the business for his/her
personal uses, This should be deducted from purchases.
(vi) Closing stock / stock at close {inventory at close}: These are the stock which
remains unsold in the business at the end of trading period.
Page 64
Understanding Book-keeping Book one
Example 1
From the following information obtained in the books of Maurine Bililiza of Mwanza Region as
on 31st Dec 1995.
Opening stock 40000
Closing stock 140000
Purchases 25000
Carriage inward 20000
Returns inward 10000
Return outward 5000
Sales 200000
Required: Draw up / prepare Trading account for the year ended 31st Dec 1995.
MAURINE BILILIZA
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.1995 CR
Particular Amount Particular Amount
Opening stock 40000 Sales 200000
Add: Purchases 25000 Less: Returns in ward 10000 190000
Add: Carriage inward 20000
45000
Less: Return outward 5000 40000
Cost of goods available for sale 80000
Less: Closing stock 30000
cost of goods sold 50000
Gross profit c/d 140000
190000 190000
Gross profit b/d 140000
Example 2
From the following trial balance extracted from the books of NORINE BILILIZA of Mwanza
region as on 31st July 198.
TRIAL BALANCE AS AT 31.7. 1998
Page 65
Understanding Book-keeping Book one
DETAILS DR CR
Capital 50000
Purchases 30000
Sales 36000
Stock 1.6.1997 5000
Carriage iward 4500
Carriage outward 5500
Returns outward 6000
Wages and salaries 7000
Furniture 8000
Debtors 4000
Cash 12000
Returns in ward 2000
Stationery 14000
92000 92000
st
Closing stock as on 31 July 1998 was Tsh 2500
Required: Prepare Trading account for the year ended 31st July 1998.
NORINE BILILIZA
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.7.1998 CR
PARTICULAR AMOUNT PARTICULAR AMOUNT
Opening stock 5000 Sales 36000
Add: Purchases 30000 Less: Returns in ward 2000 34000
Add: Carriage inward 4500
34500
Less: Return outward 6000 28500
Cost of goods available for sale 33500
Less: Closing stock 2500
Cost of goods sold 31000
Gross profit c/d 3000
34000 34000
Gross profit b/d 3000
Page 66
Understanding Book-keeping Book one
The following are the items entered in profit & loss account credit side (CR).
Gross loss, commission received, Rent received, Discount received, interest received etc.
Page 67
Understanding Book-keeping Book one
Commission xxx
Fuel & power xxx
Petrol xxx xxx
Net profit xxx Net loss xxx
Xxx xxx
ANNUARY JK LTD
DR PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.12.1992 CR
DETAILS AMOUNT DETAILS AMOUNT
Insurance 4000 Gross profit 33000
Advertising 2000 Commission received 11000
Motor Expenses 1000 Total income 44000
General expenses 6000
Transport charge 7000
Wages & Salaries 8800
Rent & Rates 9900
Total expenses 38700
Net profit 5300
44000 44000
Example 2
Given the following information found in the books of KIMATAH GILAGIZA as on 31st June
1990.
Gross loss 5500
Page 68
Understanding Book-keeping Book one
Rent received 6500
Water bills 2500
Electricity bill 3500
Repairs to motor Cycle 1500
Telephone charge 1800
Sundry Expenses 1200
Commission received 10000
Sales 3000
Purchases 4000
Returns in ward 7000
Carriage in ward 8000
Carriage out ward 9000
Required: Prepare profit & loss account for the year ended 31st Dec 1990.
KIMATAH GILAGIZA
DR PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.12.1992 CR
DETAILS AMOUNT DETAILS AMOUNT
Gross loss b/d 5500 Rent received 6500
Water bills 2500 Commission received 10000
Electricity bills 3500 Total income 16500
Repairs to Motor cycle 1500
Telephone charge 1800
Sundry expenses 1200
Carriage out ward 9000
Total expenses 25000 Net loss 8500
25000 25000
Page 69
Understanding Book-keeping Book one
Advertising xxxx
Discount allowed xxxx
Insurance xxxx
Carriage outward xxxx
Stationery xxxx
Wages & Salaries xxxx
Motor expenses xxxx
Rent & rates xxxx
Commission xxxx
Fuel & power xxxx
Light & heating xxxx
Postage & stamp xxxx
Net profit xxxx Net loss xxxx
xxxx xxxx
Example 1
Given the following information in the books of CHUNGUZA Ltd as on 31st March 1996
Opening stock 6000
Closing stock 8000
Purchases 10000
Carriage out ward 1200
Carriage in ward 5000
Returns out ward 3000
Returns in ward 7000
Sales 28000
Commission received 2000
Insurance 4000
Wages & Salaries 1000
Rent & Rates 2200
Sundry expenses 800
Water bill 8800
Telephone charge 3500
Advertising 5300
Required: Prepare Trading, profit & loss Account for the year ended 31st March 1996.
CHUNGUZA LTD
DR TRADING, PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.1996 CR
DETAILS AMOUNT DETAILS AMOUNT
Opening stock 6000 Sales 28000
Add: Purchases 10000 Less: Returns inward 7000 21000
Add: Carriage inward 5000
15000
Less: Returns outward 3000 12000
COST OF GOODS 18000
AVAILABLE FOR SALE
Less: Closing stock 8000
COST OF GOODS SOLD 10000
Gross profit c/d 11000 21000
Page 70
Understanding Book-keeping Book one
Example 2
The following trial balance was extracted from the books of Mama Moshi company ltdas at 31st
November 2003.
TRIAL BALANCE AS AT 31st NOVEMBER 2003
PARTICULAR DR CR
Sales 37200
Purchases 23748
Returns in ward 410
Returns out ward 644
Stock at start 4736
Carriage out ward 1020
Wages & Salaries 7724
Insurance 2092
General expenses 1392
Capital 25272
Drawings 2400
Creditors 3462
Debtors 7792
Cash at Bank 964
Page 71
Understanding Book-keeping Book one
Premises 14300
66578 66578
ELEMENTARYBALANCE SHEET
Is the statement which shows the financial position of the business at a given date. It is prepared
after extracting / preparation of Trading, profit and loss account
It shows the Assets and Liability of a business at a particular period of time. In preparing the
Balance sheet you will be guided by accounting equation: Assets = Capital + Liabilities.
1. ASSETS: These are the properties owned by the business such as Machinery, Motor van,
Buildings, plant & Machinery etc. An Asset is divided into two types:-
(i) Current Assets: These are the assets which can be easily be converted into cash within a
short period of time. Example Cash, Bank, Debtors and stock.
(ii) Fixed Assets: These are assets which cannot be easily converted into cash; they are owned
and used b the business for a long period of Time. Example Machinery, Buildings, Motor
van or vehicle or cycle, Fixture & fitting, premises etc.
2. LIABILITIES: These are the debts awing by the business to others; the business is bound to
pay either in a short period of time of long period of time.
Liabilities are also subdivided into two:-
(i) Long term liabilities: These are the debts of the business which are payable at a date which
is more than one year. A good example are Loans from financial institution
(ii) Current liabilities / short term liabilities: These are the debts of the business which can
be paid within a one year. Example of current liabilities are creditor, Bank overdraft
Page 72
Understanding Book-keeping Book one
CAPITAL: Is the money or Assets invested in the business by the proprietor for the aim of
making profit.
Balance sheet Equation
(i) Assets = Capital + Liabilities
Example 1
Given the following information in the table
s/n Assets Capital Liabilities
(i) 200000 - 189000
(ii) 184795 46789 -
(iii) - 987621 110000
Page 73
Understanding Book-keeping Book one
Or Buildings xxxx
Less: Net loss xxxx Plant xxxx
xxxx Machinery xxxx
Less: Drawings xxxx xxxx Premises xxxx
LONG TERM Furniture & Fittings xxxx
LIABILITIES Equipments xxxx
Loan from: Motor van / vehicle/cycle xxxx
NBC/CRDB/NMB xxxx
CURRENT ASSETS
CURRENT LIABILITIES Stock xxxx
Creditors xxxx Debtors xxxx
Bank overdraft xxxx Bank xxxx
xxxx Cash xxxx xxxx
xxxx
Note: (i) Both sides of balance sheet must balance.
(ii)There is no indication of Debit and Credit side on balance sheet.
Example 1
From the following figures are in Tanzania shilling prepare Vikundi Balance sheet as at 31st Dec
1999.
Motor vehicle 28000
Capital 63000
Stock 7000
Cash 6000
Creditors 19000
Buildings 14000
Debtors 2000
Net loss during the year 12000
Bank 12000
Drawings 1000
VIKUNDI’S
BALANCE SHEET AS AT 31.DECEMBER 1999
LIABILITIES AMOUNT ASSETS AMOUNT
Capital 63000 FIXED ASSETS
Less: Net loss 12000 Motor Vehicle 28000
Page 74
Understanding Book-keeping Book one
Example 2
The Trial Balance below was extracted from the books of Jumanne R. Kikwale Ltd for the year
ended 31st June 2014.
TRIAL BALANCE AS AT 31ST JUNE 2014
PARTICULAR DR CR
Page 75
Understanding Book-keeping Book one
Purchases 5750
Sales 14250
Stock at start 4750
Capital 22400
Land 9500
Plant & Machinery 11000
Carriage out ward 850
Purchases returns 400
Carriage in ward 600
Sales returns 500
Motor vehicles 8000
Debtors 7000
Wages & Salaries 1500
Creditors 8500
Rent & Rates 750
Discount 1000
Loan from NMB 5000
Drawings 1100
Discount received 1750
51300 51300
st
Closing stock as on 31 June 2014 Tsh 1000.
Required: Prepare Trading, profit & loss account for the year ended 31st June 2014.
Page 76
Understanding Book-keeping Book one
JUMANNE R. KIKWALE
BALANCE SHEET AS AT 31. JUNE. 2014
LIABILITIES AMOUNT ASSETS AMOUNT
Capital 22400 FIXED ASSETS
Add: Net profit 1700 Land 9500
24100 Plant & Machinery 11000
Less: Drawings 1100 23000 Motor vehicle 8000
LONG TERMLIABILITE CURRENT ASSETS
Loan from NMB 5000 Stock 1000
CURRENT LIABILITIES Debtors 7000
Creditors 8500
36500 36500
Example 3
Given the following Trial balance of Kapipi R.Kikwale Ltd a retail trader in Mwamgongo Kigoma
as on 31st Dec 2010.
PARTICULAR DR CR
Page 77
Understanding Book-keeping Book one
Capital 20080
Drawings 1340
Purchases 5900
Sales 9200
Carriage outward 1200
Stock 1/1/2010 2400
Returns 300 400
Rent received 9200
Insurance 740
General expenses 560
Debtors 2000
Land & Buildings 10000
Creditors 3000
Carriage inward 8000
Premises 7000
Furniture & Fittings 5000
Bank 1140
Cash 1300
Loan from CRDB 5000
46880 46880
st
Closing stock as at 31 Dec 2010 was Tsh 360
Required: Prepare Trading, profit and loss account for the year ended 31st Dec 2010.
KAPIPI R.KIKWALE LTD
DR. TRADING, PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.12.2010 CR
DETAILS AMOUNT DETAILS AMOUNT
Opening stock 2400 Sales 9200
Add: Purchases 5900 Less: Sales returns 300 8900
Carriage inward 8000
13900
Less: Returns out ward 400 13500
COST OF GOODS AVAILABLE FOR SAL 15900
Less: Closing stock 360
COST OF GOODS SOLD 15540 Gross loss c/d 6640
15540 15540
Gross loss b/d 6640 Rent received 9200
Carriage outward 1200
Insurance 740
General expenses 560
TOTAL EXPENSES 9140
Net profit 60
9200 9200
KAPIPI LTD
BALANCE SHEET AS AT 31.12. 2010
LIABILITIES AMOUNT ASSETS AMOUNT
Capital 20080 FIXED ASSETS
Page 78
Understanding Book-keeping Book one
Exercise 5.1
1. From the following business information of “Mr. Moshi R.Kikwale super market” you are
required to draw up a balance sheet as at 31st, Dec, 1998.
SHS
2. Enter the following information in the Balance sheet of NG’AMBO Co. LTD as at 31st Dec 2003.
Cash in hand 6000
Page 79
Understanding Book-keeping Book one
Cash at bank 2500
Stock 5000
Page 80
Understanding Book-keeping Book one
Creditors 34000
Debtors 27500
Bank over draft 4000
Loan from B.D.A 13500
Net profit 9500
Furniture 11500
Fixtures and fittings 35000
Machinery 60000
Buildings 80000
Drawings 2000
Capital 168500
3. From the trial balance below, prepaid the trading and profit and loss Account of AHMED
suppliers Ltd and Extract the Balance sheet as at 31st Dec 2000
Details DR (Tshs) CR (Tshs)
Telephone charges 500
Capital 485150
Drawings 4500
Loans from Islam 5650
Cash 1250
Bank 2500
Discount allowed 3800
Creditors 2000
Debtors 1350
Moto van 4800
Interest Received 350
Machinery 1000
Purchases Returns 442900
Sales Returns 6000
Carriage out wards 1750
Carriage in wards 1500
Wages and Salary 2700
Purchase and Sales 36250 65000
st
Stock 1 Jan 2000 6250
559150 559150
st
Note: Stock 31 Dec 2000 was valued at Tsh 2,750
Page 81
Understanding Book-keeping Book one
A. Closing entries
B. A list of assets and liabilities
C. Book – keeping
D. Classification of business transaction
iv) Which of the following concepts distinguished the business from the owner?
A. The cost concept
B. The dual aspect concept
C. The business entity concept
D. The money measurement concept
Page 82
Understanding Book-keeping Book one
C. Real accounts
D. Proprietor accounts.
xiii) To find the value of closing inventory at the end of a period use
A. Physically cunt the inventory
B. Look in the inventory account.
C. Deduct opening inventory from cost of goods sold
D. Deduct cost of goods sold from sales.
xiv) The credit entry for net profit is on the credit side of
A. The trading account
B. The profit and loss account
C. The drawings account
D. The capital account.
xv) Copy and indicate whether the following accounts are nominal, real or personal
S/N Name of account Classification
Page 83
Understanding Book-keeping Book one
1 Buildings ………………
2 Furniture ……………..
3 Sales ……………….
4 Purchases ……………….
5 Capital ……………….
6 Cash ……………….
7 Bank ……………….
8 Ibrahim ……………….
9 Drawings ……………….
10 Advertising ………………...
1. Kazukamwe started business on 1st June, 1971 with capita in Cash 30,000.00
June 2, Bought furniture for Cash 1,000.00
3, Bought goods for Cash 22,000.00
4, Sold goods for Cash 27,000
5, Paid carriage 8500
10, Cash Sales 12000
15 Bought goods for Cash 25000
18 Paid Rent 1200
20 Paid for advertising in Cash 7500
Sold goods for Cash 15000
25 Cash Sales to date 20000
26 Paid wages 6000
27 Purchased goods for Cash 5000
28 Sold goods for Cash 3500
Required: Balance the Cash account as on 30th June Complete Double entry system and Balance
the account, Bring down the balances.
3. Dr.Mwimbe Juma Rashid Kikwale commenced business on 1st August 1980 by introducing
Tsh 30000 in Cash.
Page 84
Understanding Book-keeping Book one
4.1st August 1989. Mussa J Ramadan commerce a business with a capital in cash Tsh 500000
August 2. Bought goods for cash 13000.
3. Paid transport charge for cash 70000
4. Sold goods for cash 21000
7. Bought goods for cash 20000
8. Bought packing material for cash 12000
10. Paid Advertising charge for cash 20000
15. Cash sales 15000
20. Paid wages for cash 50000
26. Paid rent for cash 15000
27. Paid electricity bill for cash 50000
28. Paid Moshi for cash 20000
29. Bought motor van for cash 20000
30. Sold goods for cash 51000
30. Bought furniture for cash 50000
Required; Record in the Cash account and bring down ledgers
5. T. Tumsifu commenced business on 1st December, 1980 with Tsh 600000 in Cash.
Page 85
Understanding Book-keeping Book one
Page 86
Understanding Book-keeping Book one
3. The process of buying goods or services for the purposes of reselling them is known as:-
A. Customer
B. Purchases
C. Supplier
D. Sales.
6. If refers to cm Account prepared at the end of the financial year to determine the Gross profit
or gross loss of a business:-
A. Balance sheet
B. Purchases Account
C. Trading Account
D. Profit and loss Account.
7. Which of the following is considered as part of purchases and it increase the cost of goods
Available for Sale?
A. Carriage outwards
B. Returns outwards
C. Carriage in wards
D. Returns in wards.
Page 87
Understanding Book-keeping Book one
9. An Account prepared to determine the net profit or Net less of a business at the end of the
Trading period is known as:-
A. Sales Account
B. Trading Account
C. Balance Sheet
D. Profit and loss Account.
12. Juma commenced business with capital in cash Shs. 12000 on 1st March, 1970.
March 1. Bought goods on Credit from RTC 7500
3. Bought goods from kikuba Ujamaa village 2000
4. Paid RTC on Account 6000
9. Purchased weighing scales 4000
13. Cash sales to date 10000
15. Paid wages 2000
19. Sold goods on credit to Chaku. 12000
20. Paid Transport expenses 300
25. Paid to Kikuba Ujamaa village on account 1000
28. Paid General expenses 250
Required: Prepare the necessary ledger account to record the above information. Balance the
accounts and take out a Trial Balance.
Page 88
Understanding Book-keeping Book one
13. Ringia commenced business with capital in Cash Shs 20,000 on 1st April
April 2. Purchased for cash a new machine 20000
5. Purchased for cash premises 150000
7. Purchased cash goods 30000
8. Cash sales to date 70000
10. Wages paid to assistant 30000
15. Received a loan in cash from NBC Tanga 10000
16. Sales for the day 34000
19. Purchases during the week 60000
20. Paid electricity bill 2000
21. Paid cash for stationery 1000
25. Repayment of loan in cash 10000
25. Interest paid in cash 15000
31. Salaries paid during the month 30000
Required: Open the ledger accounts to record the above information.Balance the accounts and
take out a Trial Balance.
14. Fatuma Mnyonge commenced business on 1st September with capital in cash Shs . 25,0000.
Sept. 1 Bought goods for cash 50000
1. Sold goods for cash 40000
2. Paid wages in cash 30000
3. Paid cash for goods bought 60000
4. Cash sales to date 60000
5. Sold goods for cash 20000
6. Paid carriage on goods 20000
8. Cash sales to date 30000
8. Purchased goods for cash 80000
9. Paid assistant in cash 30000
10. Cash sales to date 80000
11. Purchased goods for cash 65000
11. Paid carriage in purchases15000
25. Cash purchases 60000
27. Cash sales to date 60000
30. Paid wages to assistant. 30000
Required: Balance the cash a/c and complete the ledger accounts as at 30th September 1982.
Page 89
Understanding Book-keeping Book one
15. Islam Moshi started business on the 1st of October 1980 with capital in cash 20,0000
Oct 2 Bought goods and paid cash 12000
3. Bought scales for cash 75000
5. Paid for advertising charges 18000
7. Cash sales to date 85000
10. Bought goods for cash 40000
15. Sold goods for cash 60000
18. Paid wages in cash 60000
20. Bought goods for cash 20000
25. Cash sales to date 75000
27. Paid salary in cash 75000
28. Paid rent 12000
30. Paid electricity bills 80000
Required: Enter the above transactions in the cash book. Account, complete the double entry
and balance the accounts as at 30th October 1980.
16. On 1st November 1982. Ustadhi Lod started business with capital in Cash 10,000 Nov 1982
Nov 2 Purchased goods for cash 5000
3. Sold goods for cash 4000
5. Paid wages 1000
8. Cash sales to date 2800
10. Bought typewriter for office use for cash 2000
12. Purchased goods for cash 3000
15. Paid for water bill 2000
18. Sold goods for cash 3000
21. Paid for Electricity 4000
24. Paid Salary 1200
26. Purchased goods for cash 2000
28. Cash sales to date 3500
30. Paid for wages 5000
31. Paid Salary 8000
Required: Using the double Entry system, record the above transaction in the ledger. Balance
the account and bring down the balances.
Page 90
Understanding Book-keeping Book one
17. Moshi Rashid commenced business on 1st of June 1980 with Shs 100000.00 as capital
June 2 Bought goods for cash 50000
2. Paid Transport charges 50000
3. Bought packing materials and paid cash 10000
4. Sold goods for cash 30000
5. Sold goods for cash 10000
6. Purchased goods and paid cash 18000
8. Paid wages 38000
10. Cash sales 20000
12. Cash purchases 15000
15. Cash sales to date 250000
20. Paid rent 65000
Required. Enter the above Transactions in the Cash Account, complete the double entry balance
the accounts at the end of the Month and carry down the balances.
18.Mkomwa started business on 1st May 1980 with a Capital in Cash 20,000.00
May 2. Bought goods for cash 10000
3. Bought furniture for cash 20000
4. Sold goods for cash 50000
5. Paid Advertising charges 54000
8. Cash Sales 12000
10. Bought goods for cash 50000
15. Paid Rent 10000
18. Purchased goods for cash 80000
20. Paid wages 40000
25. Sold goods for cash 30000
Required. Prepare cash account for the month of May 1st, 2015
Page 91
Understanding Book-keeping Book one
(ii) Is the book – keeping principle which Separate the owner of the business and the
Business.
(a) Dual Aspect
(b) Double entry principle.
(c) Materiality Concept.
(v) The money Assets which are invested into the business
(a) Liabilities
(b) Assets
(c) Capital
Page 92
Understanding Book-keeping Book one
9. Distinguishing between.
(i) Cash transaction and credit transaction.
(ii) Receipts and invoice
(iii) Double entry principle and Business entity concept.
(iv) Balance carry down and Balance broat down.
(v) Business and Book – keeping.
Page 93
Understanding Book-keeping Book one
12. Choose the correct term from COLUMN B which Matches with the Explanation in
COLUMN A and write its letter Against the number of the corresponding Explanation in the
table provided.
COLUMN A COLUMN B
(i) Excess of Sales over cost of goods sold A. Gross loss
(ii) Is the excess of expenses over income (gross profit) B. Gross profit
(iii) A statement which shows the financial position of the business. C. Sales Account
(iv) Is the main book of Account for proper record of the business D. Ledger
transactions? E. Purchases
(v) Is the process of buying of goods or services for the purpose of selling F. Net profit
them? G. Transaction
(vi) Are costs incurred by the firm in the process of earning revenue for H. Balance sheet
example Salary and wages? I. Credit transaction
(vii) Is a statement showing the list of debit and credit balances of accounts J. Net purchases
Extracted from ledgers? K. Trial Balance
(viii) Occurs when payment is made later after the goods have been supplied. L. Balance sheet
(ix) The cost of goods purchased plus carriage in wards minus returns M. Net loss
outwards. N. Expenses
(x) The transfer of goods or services from one person to another. O. Closing stock
13. Enter the following information in the Balance sheet of KALIDUSHI MADAMA Co. LTD as at
31st Dec 2003.
Cash in hand 60000
Cash at bank 25000
Stock 50000
Creditors 34000
Debtors 27500
Bank over draft 40000
Loan from B.D.A 13500
Net profit 95000
Furniture 11500
Fixtures and fittings 35000
Machinery 60000
Buildings 80000
Drawings 20000
Capital 168500
Page 94
Understanding Book-keeping Book one
14. Given the trial balance of Mrs. Dorcas nyamasiri as at 31st Dec 1901.
PARTICULARS DR (TSHS) CR (TSHS)
Purchases and Sales 14750 23000
st
Stock 1 Jan 1901 6000
Returns 750 1000
Drawings / capital 3350 50200
Insurance 1850
General Expenses 1400
Debtors and Creditors 5000 7500
Land 25000
Premises 17500
Furniture 12500
Cash at Bank 2850
Cash in hand 3250
Loan from ABC 12500
94200 94200
15. From the trial balance below, prepaid the trading and profit and loss Account of MALIWA
suppliers Ltd and Extract the Balance sheet as at 31st Dec 2000
Details DR (Tshs) ‘00” CR (Tshs) “00”
Telephone charges 500
Capital 485150
Drawings 4500
Loans from Kurubone 5650
Cash 1250
Bank 2500
Discount allowed 3800
Creditors 2000
Debtors 1350
Moto vehicle 4800
Interest Received 350
Machinery 1000
Purchases Returns 442900
Sales Returns 6000
Carriage out wards 1750
Carriage in wards 1500
Wages and Salary 2700
Purchase and Sales 36250 65000
Stock 1st Jan 2000 6250
Page 95
Understanding Book-keeping Book one
559150 559150
st
Note: Stock 31 Dec 2000 was valued at Tsh 2,750
GROSSARY
Account: Is a part of double entry records, containing details of transaction for a specificity item.
Accounting: The uses to which data recorded by book keep can be put for various purposes.
Assets: Are resources owned by a business.
Balance brought down: The difference between both sides of an account that is entered below
the totals on the opposite side to the one on which the balance carried down was entered. it is
abbreviated by b/d
Balance carried down: The difference between both sides of an account that is entered above the
total and makes the total of both sides equal each other. This abbreviated to c/d.
Balance off the account: Insert the different (called a balance) between the two sides of an account
and then total and rule off the account. This is normally done at the end of period (usually a month,
a quarter or a year).
Balance sheet: Is a statement which shows the financial position of the business it showing the
assets, liabilities and capital of a business.
Bank cash account: A cash book that only contains entries relating to payments into and out of
the bank.
Bank loan: An amount of money advanced by a bank that has a fixed rate or interest that is charged
on the full amount and is repayable on a specified future date.
Book keeping: The process of recording data relating to accounting transactions in the accounting
books.
Books of original entry: Are books which a transaction is first to be recorded before posting to
the respective account.
Carriage inwards: Is the cost of transport the goods into a business, it occurred after purchases
of the goods and it is paid by buyer/ customer.
Carriage outward: Is the cost of transport the goods out to the customers of a business.
Cash book: Is a book of original entry for cash and bank receipts and payments.
Close off the account. Is a totaling and ruling off an account on which there is no outs standing
balance.
Contra. A contra for cash book items is where both the debit and the credit entries are shown in
the cash book such as when cash is paid into the bank.
Credit: The right hand side of the account in double entry.
Creditor: A person to whom money is owed for goods or services.
Current assets: An assets consisting of cash, goods for resale or items having a short life.
Current liabilities: Is a liability which isto paid for within a year of the balance sheet date.
Debit: A left hand side of the account.
Debtor: A person who owes money to a business for goods or services supplied to him.
Discount allowed: A deduction from the amount due given to customers who pay their accounts
within the time allowed.
Discount received: A deduction from the amount due given to a business by a supplier when
their account is paid before the allowed has elapse.
Page 96
Understanding Book-keeping Book one
Double entry book keeping: A system where cash transaction is entered twice, once on the
debit side and once on the credit side.
Drawings: Funds or goods taken out of a business by the owner for their private use.
Expenses: The value of all the assets that have been used up to obtain revenues.
Final accounts: This is a term previously used to refer to statements produced at the end of
accounting period such as the trading and profit and loss account and the balance sheet now days
the term financial statement is more commonly used.
Fixed assets: An assets which have a long life bought with the intention to use them in the business
and not with the intention to simply resell them.
Gross loss: Is where the cost of goods sold exceeds the sales revenue.
Gross profit: Is where the sales revenue exceeds the cost of goods sold.
Impersonal accounts: all accounts other that debtors and creditors accounts.
Liabilities: Total of funds owed for assets supplied to a business or expenses incurred not yet paid.
Loss: The result of selling goods for less than they cost.
Net loss: where the cost of goods sold plus expenses is greater than the revenue.
Net profit: where sales revenue plus other income such as rent received exceed the sum of cost of
goods sold plus other expenses.
Nominal accounts: accounts in which expenses, revenue and capital are recorded.
Personal accounts: accounts in which expenses, revenue and capital are recorded.
Personal accounts: accounts for creditors and debtors.
Posting: The act of transferring information into ledger accounts from books of original entry
Profit: The result of selling goods or services for more than they cost.
Profit and loss account: An account in which net profit or net loss is calculated.
Purchases: Goods bought by the business for the prime purpose of selling them again.
Purchases ledger: A ledger for supplier’s personal accounts.
Real accounts: Accounts in which properly of all kinds in recorded.
Returns inwards: Goods returned by customers (also known as sales returns)
Returns outwards: Goods returned to supplies (also known as purchases returns.)
Sales: Goods sold by the business in which it normally deals which were bought with the prime
intention of resale.
Stock: Goods in which the business normally deals that are held with the intention of resale.
Trading account: An account in which gross profit is calculated
Trade discount: A deduction in price given to a trade customer when calculating the prime
thebe charged to that customer for some goods.
Trading balance: A list of accounts title and balance in the ledger on a specific date. Shown in
debit and credit column
Vat (value added tax): A tax charged on the supply of most goods and services.
Balance: The difference between the Debit and Credit side of an account
Accounting equation: A tool of accounting which is used for balancing the resources of the
business and the claim to those resources
Bank overdraft: Is the excess amount withdrawn from the bank account to the available balance
Debts: The amount of money owed to the business for goods supplied
Journal: A chronological accounting record of a business transaction
Page 97
Understanding Book-keeping Book one
Journal proper: One the books of original entries in which assets bought on credit and capital
expenditure are recorded
Capital: The amount of resource realized in business for the purpose of generating profit
...............................................................*END*……………………………………………………
Page 98