SUBJECT: GRADE: DATE: WEEK: CAPS SECTION:

EMS 7 8 9 Term 3: Week 1 Term 3: Week 1 Fin Literacy

Learners must be able to:
1. identify the different steps in the accounting cycle.
AIMS OF LESSON:
2. list the sequence of the accounting cycle.
3. analyse the various steps in the accounting cycle.
PAPER BASED RESOURCES:
DIGITAL RESOURCES:
RESOURCES • Use your text book to read up on the accounting
• https://www.youtube.com/watch?v=36s_VHDeYHM
cycle.

• You will remember that you were introduced to the following concepts in Term 1:

➢ Sole trader; debit; credit; capital; owner’s equity; income; expenses; profits; losses;
INTRODUCTION transactions; liabilities; assets; banking; cash receipts; cash payments; subsidiary journals;
accounting equation: assets = owner’s equity + liabilities (A=O+L)

➢ This week we are going to see where the different concepts fit into the Accounting cycle.

• Accounting cycle :

➢ The accounting cycle starts when a transaction takes place and ends with the drawing up of the financial
statements.
Steps in the accounting cycle :

TERMINOLOGY 1. Transactions
2. Source documents
3. Subsidiary journals
4. General Ledger
5. Trial Balance
6. Financial statements - Income statement and Balance Sheet(You are only going to be introduced to the
financial statements in Grade 10 Accounting).
 • Transactions

➢ A transaction is an agreement between a buyer and seller to exchange a good or service for money.
➢ For example, when you go to the hairdresser to wash and style your hair you agree to pay the hairdresser a set
amount of money to wash and style your hair.
➢ Recording the transaction is the first step in the accounting cycle.

• Source documents
▪ A source document is the original record that contains the details of a transaction that has taken place.
▪ During each transaction a source document is completed in duplicate which is used to enter the
transactions in the correct subsidiary journal e.g.:

➢ Cash register slip / - roll

➢ Cash invoice
➢ Receipt
CONCEPTS ➢ Bank deposit slip
and/or ➢ Proof of EFT receipts/payments
SKILLS
➢ Bank statement

▪ Source documents contains following important information:

1. the date on which the transaction takes place.

2. the document number.
3. the persons/businesses involved in the transaction.
4. the reason for the transaction.
5. the amount involved.
• Subsidiary journals

• Subsidiary journals are called “books of first entry” because the transactions are first entered in the subsidiary journals
e.g. :

➢ Cash receipts journal (CRJ) : the subsidiary journal in which all the money that the business receives on a daily
basis is entered.

Cash receipts journal of Larah’s Garden Services – February 2020 CRJ 1

Doc Day Details............... Fol Analysis of Bank........... Current Sundry accounts

no receipts Income....... Amount...... Fol Details..........

➢ Cash payments journal (CPJ) : the subsidiary journal in which all money that the business pay per,
Electronic fund transfer (EFT) or cash on a daily basis, is entered.

Cash payments journal of Larah’s Garden Services – February 2020 CPJ 1

Doc Day Details......... Fol Bank........ Material.. Wages Equip- Sundry accounts
no Costs ment Amount Fol Details

• General Ledger
▪ The general ledger contains a summary of all the journals.
▪ At the end of the month all the journals are totalled and the information for every account in the General
Ledger is transfered through a process called posting.
▪ The General Ledger consists of a Balance Sheet accounts section and a Nominal accounts section.
 General Ledger of Larah’s Garden Services
Balance sheet accounts-section
Dr Account’s name B1 Cr
Date Day Details Fol Amount Date Day Details Fol Amount

Nominal accounts section

Dr Account’s name N1 Cr
Date Day Details Fol Amount Date Day Details Fol Amount

• Trial Balance
➢ A trial balance is a summary (list) of the closing balances of the accounts in the general ledger.
➢ The trial balance is used to test the application of the double entry principle.
➢ If all accounts are debited and credited correctly ( “double entry”), the debit and credit columns’ totals
should be equal.

• Financial statements ( for enrichment only)

➢ Income statement ( Statement of comprehensive income)
➢ Balance Sheet ( Statement of financial position )
▪ Activity1
1.1 Identify the appropriate source document and journal for the transactions below.
Transaction Source Subsidiary
document journal
1.1.1 Cash received for services rendered.
1.1.2 The owner increased his capital contribution.
CONSOLIDATION
1.1.3 Pay salaries per EFT.
ACTIVITIES
1.1.4 The bank credited our account with interest.
1.1.5 The tenant deposited her rent for June directly in the
businesses current account.
1.1.6 Receive a loan from the bank.
1.1.7 Electronic fund transfer for the purchase of a cash register.
▪ Activity 2

2.1 Discuss TWO reasons why it is important for businesses to keep record of their source documents?

▪ Activity 3

3.1 From the list below, select the concept that best fits the given statements.
List :

Trial balance ; left hand ; transaction ; right hand side ; cash register roll ; subsidiary journal

NR. STATEMENT Answer

1.1. An action or event that indicates the transfer of money.
1.2. Proof that the business received money from customers..
1.3. It is also known as books of first entry.
1.4. The ... –side of the general ledger is called the debit side.
1.5. The ... tests the accuracy of the dubbel entry system.
 • Activity1
1.1 Identify the appropriate source document and journal for the transactions below.
Transaction Source document Journal
1.1.1 Cash received for services rendered. Cash register roll / CRR CRJ
1.1.2 The owner increased his capital contribution. Receipt/Bank statement CRJ
1.1.3 Pay salaries per EFT EFT reference number CPJ
1.1.4 The bank credited our account with interest. Bank statement CRJ
1.1.5 The tenant deposited her rent for June directly in the Receipt/Bank statement CRJ
businesses current account.
1.1.6 Receive a loan from the bank. Receipt/Bank statement CRJ
1.1.7 Electronic fund transfer for the purchase of a cash register. Bankstatement/EFT proof CPJ

• Activity 2
2.1 Dicuss TWO reasons why it is important for businesses to keep record of their source documents?
MEMORANDUM
OF ACTIVITIES • Errors or ommisions may have occurred during the processing of the transactions.
• The customers can query the amounts or goods that appear on the source documents.
• Suppliers can query the amounts they were paid.

• Activity 3
3.1 From the list below, select the concept that best fits the given statements.
List :
Trial balance ; left hand ; transaction ; right hand side ; cash register roll ; subsidiary journal

NR. STATEMENT Answer

1.1. An action or event that indicates the transfer of money. Transaction
1.2. Proof that the business received money from customers.. Cash register roll
1.3. It is also known as books of first entry. Subsidiary journal
1.4. The ... –side of the general ledger is called the debit side. left hand
1.5. The ... tests the accuracy of the dubbel entry system. trial balance