ACCOUNTING FRAMEWORK

BCOM FISCAL STUDIES

AUDIT AND INVESTIGATIONS 1
 INTRODUCTION
• The current set up in Zimbabwe is that quite a
great portion of business is taking place in the
informal sector.
• Be it manufacturing, farming, mining or
buying and selling.
• This has given rise to challenges in that a
significant number of people do not
necessarily keep accounts of any sort.
 INTRO CONT.
• Further to this, there has been a growing
tendency towards corruption and a surge in
white collar crime.
• Nevertheless, we still have good accounting
systems and some very good accounting
packages available for use.
SINGLE ENTRY AND DOUBLE ENTRY
• The general bookkeeping and accounting in the
country is good and is well managed and
regulated through different accounting bodies
which all fall under the umbrella of PAAB.
• Some organizations use single entry bookkeeping
while others use double entry bookkeeping.
• At the end of the day they all have to prepare a
set of financial statements for use by different
stakeholders.
 SINGLE ENTRY BOOKKEEPING
• Single-entry bookkeeping uses only income and expense
accounts.
• The primary bookkeeping record in single-entry
bookkeeping is the cash book, which is similar to a
checking (cheque) account register but allocates the
income and expenses to various income and expense
accounts.
• Separate account records are maintained for petty cash,
accounts payable and receivable, and other relevant
transactions such as inventory and travel expenses.
 DOUBLE ENTRY BOOKKEEPING
• Double-entry bookkeeping requires posting
(recording) each transaction twice, using debits and
credits.
• Here a set of books is kept to keep a record of
transactions.
• A daybook is a descriptive and chronological (diary-
like) record of day-to-day financial transactions also
called a book of original entry. The daybook's
details must be entered formally into journals to
enable posting to ledgers.
 DOUBLE ENTRY CONT.
• Daybooks include:
• Sales daybook, for recording all the sales invoices.
• Sales credits daybook, for recording all the sales credit notes.
• Purchases daybook, for recording all the purchase invoices.
• Purchases credits daybook, for recording all the purchase
credit notes.
• Cash daybook, usually known as the cash book, for recording
all money received as well as money paid out. It may be split
into two daybooks: receipts daybook for money received in,
and payments daybook for money paid out.
 DOUBLE ENTRY
• Petty cash book
• A petty cash book is a record of small value purchases usually controlled
by imprest system. Items such as coffee, tea, birthday cards for
employees, stationery for office working, a few dollars if you're short on
postage, are listed down in the petty cash book.
• Journals
• A journal is a formal and chronological record of financial transactions
before their values are accounted for in the general ledger as
debits and credits. A company can maintain one journal for all
transactions, or keep several journals based on similar activity (i.e.
sales, cash receipts, revenue, etc.) making transactions easier to
summarize and reference later. For every debit journal entry recorded
there must be an equivalent credit journal entry to maintain a balanced
accounting equation.
 LEDGER
• Ledgers
• A ledger is a record of accounts. These accounts are
recorded separately showing their beginning/ending
balance. A journal lists financial transactions in
chronological order without showing their balance but
showing how much is going to be charged in each account.
A ledger takes each financial transactions from the journal
and records them into the corresponding account for every
transaction listed. The ledger also sums up the total of every
account which is transferred into the balance sheet and
income statement. There are 3 different kinds of ledgers
that deal with book-keeping.
 LEDGER
• Ledgers include:
• Sales ledger, which deals mostly with the Accounts
Receivable account. This ledger consists of the financial
transactions made by customers to the business.
• Purchase ledger is a ledger that goes hand in hand with
the Accounts Payable account. This is the purchasing
transaction a company does.
• General ledger representing the original 5 main
accounts: assets, liabilities, equity, income, and
expenses
 LEDGER
• Chart of accounts
• A chart of accounts is a list of the accounts codes that can be identified with
numeric, alphabetical, or alphanumeric codes allowing the account to be
located in the general ledger.
• Computerized bookkeeping
• Computerized bookkeeping removes many of the paper "books" that are used
to record transactions and usually enforces double entry bookkeeping.
• Online bookkeeping
• Online bookkeeping, or remote bookkeeping, allows source documents and
data to reside in web-based applications which allow remote access for
bookkeepers and accountants. All entries made into the online software are
recorded and stored in a remote location. The online software can be
accessed from any location in the world and permit the bookkeeper or data
entry person to work from any location with a suitable data communications
link.
 FINANCIAL ACCOUNTS
• The bookkeeper brings the books to the trial balance stage. An
accountant may prepare the income statement and balance sheet
using the trial balance and ledgers prepared by the bookkeeper
• Finally financial statements are drawn from the trial balance, which
may include:
• the income statement, also known as the statement of financial
results, profit and loss account, or P&L
• the balance sheet, also known as the statement of financial position
• the cash flow statement
• the statement of retained earnings, also known as the statement of
total recognised gains and losses or statement of changes in equity