1.1To understand nature and purpose of accounting.

1.2To understand the users of accounting information.

1.3To apply qualities of accounting information.

1.4To apply accounting concepts/principles and conventions

1. Explain source documents.

2. Prepare books of original entry.

3. Prepare Ledger Accounts.

4. Extract Trial Balance from ledger accounts.

I) . Identify capital assets and liabilities

II) . Be able to create an accounts receivable journal and balance it on P&L

III). Trainees are able to identify bad debts and when to provide for bad debts

1. determine errors that can be detected by the trial balance

2. identify the errors that causes the trial balance not to balance

3. identify the errors that cause the trial balance to balance

4. determine the procedures of correcting errors

5. identify errors that can be corrected by suspense account

6. prepare the suspense account

1. Define the term bank reconciliation statement

2. state the Needs and importance of preparing bank reconciliation statement

3. Be able to prepare Bank Reconciliation Statement

4. State and explain the effect of time intervals on bank reconciliation statement

1. Accounts receivable

2. Bad debts

3. Allowance for doubtful debts

1. what is accounts receivable

This is the money that is owed by an organization through its debtors. They represent the money the organisation is entitled to and are usually captured as current assets.

Accounts receivable provide valuable information about a customers creditworthiness as well as the business' financial health.

Theses accounts are classified into 3 main categories

a). Accounts receivable

These happens when a business extends credit facilities to its customers and the payment period is agreed by both parties

b). Notes Receivables

These are promissory notes that are given to an organization. Like accounts receivable, notes receivable are recorded as an asset because they represent monetary value that the business expects to collect. They usually have an expiry duration within which they should be paid, however, if that period expires they attract an interest.

C). Other receivables

This are other receivables that are expected. They include salary advances extended to employees, interests accumulated by the organisation and tax refunds.

Roles of Accounts receivable

1. Risk Management

Through proper documentation of accounts receivable, an organization is able to access a customer's credit worthiness before extending credit to them. This ensures that the organization is also able to minimize on bad debts and reduces potential losses due to customers' defaulting to make payments on goods or services sold.

E.g

A customer wants to hold an event at a hotel for around 50 pax at a cost of Ksh. 100,000 on 20th October, however, he wants make payments after the event has been held. The sales team consults with the credit manager and upon checking on their records, they realize that this customer has an outstanding debt of Ksh. 20,000 from a previous event that was held in the same hotel, 3 years ago. The credit manager declines to extend credit to this customer.

2. Management of cash flow

Collection of outstanding debt in a timely manner ensures that there is steady cash flow within an organization which ensures that the day-to-day expenses are met.

3.Financial Analysis

The aging of accounts receivable provides data that is crucial in the analysis of a business by identifying trends, potential issues for improvements in formulation of credit and collection policies.

BAD DEBTS

Some customers who have been allowed credit may not pay up their accounts for various reasons. When a debtor is not able to pay up their account it becomes a bad debt. Therefore, the organization should write it off from the accounts and this becomes an expense that should

be charged in the profit & loss account.

In practice a firm may also be, unable to collect all the amounts due from debtors. This is because a

section of the debtors will not honor their obligations. The problem posed by this situation is that it

is difficult to identify the debtors who are unlikely to pay their accounts. This amount will not be collected may also be difficult to ascertain. These debts that the firm may not collect

are called doubtful debts. A firm should therefore provide for such debts by charging the provision

in the income statement account. Provision for doubtful debts may be specific or general;Specific

relate to a debtor whom we can identify and we are doubtful that he may pay the debt (if one of our

debtor goes out of business).

Provision for Bad-Debts

A provision for doubtful debts can either be for a specific or a general provision. A specific

provision is where a debtor is known and chances of recovering the debt are low.

The general provision is where a provision is made on the balance of the total debtors i.e. Debtors specific or general;Specific

relate to a debtor whom we can identify and we are doubtful that he may pay the debt (if one of our

debtor goes out of business).

Provision for Bad-Debts

A provision for doubtful debts can either be for a speCific or a general provision. A specific

provision is where a debtor is known and chances of recovering the debt are low.

Group leader:mukami540@gmail.com

1.Explain and give examples of,

I. Current Assets and Non current Assets

ii. Tangible and Intangible assets

2.Define what property plant and equipment is and be able to recognize assets and classify them accordingly.

3.Be able to identify various ways of measuring items of property plant and equipment.

4.Be able to explain depreciation and the factors causing depreciation, explaining the need for depreciation.

5.Be able to explain various methods of calculating depreciation.

6.Explain what disposal of an asset is and the various methods of asset disposal.

8.Explain what revaluation of assets is and its importance.

9.Come up with property plant and equipment movement schedule.

10.Be able to compute depreciation using various methods of depreciation.

Learner to outline the types of control accounts.

Learner to discuss the uses of control accounts.

Learners to know how to prepare sales ledger control account and purchases ledger control account.

Definition of terms

Source Documents- These are original records that provide evidence of financial transactions and serve as the foundation for recording transactions in accounting systems.

Books of Original Entry- Also known as journals. These are where financial transactions are initially recorded in a chronological order before being transferred to the general ledger.

Ledger Account- it is an account with a 'letter T' shape with a debit on the left side and credit on the right side that records a financial item.

Trial Balance- an accounting report statement that lists all the accounts in a company's general ledger along with their respective debit or credit balances before adjustments are made for errors.

Cashbook- its an accounting record of all cash transactions, including both receipts and payments, providing a detailed account of a company's cash inflows and outflows.

Petty Cashbook- it records small payments of cash that are insensible to pay by cheque.

Double entry system-it is a system with a set of rules for recording information in a financial accounting system in which every transaction or event affects at least two different nominal ledger accounts.

Source Documents Examples

1. Quotations- documents that let potential customers know the cost of goods or services before they decide to purchase them.

2. Purchase Orders- commercial document issued by a buyer to the seller indicating type, quantities, and agreed prices of products/services that the seller will provide to the buyer.

3. Statement of Account- Its a record of the transactions that have occurred on a customer's account during a specified period of time.

4. Remittance Advice- It's a letter sent by a customer to a supplier to inform the supplier that the invoices have been paid.

5. Receipts- these are documents raised by the firm and issued to customers when they make payment in the form of cash or cheques.

6. Petty Cash Vouchers- It's a document used to document a disbursement (payment) from petty cash fund.

7. Sales Invoice- it is a document issued by a seller to a buyer, detailing the products or services sold, their prices, and terms of the sale when the seller makes credit sales.

8. Purchase Invoice-it is a document issued by a seller to a buyer, specifying the goods or services purchased, their costs, and payment terms when the buyer makes credit purchases.

9. Credit Note- is a document issued by a seller to a buyer, indicating a reduction in the amount owed due to returned goods, overcharges, or other adjustments.

10. Debit Note-is a document sent by a buyer to a seller, requesting a reduction in the amount owed due to overcharges, returned goods, or other adjustments. It serves as a formal notification to the seller of the debit issued to the seller's account, often used to adjust accounts payable balances.

11. Bank Statement- it's a summary of financial transactions which have occurred over a given period of time in a bank account held by a person/business with a financial institution.

Books of Original Entry Types

1. Sales Journal- It is used to record all credit sales transactions of goods or services, typically organized by customer name or account number.

2. Purchases Journal-It contains a record of all credit purchases of goods or services, usually arranged by supplier name or account number.

3. Returns Inwards (Sales Returns)Journal-It records goods or services returned by customers. It documents the return of defective, damaged, or unsatisfactory items previously sold on credit.

4. Returns Outwards (Purchases returns)Journal-It is used to record goods returned to suppliers. It documents the return of defective, damaged, or unwanted items previously purchased on credit.

5. Cashbook-It is used to record all cash transactions, including both receipts and payments. The cashbook provides a detailed record of cash inflows and outflows, facilitating cash management and financial decision-making.

General Journal (Journal Proper)- used to record transactions that do not fit into specialized journals like sales, purchases, or cash journals. It records adjusting entries, accruals, corrections, and unusual or non-routine transactions.

THE LEDGER ACCOUNT

It is an account with a simple structure shaped like letter T with debit entries on the left side and credits on the right side.

Classification of Ledgers

1. Sales Ledger- is a record of a company's sales, showing the amounts paid and owed by customers.

   -Accounts of all debtors

2. Purchases Ledger - subsidiary ledger that records all purchases made by a business on credit.

   -Accounts of all creditors

3. General ledger- a record of all past transactions of a company, organized by accounts.

-Also, ledgers record other items including Assets, Liabilities, income, expenses, and capital.

The accounting equation (A=C+L) form the basis of double entry and therefore it should always be retained.

DOUBLE ENTRY SYSTEM

It is a simple accounting principle that states that for every debit entry of every transaction, there is a corresponding credit entry.

Steps involved in preparing Ledger Accounts

1. Identify the two accounts involved

2. Identify the effect on the account identified i.e. increase or decrease.

3. Post the transaction into the identified account i.e. Dr or Cr.

1 Define the term sole proprietor

2. To prepare income statement

3. To prepare the statement of financial position

4.Analyse and interpret financial statements