KINGSMEAD COLLEGE

IKORODU, LAGOS

FINANCIAL ACCOUNTING E-NOTE

For

1st Term 2023/2024

YEAR 10

SCHEME OF WORK

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WEEK TOPIC
1. Book-keeping and Accounting: Definition and meaning of Book-keeping and
AccountingOrigin; Accounting as a profession; Future prospects. The need for Book-
keeping and Accounting. Users of Accounting information and its purpose Accounting
professional bodies. Ethics of Accounting

2. History of Accounting in Nigeria

3. Career opportunities in Book keeping and Accounting

4. Accounting equation: Meaning of assets, liabilities and owners equity (Capita). State the
accounting equation and apply the accounting equation.
5. Principles and Practice of Double Entry/ Ledger: Concept of the double entry.
Review of double entry with comprehensive illustrations. Uses of General Journal.
6. Source Documents: Meaning, uses, types- Credit Note, Debit Note, Receipt etc.
7. Subsidiary Books: Meaning, uses, types- Sales daybook. Return Inward Journal, Return
Outward Journal.
8. Subsidiary Books: Working exercises on Sales daybook and Return Inwards Journal and
posting them to ledger.
9. Working exercises on Purchases daybook and Return Outwards Journal and posting
them to ledger.
10. One Column Cash Book: Meaning, uses and working exercises.
11. Double Column Cash book: Meaning, Bank transactions, contra entry, posting and
balancing of Cash Book.
12. Revision.
13. Examination.

REFERENCE:
 O.A. Longe, etal; Essential Financial Accounting, Tonad publisher, Lagos , Nigeria
 2012. (page)
 Frank Wood, Business Accounting 1, Longman, Nigeria, 2008. (Page 72-77)
 Robert. O.I., Financial Accounting Made Simple 1, ROI publisher, Lagos Nigeria,
latest edition. (14-16)
 Simplified and Amplified Book keeping and Accounting

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 INTRODUCTION AND HISTORICAL DEVELOPMENT OF BOOK KEEPING

Meaning of Book Keeping:

Book-keeping from time immemorial has been defined as a science of recording business
transactions in a systematic manner so as to exact financial position of the business that can be
easily ascertained at any time.
Book-keeping may be defined as the art of recording business transactions in a systematic
manner so that the books of account will reveal at any time the financial position of the business
to the owner and other stakeholders in the business.

Meaning of Accounting:
Accounting is the process of obtaining, recording, classifying, summarizing, reporting,
interpreting and presenting financial information in a manner that will facilitate informed
decision by the users of accounting information.
Boateng, (1884)”accounting is the process of identifying, measuring, and communicating
economic and financial information to permit informed judgment and decision by the users of
the information”.

History of Accounting in Nigeria

Origin of Accounting in Nigeria
Nigeria has a long standing history in international trade even before colonization came to
Africa. Back in the olden days, properly organized system of trade and government were in
existence in the ancient kingdoms of South- south/ South-west, Western part of Nigeria, and part
of the Northern part (Benin, Oyo and Borno, etc.).
The granting of the Royal Charter to Niger Company in 1886 necessitated the preparation of
proper records by the company. From that time till the independence in Nigeria in October 1960,
the law governing accounting in Nigeria was tailored after her colonial master (Great Britain).
The Association of Accountants of Nigeria, which later became Institute of Chartered
Accountants of Nigeria, was established in the 1965. Majority of the members were trained in
Britain.
In 1965, the Federal government of Nigeria passed an Act of Parliament No.15 establishing the
Institute of Chartered Accountants of Nigeria and was affiliated with the professional Institute of
Britain and United State of America (USA).
Many Nigerians came back as professional accountants and became a member. One of the
doyens of accounting profession in Nigeria is Chief Akintola Williams. The Institution has about
26,000 Accountants as at December 2008 and more than 120,000 as student members.
The two major accounting professional bodies in Nigeria are ICAN and ANAN. The Association
of National Accountants of Nigeria (ANAN) was formed in 1979 with the Headquarter in Lagos,
Nigeria.
In 1982, Nigeria Accounting Standard Board was born to set standards to guide accounting
operations. Members include:
 Central Bank of Nigeria
 Ministry of Finance
 Nigeria Accounting Teachers Association
 Chamber of commerce
 Office of the Auditor General etc.

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WHO IS AN ACCOUNTANT?
An accounting is a person who has undergone a formal or professional training in the process of
accounting and who belongs to at least one of the recognized professional accounting bodies.
ROLES OF AN ACCOUNTANT
 Preparation and presentation of timely and accurate financial/ accounting reports to
management.
 Identification of areas of inefficiency and wastage of resources.
 Treasury functions- rising finance, cash management and so on.
 Setting up effective system of internal and accounting controls.
 Preparation of feasibility reports.
 Investigation of fraud within the organization.
TYPES OF ACCOUNTANTS
 Financial Accountant
 Cost Accountant
 Management Accountant.
 Tax Accountant
 Auditor
Accounting as a profession
Profession: is a field of study, a unique career or a job requiring special expertise or skill and
operates with principle or standards agreed upon by members (professionals).
Accounting is a profession because it is field of study or a career that requires figure
manipulation skill and unique expertise and operates with sets of principles and standards
agreed upon by its members(professionals).
Accounting opens doors in every kind of business coast to coast. It can prepare you to become a
partner in an accounting firm, to pursue a career in finance or corporate management, to work in
government, or even to become an entrepreneur. In fact, no matter what you decide to do, having
an accounting background can open doors wide."
The reason why accounting may be the best route to a successful business career is, accounting
has always been considered as the language and basic tool of business. It has always concerned
itself with determining how a business is doing and what the bottom line is. In this increasingly
complex and competitive business environment, accounting skills are very much in demand and
accounting has become a dynamic career.
The demand for accountants appears to be growing and outstripping supply. Job opportunities in
today’s business climate are better than ever for accountants.

NEED FOR BOOK-KEEPING AND ACCOUNTING:

The recording phase of accounting is known as the book-keeping. The practice of accountancy
will be virtually impossible if there is no day-to-day recording of financial transactions as they
occur.
(a) Keeping Accounting records as a soul of the business: Recording of relevant information
in accounting is the pivotal and backbone of accounting principle. The recording provides
both accounting/financial information to members of the public who are interested in the
business through the financial statement. It also helps the management decision making.
(b) Stock Valuation: Stock may be seen as any item whether raw materials, work –in –
progress or finished goods kept in store for resale or as input for further productions.
Specifically stock will consist of :
 Finished goods purchased for resale
 Indirect materials (e.g. stationery)
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  Raw materials (also referred to as direct materials)
 Work in process or work in progress
 Finished goods manufactured by the business and yet to be sold
Points to note:
 Another term for stock is INVENTORY
 The unsold items in one period become the closing stock of that period and the opening
stock of the next period.
 The total of opening stock and purchases gives the cost of goods available for sale.
 The difference between the cost of goods available for sale and the value of closing stock
gives us the cost of goods sold
 The gross profit on trading arises when sales revenue exceeds cost of sales.
 Therefore, there is relationship between the value of closing stock, cost of sales and size
of profit.
(c) Methods of Stock Valuation: Bookkeepers use various methods for valuing stock. Four
ways in which you can do this are:
 FIFO (First In, First Out): Assumes first (oldest) item put on the shelf is the first one sold.
Example: A firm has a stock of 3,000 items at the beginning of an accounting year .The
items were valued at N3 each. Purchases and sales during the year were as follows:
 January :purchases 15,000 units @ N3.50 =N52,500
 February :purchases 25,000 units @ N4.00 =N100,000
 January : sales 13,000 units @ N4.50 = N58,500
 February :sales 28,000 units@ N5.00 = N140,000
Calculate the: (i) cost of goods sold
(ii) Value of closing stock of goods
Solution
(i) Cost of goods sold
3,000 units of the opening stock cost N3.00 each =N9, 000
10,000 units sold from January purchases N3.50 each =N35, 000
5,000 units sold from January purchasesN3.50 each =N17, 500
23,000 units sold from February purchases N4.00 each =N92, 000
41,000 N153, 500
(ii) Value of closing stock
2,000 units of February purchases remained unsold @N4.00 =N8, 000
 LIFO (Last In, First Out): Assumes last (most recent) item put on the shelf is the first
product sold.
Example: same as under FIFO

Solution
(i) Cost of goods sold
13,000 units sold from February purchases N4.00 = N 52,000
12,000 units sold from February purchases N4.00 = N 48,000

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 15,000 units sold from January purchases N3.50 = N 52,500
1,000 units sold from opening stock N3.00 = N 3,000
41,000 N 155,500
(ii) Value of closing stock
2,000 units of the opening stock remained unsold @ N3.00 =N 5,000
 Weighted Average Cost (WAC) Method: You don’t need to worry about what item came
in first or last. Average the cost of stock when calculating stock value.
Example: same under FIFO
Solution
Month Units Unit cost Total cost
NN
January (opening) 3,000 3.00 9,000
January (purchases) 15,000 3.50 52,500
February (purchases) 25,000 4.00 100,000
Total 43,000 161,500
Weighted Average Cost =161,500/43,000 = N3.76
(i) Cost of goods sold
Number of units sold =41,000
Weighted Average Cost per unit =N3.76
Cost of all units sold =N3.76x41, 000 = N154, 160

(ii) Value of closing stock

Number of units of closing stock =2,000
Weighted Average Cost per unit = N3.76
Value of closing stock = N3.76 X 2,000=N7520
 Specific identification: Track how much you paid for each individual item to determine
stock value.
 Valuation of Asset: No organization keeps proper record without taking into cognizance
her Asset. To be able to ascertain the cost and usefulness (input) of the assets to the
organization. It helps to determine the life span of that asset and the depreciation, as well
as when to replace such an asset.
 Determine debtors and creditors: It shows an accurate standing position of business in
relation to its customers i.e. what is owed and what is owned by the firm.
 Conservation of assets: Book keeping enables a firm to determine the salvage value of
an asset. It helps an organization to know when to dispose and replace an asset to avoid
low production. e.g. plant and machinery, building etc.

THE NEED /IMPORTANCE OF BOOKKEEPING

(i) It is for easy reference of business financial records.
(ii) It reveals profits and losses position to the company through trading profit and loss account.
(iii) It provides information to members of the public who are interested in the business through
the balance sheet.
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(v) Auditors use the books to issue their audit reports.
(vi)The records help in management decision-making.
(vii) The records project the image of the business to the public.

USERS OF ACCOUNTING INFORMATION

Financial statements of organizations are of interest to a various users whose information
needs differs. Among the users are:
 Customers
 Owners
 Managers
 Competitors
 Government
 Public
 Lenders
 Analysts
 Tax authorities
 Financial analysis
 Suppliers
 Employees
 Government agencies

CUSTOMERS: The customers demand for financial statement to check the price of the
products, quality and reliability of the products.
OWNERS: Owners or shareholders need the financial statement to ascertain the performance of
the firm to inform the decision making.
SUPPLIERS: The supplier’s needs the information regarding the liquidity of the firm as this
will determine the firm’s ability to pay for goods supplied.
TAX AUTHORITY: They require the financial information for the purpose of assessing the tax
liability of the firm.
LENDERS: Banks and other lending institutions are concern with the information regarding the
ability of the firm to pay interest on loan collected.
GOVERNMENT: The government needs the accounting information to keep the statistics of the
economic development to ascertain the rate of growth of the nation.
EMPLOYEES: They need the financial statement to enable them decide how secured their job
is and ability of the firm to pay their salary.

QUALITIES OF ACCOUNTING INFORMATION

Timeliness: Financial statement must reach the management in time for the purpose of decision
making.
Relevance: The financial statement must contain information that is relevant to the users of the
accounting information
Comprehensiveness: The accounting information must be detailed for the users to have access
to what they need.
Reliability: Accounting information should be void of errors, to enable the users get the right
information. Etc

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LIMITATIONS OF ACCOUNTING INFORMATION
The limitations of accounting information to varieties of users are not easily traced to any
accounting records. Because accounting information is historical in nature .i.e. does not record
current or future events. The following are the limitations:
 Quality of Staff: The financial information does not capture the quality of staff or
labour.
 Inflation: The effect of the change in the price of a commodity due to inflation, does not
give the true picture of the financial statement, since records are based on historical cost
and not current market price.
 Organization uselessness: The managerial faults and conflict of interest among staff are
not reported in the financial statement.

ETHICS OF ACCOUNTING

Ethics can be defined as established codes of conduct, modes of behavior, pattern, practice,
standard and principles generally accepted or strictly adhered in a given profession or situation.
Accounting Ethics: refers to generally accepted codes of conduct, standard, practices and
principles of accounting to be strictly adhered to by accountants/professionals in accounting
profession.
Qualities of Accounting Ethics
1) Honesty: Honesty means to be truthful. Not only to being truthful but candid and
forthright, absence of lie and deception.
2) Transparency: Transparency means to be open-minded, being straight-forward in
dealing with clients without hypocrisy and pretends.
3) Integrity: An accountant should behave with integrity in all professional, business and
financial relationships. Integrity implies not mere honesty but fair dealing and
truthfulness. Integrity is an important fundamental element of the accounting profession.
Integrity requires accountants to be honest, candid and forthright with a client and
financial information.
4) Accountability: Accountants should acknowledge and accept personal accountability for
the ethical quality of their decisions and omissions to themselves, clients, and their
companies. Accountability simply means being responsible for any cause of action.
Ability to be depended or relied upon.
5) Fairness: Fairness means just in all dealings. Not to exercise power arbitrarily or use
overreaching or indecent means to gain, maintain any advantage nor take undue
advantage of another’s ignorance or difficulties. Fairness also means to be open-minded
6) Objectivity: Objectivity is the state of mind which has regard to all considerations
relevant to the task in hand but no other; Objectivity is essential for any professional
person exercising professional judgement. It means accountants should not allow bias,
conflicts of interest or undue influence of others to override professional or business
judgement. It is sometimes described as ‘independence of mind’
7) Trustworthy: Trustworthy is the state of relying and depending on someone’s ability,
professional competency. It simply means to believe somebody sincerely. Accountants
should be competent enough to be trusted by the client in all professional standard and
business.

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Benefits of Accounting Ethics to Accounting Profession and the Public (Society)
Accounting Profession
i. Ensures standard in Accounting profession
ii. Ensures accountant’s integrity, transparency and objectivity in accounting

Practice Public
i. To protect the public from unscrupulous Accountants and corporations
ii. It prevents hiding or mis-representation of information to the society

EVALUATION
1. Define Accounting.
2. Mention two differences between Book keeping and Accounting.
3. Define ethics in accounting
4. List five professional ethics in accounting
5. Briefly explain the following accounting ethics: (i) Transparency (ii) Accountability (iii)
Fairness (iv) Integrity (v) Trustworthy
6. Mention four benefits of accounting ethics to accounting profession and the society.
7. List four methods of stock valuation.
8. Mention three needs for book keeping

Objective Questions

1. The professional ethic that is sometimes described as ‘independence of mind’ is called _____
(a) Honesty (b) fairness (c) Trustworthy (d) Objectivity.
2. Being open-minded, being straight-forward in dealing with clients without hypocrisy and
pretense is the example of _______ ethics (a) Trustworthy (b) Transparency (c) Objectivity (d)
Accountability
3. Another word for Honesty is _______ (a) Forthright (b) Boldness (c) Truthful (d) Cunning
4. One of the following is NOT part of professional ethics of accounting ________ (a) Fairness
(b) Integrity (c) Transparency (d) Responsibility
5. Investors in a business are mainly interested in the firm's (a) liquidity (b) debt (c) management
(d) profitability
6. The art of recording transactions in the books of account is known as _____ (a) debiting (b)
bookkeeping (c)auditing (d)crediting.
7. The art of collecting, recording, presenting and interpreting accounting data is _______ (a)
cost accounting (b) management accounting (c) financial accounting (d) data processing.
8. Financial accounting information is for (a) internal use only (b) external use only (c) business
use only (d) internal and external use.
9. Which of the following is NOT an external user of accounting information? (a) Management
(b) Creditors (c) Shareholders (d) Government.
10. Customers use the financial statement of a company to (a) assess the financial position of the
business ( b) regulate their activities (c) ascertain the taxable profit of the business (d) be sure of
the extent of job security.

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ACCOUNTING EQUATION

The accounting equation is the fundamental framework of the entire financial accounting
process. The whole of accounting is based on this equation. The equation can be expressed as:

Assets = Capital + Liabilities

Meaning of Assets: Assets are the properties or resources of a business organisation e.g. land
and building, premises, stock, cash, debtors etc. Assets can be classified into fixed assets and
current assets.

Meaning of Liabilities: Liabilities are obligations to pay out money in the future. It is the
indebtedness of the firm to outsiders. It is the claim on the assets from outsiders. This is the
amount owed by the business to outsiders. e.g.loan, creditors, overdraft etc.

Meaning of Capital: This is the proprietors fund or net worth of a business. This is the total
amount provided by the owner to start a business. It is the claim of the owner of the business on
the assets.

Assets(N) Liabilities (N) Capital (N)

250,000 ? 160,000
? 70,000 30,000

SOLUTION
a) Assets = Liabilities + Capital
N250,000 = L. + N160,000
L. = 250,000 - 160,000
N90,000

b) Assets = Capital + Liabilities

A = N70,000 + N30,000
N100,000

Objective Questions

1. The accounting equation is (a) assets + liabilities=capital (b) capital - assets=liabilities (c)
assets - liabilities=capital (d) capital + assets=liabilities.
2. The claim of a proprietor of a business entity on its assets is (a) liabilities (b) capital (c)
drawings (d) assets
3. The claim n the assets of a business by outsiders is (a) capital (b) liabilities (c) reserves (d)
provisions
4. The objective of accounting information is to enable users to (a) prepare the financial
statement (b) value stock (c) make decisions (d) prepare budgets
5. Another name for owner's equity is (a) loan (b) debtors (c) capital (d) overdraft
6. Which statement is incorrect? (a) Asset = liabilities + capital (b) Capital = assets – liabilities
(c) Capital – liabilities = assets (d) Liabilities = assets – capital
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7. Every asset should have (a) a non monetary value (b) tangible and intangible qualities (c)
monetary cost and future benefit (d) an inadequate monetary value

PRINCIPLES AND PRACTICE OF DOUBLE ENTRY:

Concept of Double Entry System

Among the oldest known and indisputable principles of accounting is the Double Entry principle.
The principle states that, ‘for every debit entry there must be a corresponding credit entry and
vice-versa’, which in everyday English means that for every receiver there must be a giver.
The receiver is always regarded as the Debtor whiles the giver as a creditor under this principle.
As far as double entry principle is concerned, there must always be two parties to a transaction.
One entry at the debit side for the debtor or the receiver and the other entry at the credit side for
the creditor or the giver.

Review of Double Entry with Comprehensive Illustrations

The principles of Double Entry

The double entry principles applied by observing two rules. The rule states that debit all receiver,
credit all giver; meaning that, debit the receiving account and credit the giving account. The
double entry system of book keeping will be used for recording transactions in the ledgers.
Summary: Debit= Receiving account
Credit=Giving account
Procedures to be followed:
 Every transaction must affect two accounts
 Give names to the two accounts
 Debit – Receiving account (Receiver)
 Credit – giving account (Giver)

ILLUSTRATION1
Jan. 1 Miss. Faith starts business with N800.00 in bank

There are two accounts involved:

Capital account---------giving---------- Credit = N800.00
Bank account-----------receiving--------Debit = N800.00

Miss. Faith is the owner of the business therefore her name must not appear in the books.
Entries in the ledger
DR CAPITAL ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
1 Bank 800.00

DR BANK ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Capital 800.00
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 1

Jan. 2 purchased goods N300.00 by cheque.

Two accounts are involved:
Purchases account-------receiving----- Debit = 300.0
Bank account-------------giving---------Credit= 300.00
DR PURCHASES ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Bank 300.00
2

DR BANK ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
2 Purchases 300.00

Jan. 4 Sold goods N700.00 cash

Two accounts are involved:
Sales account--------giving------- Credit =N700.00
Cash account -------receiving-----Debit =700.00
DR SALES ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
4 Cash 700.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Sales 700.00
4

Jan.7 Paid wages N50.00 cash

Two accounts are involved:
Wages account ------Receiving------ Debit =N50.00
Cash account ---------Giving--------Credit =N50.00
DR WAGES ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan ₦ ₦
7 Cash 50.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ Jan. ₦
7 Wages 50.00

Jan. 8 bought machinery N500.00 paying by cheque

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Two accounts are involved:
Machinery account---------Receiving------ Debit =500.00
Bank account--------------- Giving---------- Credit =500.00
DR MACHINERY ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ ₦
8 Bank 500.00

DR BANK ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
8 Machinery 500.00

Jan. 10 Cash drawings N80.00

Two accounts are involved:
Cash account------Giving------- Credit =80.00
Drawings account-------Receiving-----Debit =80.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
10 Drawings 80.00

DR DRAWINGS ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Cash 80.00
10

Jan.12 Goods returned to us by Baba N200.00

Two accounts are involved:
Returned inward account-----receiving------ Debit =N200.00
Baba’s account-----------Giving---------Credit =N200.00
DR RETURN ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Baba 200.00
12

DR BABA ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
12 Returned 200.00
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Jan.17 Took cash N2, 400.00 from the bank and put it into cash till.
Two accounts are involved:
Bank account------Giving---------Credit =N2, 400.00
Cash account ------Receiving----Debit =N 2,400.00
DR BANK ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
17 Cash 2,400.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ ₦
17 Bank 2,400.00

Jan. 20 we returned goods worth N100.00 to Jasper

Two accounts are involved:
Returned outward account----Giving------Credit = N100.00
Jasper account -------------------receiving---- Debit = N100.00
DR RETURNED OUTWARD ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
20 Jasper 100.00

DR JASPER ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ ₦
20 Returned outward 100.00

Jan. 22 received commission in Cash N350.00

Two accounts are involved:
Commission------giving------Credit = N350.00
Cash--------------receiving-----Debit = N350.00
DR COMMISSION ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
22 Cash 350.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
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 Jan. ₦ ₦
22 Commision 350.00

Jan. 23 took loan from Mark by cheque N750.00

Two accounts are involved:
Loan (Mark) -----Giving------- Credit =N750.00
Bank--------------Receiving----Debit =N750.00
DR LOAN ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
23 Bank 750.00

DR BANK ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ ₦
23 Loan 750.00

Jan. 25 sold car on credit to Ojo N220.00

Two accounts are involved:
Car account -----giving----- Credit =N220.00
Ojo account ------receiving-----Debit =N220.00
DR Car ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
25 Ojo 220.00

DR Ojo ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Jan. Car 220.00
25

Jan. 27 paid cash for repairs of Motor Vehicle N1, 500.00

Two accounts are involved:
Motor Vehicle-----Receiving------ Debit =N1, 500.00
Cash --------------giving-------------Credit =N1, 500.00
DR Motor Car Repairs ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
Jan. ₦ ₦
27 Cash 1,500.00

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
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 ₦ Jan. ₦
27 Motor Vehicle 1,500.00

Jan 30 withdrew N1, 000 cash for personal use

Two accounts are involved:
Drawings --------Receiving----- Debit =N1, 000.00
Cash------------giving---------- Credit =N1, 000.00
DR DRAWING ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
Jan. Cash 1,000.00 10
30

DR CASH ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
30 drawings 1,000.00

ACCOUNTS
An account can be defined as a record in a double entry system that is kept for each class of
assets, liability, revenue and expenses.

Classification of Accounts

Accounts are classified into two main classes namely:

1. Personal
2. Impersonal
These classes of accounts diagrammatically are represented as below:

ACCOUNTS
PERSONAL IMPERSONAL
DEBTORS CREDITORS REAL NOMINAL
(Tangible/Material)(Intangible/Immaterial)

1. Personal Accounts: These are accounts for the names of individuals, firm and business
enterprises. Examples: Stephen Account, Rhoda Nigeria Ltd Account, Debtors and
Creditors Accounts, Capital Account, Drawings Account, Loan Account, Bank Account,
etc.
Illustration: Mr. Andrew is given a cheque of N 5,000.00 by L.Deborah.
Two Accounts are opened:
Debit: Mr. Andrew’s Bank Account that receives
Credit: L.Deborah Account that gives out.

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2. Impersonal Accounts: These are accounts for properties, items of expenditure and income. It
can be divided into two:

(a)Real Accounts: These are accounts of tangible assets, Physical Assets or properties. On the
other way round, they are assets or something we can see, feel touch or move. Examples:
motor vehicle, land, cash, furniture, plant and machinery, stock, etc.

(b) Nominal Accounts: These are accounts in which income and expenditure are recorded. E.g.
Rent Account, Discount received, discount allowed, Insurance and Interest account,
Sales, Purchases, commission received account, Profit on sales of fixed assets and or
investment.

Rules of Double Entry:

Personal Account: Dr. Receiver Cr. Supplier
Nominal Account: Dr. Expenses or losses Cr. Income

EVALUATION
1. Explain the principle of double entry system
2. Complete this table showing which account should be debited and which should be
credited:
 Started business with cash
 Paid part of the opening cash into the bank
 A vehicle was sold for cash
 Charles lent us cash
 Cash purchases

OBJECTIVE QUESTIONS

1.The double entry principle states that ________ (a) every debit entry must have a
corresponding credit entry (b)every credit entry must have a corresponding double entry (c)every
debit entry must have a corresponding double entry (d)every asset must have a corresponding
liability.

2. The books of account are opened by means of a ______ (a) sales journal (b) principal journal
(c) purchases journal (d) bank journal

3. A book that contains the accounts for the financial transactions of an organization is the___
(a) Journal (b) Ledger (c) Folio (d) Register.

4. The two fundamental books of accounts are (a) return inwards and outwards (b) journal and
ledger (c) discount allowed and received (d) credit note and debit note.

5. The process of entering transactions from one book to another is ___________

(a) Posting (b) reading (c) numbering (d) listing.

6. All of these are personal accounts except ? (a) Lawson (b) Cash (c) Olu Abiola Nig.Ltd. (d)
Debtors

17
7. Which of these is true of an account? (a) It has a record in a double entry system(b)It is a
statement of business transactions (c) All entries are maintained on their on their debit and credit
sides. (d) It keeps both revenue and expenses. (e) All entries are balanced when an account is in
carried down on either side.

8. Nominal account is naturally characterized by all these accounts except?(a)Losses andgains

(b) Discount received account (c) Interest on capital (d) Discount allowed (e) Premises.

9.What is Impersonal Account? (a) Accounts for properties (b) Account for tangible Assets (c)
Account for expenditures only (d) Accounts for items of income (e) Accounts for
properties ,item of expenditure and Income

10.The following are examples of Impersonal Accounts except? (a) Names of individual, firms,
and business enterprises are put as headings in the Accounts. (b) Accounts for assets (c)
Accounts for expenses incurred (d) Accounts for income received (e) Accounts for losses and
gains.
11.Which of these is not a Nominal account? (a) Loses (b) Income (c) Expenses (d) Equipment.
12. Which of the following books acts as a book of original entry only? (a) Journal (b) cashbook
(c) petty cashbook (d) purchases ledger (e)general ledger.
13. Stock account is a type of ____________ (a) nominal account (b) personal account (c) real
account (d) fixed assets account.
14. Which of the following is a nominal account? (a) Machine account (b) drawings account (c)
debtors account (d) wages account
15. Which of the following is a Real Account item? (a)Wages Account (b)Machinery Account
(c) Capital Account (d) Drawings Account.
16. A real account is the account of _______ (a)expenses or losses (b)gains or income
(c)physical tangible items (d)fictitious items.
17. Nwoye buys stock and pays by cheque. The entries in the books of Nwoye is debit (a)
purchases; credit cheque (b) purchases; credit bank (c) bank; credit purchases (d) cheque; credit
purchases

18
LEDGERS
A ledger can be defined as a principal book of account which contains in a classified and
summarized form, a permanent record of all transactions. The ledger book is the final destination
of all transactions in the subsidiary books. The ledger is used for the double entry book keeping.
DIVISION OF THE LEDGER
The division are as follows:
a) Personal Ledger: The personal legder comprises of the suppliers personal account and
customer's personal ledger. It can be divided into sales ledger and purchases ledger.
1. Sales Ledger: This is a ledger that contains accounts of debtors.
2. Purchases ledger: This is a ledger that contains accounts of creditors. It is a book for suppliers
personal account.
b) General Ledger: The general ledger contains the nominal and real accounts. Eg purchase
account, sales account, income account, expenses account, land and building account etc.
c) Private Ledgers: These are ledgers for capital and drawings account of the proprietor.
NATURE OF THE LEDGER
1. Ledger is divided into separate sections called account.
2. A ledger account is divided by a central line into two parts.
3. The left side is the debit side (Dr).
4. The right side is the credit side (Cr).
5. The debit side receives value.
6. The credit side gives value.
7. Ledger has column for Date, Particulars, Folio and Amount on both sides.
8. Folio is known as the pages which are numbered consecutively for easy identification.

OBJECTIVE QUESTIONS
1. Which of the following accounts belong to private ledger? (a) drawings account (b)Premises
account (c)debtors account (d) Rent and Rates account
2. Which of the following accounts belong to the personal ledger? (a) Purchase account (b)
Capital account (c) Depreciation account (d) V.Okafor's account.

19
3. Which of the following is related to debtors account? (a)purchases ledger (b)general ledger
(c)nominal ledger (d)sales ledger.
4. Which of the following is in the personal ledger? (a)Discount allowed account (b)Cash sales
account (c)Debtors account (d)Assets account.
5. Which of these is treated in the Nomnal ledger? (a)purchases (b)sales (c)wages (d)bank.
6. Which of the following is NOT a Nominal account? (a)Rent (b) Wages (c)Discounted (d)
Land.
7. A ledger is a ______ (a)book of accounts (b)summary of entries (c)book of original entry
(d)double entry posting.
8. Rent Payable Account is an example of a _______ (a) nominal account (b) r eal account (c)
personal account (d) private Account.

9. Which of the following is found in the general ledger? (a) Capital Accounts (b) Sales
Accounts (c) Loan accounts (d) Drawings Accounts.
10. Stock account is a type of (a) Nominal account (b) Personal account (c) Real account (d)
fixed assets account.

JOURNAL

General Journal is designed as an all-purpose book- this means that any business transaction
can be conveniently recorded in it. General Journal is also called Journal proper, it is also part of
the books of original entry in which are recorded the initial entries in chronological order. But its
entries are usually restricted to records of opening and closing entries of business e.g.
 The purchases or the sales of fixed asset on credit,
 Correction of errors,
 adjustment in account
 purchases of new business
 and other transfer
Uses of General Journal
1) Opening entries
2) Closing entries
3) Correction of errors
4) Transfer between accounts
5) Purchases of fixed asset on credit
6) Sales of fixed assets on credit
7) To answer questions on double entry

Classes of Entries
Simple Entries: Only two accounts are involved. One account will be debited and another
credited.
20
Composite entries: these may involve several accounts to be debited and only one account to be
credited or vice versa.

FORMAT OF JOURNAL ENTRIES

DATE PARTICULARS FOLIO DR CR
Name of account to be debited ×××
Name of account to be credited ×××
Narrations.

Note: It should be noted that any transaction which cannot be entered in the subsidiary books
must appear in the journal before being posted to the ledgers.

1. Sales and purchases of fixed assets on credit: e.g.

(a) Sold Furniture to Rita on credit N600.00

DATE PARTICULARS DR CR
N N
Furniture 600.00
Rita 600.00
Sales of furniture to Rita

(b) Purchases of Motor Vehicle N 5,000.00 from Ali on credit

DATE PARTICULARS DR CR
N N
Motor Vehicle 5,000.00
Ali 5,000.00
Purchases of Motor Vehicle from Ali

Use of Journal to Answer Questions on Double Entry System

EXAMPLES:
(a) Paid rent N400.00 for cash
(b) Cash sale N650.00

JOURNAL
DATE PARTICULARS DR CR
N N
Rent 400.00
Cash 400.00
Rent paid with cash

DATE PARTICULARS DR CR
N N
Cash 650.00
Sales 650.00
Being sales of goods for cash

21
OPENING ENTRIES
EXAMPLE:
Jojo’s book shows the following balances on 1st January, 2013
ASSETS: Motor Van N800, Stock N450, Plant and machinery N900, Furniture N450,
Cash N500 Debtor N200, Bill receivable 550
LIABILITY: Creditor 1,600, Loans 1,400, Bill payable 850.
DATE PARTICULARS DR CR
N N
Asset: Motor van 800
Stock 450
Plant and machinery 900
Furniture 450
Cash 500
Debtors 200
Bill receivable 550
Liability:
Creditor 1,600
Loans 1,400
Bill receivable 850
3,850 3,850

SOURCE DOCUMENTS

Source Documents may be defined as original documents on which monetary transactions are
recorded, which provide necessary information for the preparation of books of original entry. It
can also be defined as original documents on which information is recorded about business
transactions.

22
Transactions are the major feature of any business. The business transactions take place when
goods and services are transferred from one person to another. There are two types of
transaction namely cash and credit transaction. Cash transaction means that money is paid
immediately the transaction occurs. Credit transaction means that payment for what is bought or
sold is made at a later date.
Importance of Source Document
1. To originate data for accounting records.
2. They act as working evidence or as a proof of occurrence of such transactions.
3. They enable various books of accounts to be opened.
4. They serve as a source of information.
Types of Source Documents
The major types of Source documents are:
(a) Invoice: This document is usually issued by the seller to the buyer immediately goods
are dispatch or services rendered on credit. It shows the date of sales, description of goods
bought or sold, quantity, unit price, total cost. An example of Invoice is shown below.

INVOICE

Azure Net Co.,Ltd INVOICE # [100]

[Your Company Slogan] DATE: JANUARY 24, 2025

[Street Address], [City, ST ZIP Code]

Phone [000.000.0000] Fax [000.000.0000]
[e-mail]

To [Name]
[Company Name]
[Street Address]
[City, ST ZIP Code]
[Phone]
Customer ID [ABC12345]
ITEM DESCRIPTIO UNIT DISCOUN
QTY TOTAL
# N PRICE T

23
 3 Motor 250 10% 750

TOTAL
DISCOUN 75
T
SUBTOTAL
SALES TAX
TOTAL 675

(b) Receipt: This document serves as an evidence of payment for goods bought or sold and
services rendered. Receipts are given or received whenever cash is paid or collected for goods
bought or sold or services rendered. It shows the following particulars:
(i) The reason for payment
(ii) The amount of money received
(iii) The person who made the payment and to whom the payment was made to.

(iv) The date of payment.

24
 CASH RECEIPT

Received from _____________________________________

The sum of ________________________________________
_______________________________________________
(Amount in Words)
Being payment for _________________________________

____________________
N Signature

(c) Cheque: A cheque is defined as a written order or instruction made upon a bank to
pay a specific sum of money to a named person at a specific date. A cheque is a
source document used as a means of receipts and payments instead of the physical
cash.
Parties to a cheque
There are three parties to a cheque namely – the drawer, the drawee and the payee
 The drawer is the owner of the account who issues out or draws the cheque.
 The drawee is the bank to which instruction is given to pay.
 The payee is the person to whom the money will be paid.
(d) Debit Note: This is sent by the seller to the buyer when there is an undercharge in the
original invoice. A debit note can also be sent when there is an omission or return of goods.
Below is an example of a Debit Note
Debit Note

Odo & Co. Ltd

47, Sabo Road, Kudansa, Kaduna
September 20, 2011
To: Academier Books Co. Ltd Debited By:
3, Oba Lane NsukkaOdo& Co. Ltd

Quantity Description Unit Price Amount

2 2

Total

(e) Credit Note: This is normally printed in red to distinguish it from an invoice. It is used
when an invoice is overcharged, that is when the buyer is wrongly overcharged or goods are
returned by the buyer. It is also called a credit memo.
(f) Petty Cash Voucher: This is a written authorization to pay small amounts in cash.
Usually the Petty cashier fills out the voucher and ensures that the person requesting the cash
25
signs it. The petty cashier then disburses the money and files the voucher in the petty cash
container.
(g)Cash register tape: A cash register tape is a machine for quick and accurate recording. This
helps when recording volume of transaction. The machine automatically prints receipt on the
tape for the customers each time a sale is made.

EVALUATION (Objectives)
1. All EXCEPT one are source documents. (a) Invoice (b) debit note (c) receipt (d) delivery note
(e) credit note.
2. The _______ is the owner of the account who issues out or draws the cheque. (a) payee (b)
entrepreneur (c) drawer (d) drawee
3. An invoice contains all the items listed below except one. (a) Names and addresses of the
buyer and seller b. quality of goods c. date of sales d. description, quantity and unit price of
goods e. terms on which the goods are sold.

4. A document that is written out by the seller for goods returned is a _________ (a) purchase
note b. purchase return c. debit return d. credit note e. debit note.

5. A payee is _________ (a) the owner of the account who issues out or draws the cheque. (b)
The bank to which instruction is given to pay. (c) The payee is the person to whom the money
will be paid. (d) Used when an invoice is overcharged.

6. The burden of ___________ has been erased with the introduction of cash register machines.
(a) Accounting (b) business (c) book-keeping (d) calculation e. all of the above.

7. The two types of transaction are ________ and _______ (a) cash and credit (b) payment and
credit (c) credit and debit (d) cash and bank (e) credit note and debit note.

8. A written authorization to pay small amounts in cash is known as a ______ (a) petty cashier
(b) float (c) debit note (d) petty cash voucher

9. When a buyer returns damaged goods to the seller, the buyer receive a _____ (a)
consignment note (b) credit note (c) debit note (d) goods return note.

10. Which of the following is sent to correct an under-charge? (a) Credit note (b) debit note (c)
cheque (d) Invoice.
11. Which of the following is not a source document for recording sales? (a) Credit note (b)
Debit note (c) Sales journal (d) Invoice.

12. Which of the following source documents is used for recording goods returned to the
suppliers? (a)Nominal Ledger (b) Purchases Ledger (c) General Ledger (d) Sales Ledger.
26
13. Which of the following is NOT a source document? (a) Cheque stub (b) Cash receipt (c)
Cash book (d) Sales Invoice.

14. Which of the following is NOT a source document? (a) Credit note (b) Invoice (c) Debit note
(d) Bank note.

15. A customer who returns goods to the supplier because they are defective is issued a _____
(a) Debit note (b) Credit note (c) Delivery note (d) Bank note.

16. Which of the following is a Journal as well as an account? (a)Sales day book (b) Cash book
(c) General Journal (d) Purchases Journal.

17. A document forwarded to a supplier showing amount due for satisfactory goods is (a) debit
note (b) credit note (c) invoice (d) waybill

18.

Essay
1. Explain the types of transaction
2. State three importance of source document.
3. Explain the term invoice
4. Differentiate between Credit note and Debit note
5. Differentiate between Receipt and Invoice

SUBSIDIARY BOOKS
These Journals are called Books of Original Entries or Subsidiary Books or Prime Books.
Journal is a document which contains the daily records of business transactions. Each record in a
journal is called an entry. The journal is called a book of original entry because its entries are
transferred to a second book.
Format of a Journal

Date Particulars Folio Invoice No. Amount

Types of Journal
There are two major divisions of Journals: General Journal and Special Journal
General Journal: this is a book that records all transactions (both sales and purchases). It is also
used to correct errors made in the books of account. It is used when no special journal exists. It
can also be called The Journal.

27
 Date Particulars Folio Invoice No. Dr.` Cr.

Special Journal: it is used to record only one type of entry. Types of Special Journals are listed
below:
1. Purchases Journal FOR recording credit purchases
2. Sales Journal FOR recording credit sales
3. Return Inward Journal FOR recording returns from customers
4. Return Outward Journal FOR recording returns to suppliers
In order to keep the general ledger free from unnecessary details, separate journals are kept for
credit transactions concerning sales and purchases.

SALES JOURNAL: This is a subsidiary book that records credit sales of goods to customer in
detail. Sales journals are usually entered from the sales invoice. Another name for sales Journal
is Sales Day Book.
PURCHASES JOURNAL: This is a subsidiary book that records credit purchase of goods from
suppliers in detail. Purchase journals are usually entered from purchase invoice. Another name
for purchases Journal is Purchases Day Book
RETURN INWARD JOURNALS: This is the subsidiary books that records returns of good
sold on credit to the customers. It is also referred to as Sales Returns Journals. A Credit Note is
usually issued or sent by the seller to the customer as evidence of sales returns.
RETURN OUTWARD JOURNALS: This is the subsidiary books that records returns of goods
bought on credit to the suppliers. It is also called Purchases Return Journals. A Debit Note is
usually received by the suppliers as an evidence of return.

USES OF SUBSIDIARY BOOKS/JOURNAL:

1. It is used to know the Total Sales
2. It is used to know the Total Purchases.
3. It is used to make first Entry of transactions
4. It is used to keep tract of the people to whom money is owed and of the people who owed money

POSTING TRANSACTIONS FROM SUBSIDIARY BOOKS TO THE LEDGER

Sales Journals or Sales Day Books
DR. Debtors Account (individually in the sales ledger amount sold to him or her)
CR. Sales Account (with the total sale relating to these debtors as at the end the given period)
Return Inward Journal or Sale Return
The sales journals records return of sales made on credit to customers previously. Thus, it is in
this wise a reversal of sales.
DR. Sales Returns Account (periodically with the total amount of sale returns)
CR. Debtors Account (individually with the amount of sales return)

Sales Journal or Sales Day Book

Illustration 1
From the following transaction of MTN NIG. LTD, write up the sale journal for the month of
March 2016 and post to ledger.
28
Mar. 2 Sold to S. Bello
2 cartons of Apple @ N1000 per carton
5 cartons of Gala @ N400 per carton
Mar 5 Sold to M. Adisa
10 crates of Shapman@ N500 per carton
2 dozens of peak milk @ N400 per carton
5 Crates of eggs @ N300 per carton

Solution:

MTN NIG LTD

SALES JOURNAL
DATE NAMES AND PARTICULARS FOLIO DEATAIL AMOUNT
S
Mar. 2 S.BELLO F001
2 cartons of Apple @N1000 (2XN1000) 2,000
5 cartons of Gala @N400 (5X N400) 2,000 4,000

Mar. 5 M. ADISA F002

10 crates of Shapman @ N500 (10X 500) 5,000
2 dozens peak milk @ N400 (2X400) 800 7,300
5 Crates of eggs @ N300 (5X N300) 1,500
Mar. 5 Transfer to credit side of sales account 11,300

DR S. BELLO ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Mar. Sales 4,000
2

DR M. ADISA ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦

29
 Mar. Sales 7,300
5

DR SALES ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ Mar ₦
5 Sundries 11,300

Illustration 2: Write up the sales Returns Book of DADA and sons for the Month of July 2016
and post to ledger account.

July 7 Returned Goods from Chisom Ltd

2 bags of rice @ N500

3 plates @ N100
July 10 Returned from Mukaka and sons

10 shoes @ N600
5 packet of sweet @ N120
Less 2% trade discount

DADA & SON

RETURN INWARD JOURNAL
DATE PARTICULARS FOLIO DETAIL TOTAL
July 7 CHISON LTD ₦ ₦
2 bags of rice@ N500 1,000.00
3 plates @ N100 300.00 1,300.00

July. MUKAKA AND SONS

10 10 shoes @ N600 6,000.00
6 packets of sweet@ N120 720.00
Less 10% Trade Discount (67.20) 6,652.80
(N6,720.00 X 10/100)
July Transfer to the Debit side of Return Inward 7,952.80
10 Account

DR RETURNS INWARD ACCOUNT CR

Date Particular F Amount Date Particulars F Amount
₦ ₦
July Sundries 7,952.80
10

30
 DR CHISON LTD ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ July ₦
7 Return Inward 1,300.00

DR MUKAKA & ACCOUNT CR

Date Particular F Amount Date Particulars F Amount
₦ July. ₦
10 Return Inward 6.652.80

EVALUATION:
1. (a) What are books of prime entry?
(b) Define subsidiary books.
(c) Define Sales day book.
2. Enumerate 5 subsidiary book.
3. Define the return inwards day book.

OBJECTIVES:
1. A subsidiary record is a book of _________ (a) original entries (b) subsidiary entries (c) final
accounts (d) final entry.
2. Which of the following is not a book of prime entry? (a) Cash book (b) purchases day book (c)
sales day book (d) purchases ledger.
3. A sales journal is used to record (a) sales expenses (b) cash sales (c) credit sales (d) sales
returns.
4. The credit sales should be entered into________ (a) Sales Day book (b) Purchases Day book
(c) Treading Account (d) Cash book.
5. The Sales Day Book is used to record. (a) Cash and credit sales (b) credit sales (c) cash sales
(d) sales to middle men.
6. Which of the following is NOT contained in a journal. (a) Folio number of transaction (b)
Date of transaction (c) Address of the customer (d) Description of the transaction.
7. Which of the following is a subsidiary book? (a) Cash book (b) Bank statement (c) Control
accounts (d) Trial balance.

SUBSIDIARY BOOKS - PURCHASES JOURNAL

Purchase Journals or Purchases Day Book

DR. Purchase Account (with the total value of the purchase for the period)
CR. Creditor Account (individually with the value of the purchases made from each of them).
Return Outward Journal or Purchases Return Journal
31
The purchases Return Journal record the credit Purchase Returned to the supplier. It is therefore
a reversal of purchases.
DR. Creditors (individually with the amount returned)
CR. Purchases Return Account (with the total amount returned periodically)

Illustration 1: Record the following transaction in purchases journals the books for KFC LTD
and post to ledger.

Sept. 2 Bought of Chucks Int’l.

5 kg of Turkey. @ N100
10 Cartons of Gala @ N1000
7measures of beans@ N200
Sept. 6 Bought of Chibuzo Ltd
2 Measures of Rice @ N800
5 litres of g/nut oil @ N800
Less: 10% trade discount
KFC LTD
PURCHASES JOURNAL
DATE PARTICULARS FOLIO DETAIL TOTAL
Sept. 2 CHUCKS INT’L ₦ ₦
5kg of Turkey@ N100 (5 X N100) 500.00
10 cartons of Gala@ N1,000 (10 X N1,000) 10,000.00
7 measures of beans@ N200 (7 X N200) 1,400.00 11,900.00

Sept 6 CHIBUZO LTD

2 measures of Rice @ N800 1,600.00
5 litres of G/nut oil @ N800 4,000.00
Less 10% trade discount (560.00) 5,040.00

Sept Transfer to 16,940.00

10 the debit side of purchases account

DR CHUCKS INT’L ACCOUNTS CR

Date Particular F Amount Date Particulars F Amount
₦ Sept ₦
2 Purchases 11,900.00

DR CHIBUZO LTD ACCOUNT CR

Date Particular F Amount Date Particulars F Amount
₦ Sept. ₦
6 Purchases 5,040.00

DR PURCHASES ACCOUNT CR
32
 Date Particular F Amount Date Particulars F Amount
Sept. ₦ ₦
10 Sundries 16,940.00

RETURN OUTWARD JOURNAL

Illustration 2: From the following transactions write up the Return Outward Books of MUFARA
and post the transaction to the ledger.
Jan 4 Returned to Coca Kola ltd
6 crate of coke @ N200 per crate
10 crates of Fanta @ N200 per crate
Trade discount on 10%
Jan. 9 Returned to PZ ltd
15 bags of flour @ N100 per bag
20 Canoe soaps @ N500 per soap
Trade discount. @ 5%

MUFARA
RETURN OUTWARD JOURNALS
DATE PARTICULARS FOLIO DETAIL TOTAL
Jan. 4 COCA KOLA LTD ₦ ₦
6 crates of coke @ N200 1,200.00
10 Crates of Fanta @ N200 2,000.00
Less 10% Trade Discount (320.00) 3,168.00
( N3,200 X 10/100)
Jan. 9 PZ LTD
15 bags of flour @ N100 1,500.00
20 Canoe soaps@ N500 10,000.00
Les Trade discount of 5% (575.00) 56,925.00
(N11,500 X 5/100)

Jan.10 Transfer to the credit side of Returns outward 60,093.00

Account

DR RETURN OUTWARD ACCOUNT CR

Date Particular F Amount Date Particulars F Amount
₦ Jan. ₦
10 Sundries 60,093.00

33
 DR COCA KOLA ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Return outward 3,168.00

DR PZ ACCOUNT CR
Date Particular F Amount Date Particulars F Amount
₦ ₦
Returns outward 56,925.00

EVALUATION
1. From the following particulars, prepare purchases day book of Teeing& Co.
Jan. 5 Bought goods from Arikpo and Sons
3 Cartons of Biscuit at N450 a carton
2 cartons of Jumbo matches at N350 a carton
The invoice is subject to 5% discount
Jan. 8 Received invoice No. 11 from Abuo Enterprises.
4 dozens of 40 leaves exercise books at N600 a dozen
100 erasers at 5 for N2
20 rulers at N4 each
2. Explain the term Return Outward Day Book.
3. What do you understand by the term Purchase day book?

OBJECTIVE QUESTIONS
1. Information for the Purchases Journal is obtained from the __________ (a) invoice (b) receipt
(c) debit note (d) credit note (e) purchase order.

2. The other name for the Purchases Journal is __________ (a) general day book (b) return
inwards book (c) purchases day book (d) returns outwards book

3. A credit note from a supplier for damaged goods would first be entered in the____ (a)
purchases day book (b) sales day book (c) return inwards book (d) return outwards book.

4. Books of account consists of (a) ledgers and subsidiary books (b) ledger and principal books
(c) folios and subsidiary books (d) Ledgers and Cash book.

5. The documents from which entries are transferred to the purchases day book is the (a) waybill
(b) credit note (c) receipt (d) Invoice.

6. The sales day book is used for recording (a) credit sales (b) sales returns (c) hire purchases (d)
cash sales

7. Return inwards is also called (a) purchases return (b) sales return (c) goods on sale or return
(d) goods in transit

34
8. Which of the following is used to record the purchase of fixed asset on credit? (a) Sales
journal (b) Purchases journal (c) Journal proper (d) Cash book

9. A subsidiary record is a book (a) of original entry (b) containing the ledgers (c) found in the
ledger (d) containing in the balance sheet

10.

EVALUATION(SECTIONI)
1. Credit sales were made to the unde rmentioned customers. Record the transaction in the
sales journals.
April 5 Okoro Enterprises, invoiceNo.02/8 N1,200
April 7 Otan&Co.,invoiceNo.02/12. N2,500
April 9 Ogbodin,A.A.invoiceNo.02/1. N1,350
April 10 Agbo&Sons,invoiceNo.02/2. N3,150
April 15 PetersoninvoiceNo.02/21 N1,235

2. Record the following transactions into the returns inward journal

June 6 O.Etim,Note No.41 275
June8 A.O.Aduquo, NoteNo.43 330
June9 Onda Enterprises, NoteNo.44 250
June11 Owal&Sons,NoteNo.46 315

INTRODUCTION TO CASH BOOK (SINGLE COLUMN CASH BOOK)

Cash book is the book of prime entry which record cash transactions only. Cash book is the
book for recording detailed particulars of all money received and paid. It is a subsidiary book
and also performs the function of a ledger.
TYPES OF CASH BOOK
 Single column cash book( also known as cash account)
 Two or double column cash book
 Three column cash book
 Petty cash book
Single Column Cash Book
ILLUSTRATION 1.Enter the following transactions in the cash book of A. Diamond, a sole
trader, for the month of January, 2013.
N

Jan. 1 Start business with cash 7,200

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 2 bought goods for cash 1,800
3 sold goods for cash 440
3. Paid carriage 80
6 paid advertising account 80
9 Ham paid cash on account 340
14 lent U.Olu 800
16 purchase goods for cash 1,600
18 cash sales 850
24 paid wages 180
28 cash sales 760
29. Paid rent and rates 100
30. U.Olu paid on account 400
st
Open cash book, ledger accounts and extract a trial balance as at 31 Jan., 2013.

DIAMOND
DR. CASH BOOK FOR THE MONTH END 31JAN. 2013CR
Date particulars Fol. Cash Date Particulars Fol. Cash
N N
Jan.1 Capital 7,200 Jan.2 Purchases 1,800
Sales 440 3 Carriage 80
9 Ham 340 6 Advert 80
14 U.Olu 800 16 Purchases 1,600
18 Sales 850 24 Wages 180
28 Sales 760 29 Rents 100
30 U. Ola 400 31 balance c/d 6,950
10,790 10,790
Feb1 Balance b/d 6,950

DR. CAPITAL ACCOUNT CR.

Date particulars fol N Date Particulars fol N
Jan. 1 Cash 7,200

DR PURCHASES A/C CR
Date particular l/f N Date Particulars l/f N
Jan. 3 Cash 1,800 Jan.31 Bal.c/d 3,400
19 Cash 1,600
3,400 3,400
Feb. Bal.b/d 3,400
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 DR. SALES ACCOUNT CR.
Date particulars l/f N Date Particulars l/f N
Jan31 Bal.c/d 2,050 Jan. Cash 440
Cash 850
Cash 760
2,050 2,050
Fed 1 Bal. b/d 2,050

DR WAGES ACCOUNT CR.

Date particulars l/f N Date Particulars l/f N
Jan.5 cash 80

DR ADVERTISING A/C CR.

Date particulars l/f N Date Particulars l/f N
Jan.8 cash 80

DR. HAM ACCOIUNT CR.

Date particulars l/f N Date Particulars l/f N
Jan.9 Cash 340

DR. U. OLU ACCOUNT CR.

Date particulars l/f N Date Particulars l/f N
Jan31 Cash 800 Jan29 Cash 400
31 Bal.c/d 400
800 800
Feb.1 Bal.b/d 400

DR. WAGES ACCOUNT CR.

Date particulars l/f N Date Particulars l/f N

Jan25 cash 180

DR. RENT AND RATE A/C CR

Date particulars l/f N Date Particulars l/f N
Jan cash 100

NOTE: the cardinal point in posting items from cash book to the ledger is that all items from the
debit side of the cash book except the balance(s) and cash discounts are posted to the credit side
of the ledger and vice versa.

EVALUATION

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MR .DADA commenced business as a petty trader in Lagos, on 1st of March, 2011 with N5, 000
in cash. During the month, the following transactions took place.
N
1. Mar. Bought office furniture……………….. 400
3.
Mar. Bought assorted goods for sale…2000
5 Mar. Bought postage stamps ……………….. 10
7 Mar. Sold goods for cash……………………… 80
8 Mar. Paid for cleaning materials …………… 10
10 Mar. Received cash from Godwin….. 50
14. Mar. Paid Mark ………..……………………90
16. Mar. Bought Stationery for cash…………..… 5
18 Mar. Bought sundry articles for Resale……500
20. Mar. Received cash from Malin……………..100
22.Mar. Cash Sale……………………………....50
24. Mar. Paid Jemima Kemi Cash………...…100
28. Mar. Paid wages to assistant………………. 100
30. Mar. Paid rent………………………………… 50
You are required to post the above entries to a single column cash book.

OBJECTIVES:
1. Which of the following is both a subsidiary book and a Ledger? (a) SalesJournal (b)
Purchases Journal (c)Return Inward Book (d)Cash Book.
2. Cross referencing among different books of accounts is achieved with the use of _____
(a)columns (b)numbers (c)folio (d)margin.
3. Which of the following is not a book of original entry? (a) Cash book. (b) Purchases ledger
(c) Return outwards (d) General journal.
The single column cash book has ____ columns (a) one (b) two (c) three (d) four

DOUBLE COLUMN CASHBOOK

In this type of cash book, two separate accounts cash and bank are combined for the sake of
convenience. There will be separate columns for date, particulars, folio, cash and bank.

Cash column: cash receipts and payments are recorded.

Bank column: All payments made by cheque and money received and paid into the bank are
recorded.

CONTRA ENTRIES:

The word contra is a Latin word meaning opposite. In some cases in business, there may be
excess cash in hand which needs to be paid into the bank for official use. These are known as
contra entries because both sides of the cash book will have entries concerning each
transaction. Contra entries are denoted by “c” or “cc” in the folio columns and on the ledger.

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A bank that is credited in the cash book will be debited, while cash debited on the cash book
will be credited.
ILLUSTRATION
Enter the following transactions in a double column cash book of KINGSMEAD COLLEGE
Enterprises from the following particulars:
N
May 1 Cash in office 260.00
May 1 Cash at Bank 1,800.00
May 3 Received bank cheque from Aboh 160.00
May 5 Cash Sales to date 500.00
May 6 Paid cash into bank 650.00
May 8 Paid Attabor by cheque 140.00
May 12 Paid rent by cheque 100.00
May 14 Bought Stationery by cash 100.00
May 17 Withdraw cash from bank to office 400.00
May 18 Purchase goods for cash 160.00
May 29 Cash sales to date 600.00
May 30 Paid cash to the bank 150.00
May 31 Paid wages in cash 100.00
May 31 Bank desired charges 50.00

You are required to prepare double column cash book

SOLUTION:
KINGSMEAD COLLEGE
DR Double Column Cash Book for the Month End 31st May, 2013 CR
Date Particulars f Cash Bank Date particulars F Cash Bank
N N N N
May.1 Bal. 260 1,800 May.6 Bank c 500
3 Aboh 160 8 Attbor 140
5 Sales 500 12 Rent 100
6 Cash c 500 14 Stationery 100
29 Sales 600 17 Cash c 400
30 Cash 150 18 Purchases 160
31 Wages 100
31 Charges 50

31 Bal.c/d 500 1,820

1,360 2,510 1,360 2,510

Jun.1 Bal.b/d 500 1,820

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EVALUATION
Enter the following transactions in a double-column cash book of OLAGRACE STORES, a sole
trader based in Lagos for the month of March 2013.
Mar.1 Capital at start: Cash ………………. N4, 500.00
Bank……………… N9, 000.00
“2 Lent to Favour in cheque………….. N1, 500.00
“4 Purchase goods by cheque……….. N7, 500.00
“6 Cash sales…………………………… N6, 000.00
“9 Paid expenses…………………………… N150.00
“15 Cash sales paid into the bank……. N1, 500.00
“22 Paid cash into the bank…………..... N3, 000.00
“25 Favour paid cheque on account... N750.00
“25 Withdraw cash from bank for office use N600.00
“28 Paid T. Baba by cheque ……………… N750.00
“28 Cash sales……………………………….. N750.00
“29 Paid wages in cash……………………… N300.00
“30 Cash sales paid into bank……………. N350.00
“30 Paid cash into bank………………….....N600.00
You are required to prepare the Double column Cash Book.

OBJECTIVES:
1. When a proprietor wthdraws cash from bank for office use, the entries would be _______
(a)credit Cash Account, debit Bank Account (b)debit Cash Account, credit Bank Account (c)debit
Drawings Account, credit Bank Account (d)debit Bank Account, credit Drawings Account.
2. Which of the following is a book of original entry for all payments and receipts whether by
cash or cheque? (a)Sales Day book (b)Purchases Day book (c)Cash book (d)Cheque book.
3. Which of the following is a contra entry? (a)Lodgement of cheques into bank account
(b)Lodgement of cash in hand into bank account (c)withdrawal of cash for private use
(d)treatment of discount received in the cash book.
4. The account that shows both the cash and bank transactions of an enterprise is (a)Trading
Account (b)Cash book (c)Profit and Loss Account (d)Appropriation Account.
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5. When both Debit and Credit entries are made in respect of a transaction in the same ledger
account, this is (a)Ledger entry (b)Accounting entry (c)folio entry (d)Contra entry.
6. An analytical cash book is used to (a) indicate sources of cash received (b) categorise petty
cash payments (c) separate cash and bank balance (d) analyse amount due from debtors.

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