1. Bookkeeping involves recording financial transactions so a business can ascertain its financial position. Accounting builds on this by classifying, interpreting, and communicating this information to various users. 2. Accounts can be personal (related to individuals or entities) or impersonal (related to things). Impersonal accounts are further divided into real accounts (for assets) and nominal accounts (for other items). 3. Key users of accounting information include governments, employees, competitors, banks, creditors, financial analysts, shareholders/owners, managers, auditors, and investors - each with their own reasons for needing this data.

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PRINCIPLES OFACCOUNTING (ACC 111)
BOOKKEEPING is the art of recording the financial transactions of a business in a manner that its
financial position can be ascertained at any given period. Bookkeeping is done by the bookkeepers
(accounting clerks).
ACCOUNTING: -is the language of finance. It involves the recording, preparation, classification,
interpretation, and summarizing of accounting information in a manner that it will be meaningful and useful
to the users.
ACCOUNTS: -An account is ledger information in a summarised manner. It is classified into two:
1. PERSONAL ACCOUNTS: -These are those accounts that are prepared with the names of persons,
companies, organization, countries etc.
2. IMPERSONALACCOUNTS: -These are those accounts that are prepared with the names of things.
These accounts are divided into two namely: real account and nominal account. REAL ACCOUNTs are
those accounts that are prepared with the names of property/assets. NOMINAL ACCOUNTS: These are
other accounts that do not bear the names of assets or property.
USERS OF ACCOUNTING INFORMATION
Some people may be interested on the information contents of accounting records. Such people are known
as users of accounting information and each people/party may like to use accounting information for some
purposes or reasons. Some of the users are; -
1. Government: The government wants to use accounting information in order to ascertain the total income
(profit) within a financial period for tax purposes.
2.Workers/staff/employees: These people will like to use accounting information in order to ascertain of
the business so that they can demand for increase on salaries and wages and better service condition.
3. Competitors: are two or more people that are in the same line of business. They need accounting
information in order to be able to compete with the others and to improve on their own business.
4. Banks: banks need accounting information of businesses and companies in order to know if they are
eligible to be given loans and advances and other facilities.
5. Creditors: are people that give their goods or services to a business. They will need accounting
information relating to their customer(s) in order to know their credit worthiness.
6. Financial analyst: they are those that can study the financial records of a business and be able to
determine the financial standard of the business and also be able to give advice to the public on demand.
They need accounting information for their financial analysis.
7. Shareholders/members/owners: these are the people that invest in the shares of a company, they need
the accounting information in order to ascertain whether to invest in the shares or not.
8. The Public: the public refers to general masses.
ACCOUNTS
PERSONAL ACCOUNTS IMPERSONAL ACCOUNTS
REAL ACCOUNTS NOMINAL ACCOUNTS

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9. Managers: these are people that manage the affairs of a business. They need accounting information in
order to measure their performances.
10. Auditors: the auditors audit the accounting books. They need accounting information to perform their
auditing functions or duties.
11. Investors: these refer to people that invest in long term liabilities of a business. They need accounting
information to ascertain whether to invest their money or not.
12. Share brokers: they are the people that market the shares of a company. They need the accounting
information to ascertain the standard of the company and be able to decide whether to market the shares or
not.
13. Students/researchers: they need accounting information for research purposes.
THE BOOKS OF ORIGINAL ENTRY
These are those books used for recording initial information relating to financial transactions of a business
before transferring the summary to ledger accounts. They include:
 Cash account
 Bank account
 Cashbook
 Petty cash-book
 Sales journal/sales daybook
 Purchases journal/purchases daybook
 Returns inwards journal
 Returns outwards journal
 Journal proper
CASH ACCOUNT: this is used for recording all transactions that involve immediate cash payments and
immediate cash receipts. It is divided into two sides known as Debit (Dr) and Credit (Cr). The right-hand
side is known as the credit side and it is used for recording all transactions that involve immediate cash
payments. The left-hand side is known as the debit side and it is uses for recording all transaction that
involve immediate cash receipts. Each side has the following columns:
1. Date: it is used for recording the date the transaction took place.
2. Particulars: used for recording a summary description of a transaction.
3. Folio: used for reference purposes.
4. Amount: used for recording the amount of transaction involved.
BANK ACCOUNT: this is used for recording all transaction that involve receiving cheque and paying
cheques.it is recorded or prepared in the same way the cash account is recorded. Note, the credit side of
the bank can be greater than the total on the debit side.
THE CASHBOOK-the cash book is a combination of the cash and the book accounts as one account there
are two types of cashbooks:
1.Two-column cashbook: it is called a two-column cashbook because it has two columns on each side for
recording money one column for transaction that involve cash receipt and payments and another column
for recording transaction that involve immediate cheque receipt and payment.
Example: - This example will be used to illustrate how to prepare a cash-account, bank-account and cash-
book.
The following information relate to the transactions of Sheddy for the month ended 31st
January 2021
1.1/1/2021 started business with N200,000 cash at bank and N150,000 cash at hand
2.5/1/2021 paid office rent by cheque N36,000 cheque no 004
3.7/1/2021 bought goods in cash N70,000 voucher no006
4.8/1/2021 sold goods in cash N120,000 receipt no 002

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5.10/1/2021 bought goods by cheque N80,000 and in cash N25,000
6.15/1/2021 sold goods by cheque N60,000 and in cash N45,000
7. 16/1/2021 borrowed N15,000 from Adamu
8.20/1/2021 paid workers wages in cash N23,000
9.28/1/2021 paid Adamu N10,000 by cheque
10. 31/1/2021 paid workers salaries by cheque N18,000
You are required to use this question to; the cash-account, bank account and a cash-book.
THE THREE COLUMN CASH BOOK is used when the transactions of a business involve giving and
receiving discount, it is called three column cash-book because it has three columns on each side for
recording money. One column for discount another column for cash and a column for bank. A discount is
a reduction on a price of a commodity in order to encourage a customer to buy and pay immediately and
/or to buy in a large quantity discount is classified in accounting as discount received or discount allowed.
Discount received is regarded as an income to a business while discount allowed is regarded as part of
business expenses. Discount received is recorded on the credit side of the cashbook while discount allowed
is recorded on the debit side. Example
1.Mr Edem started business on 1/1/2014 with N300,000 cash in hand and N700,000 at bank
2. bought goods in cash N150,000 And by cheque N250,000 and was given 10% discount
3. Bought office furniture by cheque N80,000
4. Sold goods in cash N250,000 at a discount of 5%
5. Paid office rent in cashN48,000
6. Bought goods by cheque N17,000 at a discount of 7%
7. Sold goods by cheque N80,000 at a discount of 3%
8. Bought motor vehicles for the business by cheque N1,300,000
Requires a three-column cash for the period ended 31/1/2014
CONTRA- ENTRY:A contra entry is said to have occurred if one transaction is recorded twice on the
same account once on the credit side and again on the debit side.
SALES DAYBOOK/JOURNAL: -A sales journal or daybook is used when a business sales goods on
credit to the customers. The sales daybook is not an account. It is a schedule used for recording all sales
on credit before transferring the total to the sales account.
PURCHASES JOURNAL/DAYBOOK: -This is used when a business buys goods on credit. It is not an
account it is a schedule used for recording all purchases on credit before transferring the total to purchases
account.
RETURNS INWARDS JOURNAL: -This is used for recording all sales that were returned to the
business. It is not an account; it is a schedule used for recording returns inwards before transferring the
total to returns inwards account.
RETURNS OUTWARDS JOURNAL; -This is used for recording all purchases that were returned back
to the place they were bought. It is not an account; it is a schedule used for recording all returns outwards
before transferring the total to the returns outwards account.
Example B started business with N80, 000 cash in hand and 100,000 cash at bank.
¶ Paid office rent by cash N12,000 and by cheque N36,000
¶ Bought office furniture by cheque N50,000
¶ Sold goods to Madam Do-good in cash at N100,000 at a discount of 5%.
¶ Bought goods on credit from Mr.Do good onN400,000 at a discount of 10%
¶ Madam do good returned goods worth N20,000 because of their poor quality.
¶ Return goods #50,000 to Mr. do good.
¶ Sold goods on credit to madam Aisha N150,000
¶ Paid office expenses in cash N15,000

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¶ Madam Aisha returned goods worth 35,000
¶ Bought goods in cash from madam blessing N55,000
¶ Paid wages by chequeN33,000
¶ Returned goods worth N8,000 to madam blessing
¶ Sold goods on credit to Mr. Edwin N150,000
¶ Paid cash into bank N100,000
¶ Bought goods in cash N34,000
¶ Withdraw cash from bank for office use N25,000
You are required to record these transactions in the necessary books balance or/ and summarise
the books where necessary.
HISTORICAL DEVELOPMENT OF ACCOUNTING
There is no existence on earth that has no origin. The evolution of accounting history which began thousands
of years ago could be traced to have originated during ancient civilization. The developments in writing,
counting and money are believed to have played significant roles in the development of accounting. The
reason is that “writing” is a means of communication; “counting” is the process of listing or mentioning of
numbers from the first to the last, making sure that none would be repeated at the end of the counting
exercise; and “money” is an acceptable medium of exchange. A proper knowledge of the trio can make
memorisation and documentation of financial transactions easy.
The development of accounting in the ancient days could be traced back to the ancient Mesopotamia,
Babylon, Assyria and Samaria. Accounting records and other documents that contained lists of
expenditures, purchases and sales of goods were found in those countries about seven thousand years ago.
The ancient Egyptian civilization also contributed as paintings of early accounting records and activities
were exhibited on temples and accounting systems similar to modern day systems were used for recording
the cost of labour and materials used for construction of monumental structures such as the pyramids
thousands of years ago.
In spite of the surrounding arguments over the first person that invented double entry bookkeeping
system, Luca Pacioli, an Italian is widely acknowledged as the father of modern accounting and
bookkeeping and is recognised as the first person to publish a book on double entry bookkeeping in
1494.
THE PRINCIPLE OF DOUBLE ENTRY BOOK- KEEPING AND THE TRIAL BALANCE
1. THE PRINCIPLE OF DOUBLE ENTRY BOOK-KEEPING: -
The principle of double entry states that every financial transaction must be recorded twice, once on the
credit side of one account and again on the debit side of another account. This is the foundation of
accounting, any accounting records not kept in line with this principle is said to be single entry and will
result to keeping incomplete records.
2. THE TRIAL BALANCE: -
Is not an account, it is a schedule used for testing arithmetical accuracy of the records kept by using the
principle of double entry. If the two sides give the same total or agree it is assumed that no errors occurred
when the account were prepared. However, the disagreement of the two sides shows that some errors must
have occurred when the account were prepared. Any difference between two sides will be transferred to
suspense account pending the time the error(s) will be corrected. There are some errors that may not affect
the agreement of the two sides of the
ILLUUSTRATION 1
The following transactions relate to Lawali Soft-drinks, a petty trader at A.G.P. Premises
1. Started business with N50,000 cash in hand and N 200,000 at bank
2. Paid office rent in cash N50,000 cash in hand and N200,000 at bank
3. Bought goods for sales by cheque N55,000
4. Sold goods in cash N28,000 and by cheque N 40,000
5. Paid office expenses in cash N 2000 and by cheque N12,000

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6. Bought goods for sale N15, 000 in cash.
You are required to record these transactions on the necessary accounts, balance the account and extract a
trial balance.
ILLUSTRATION 2: -
The following information relates to Mama Bello who sells food in A.G.P premises at Talata Mafara.
1) Started business with N 400,000 cash in hand and N 600,000 at bank
2) Bought goods for sale in cash N80, 000 and by cheque N 60,000.
3) Sold goods to A.G.P for matriculation on credit N 700,000.
4) Paid cash for repairs N 25,000 and by chequeN 40,000
5) A.G.P returned goods worth N 150,000
6) Received cash N400,000 from A.G.P as part payment
7) Bought goods on credit from Dauda N 300,000.
8) Paid wages to staff in cash N 35,000 and by cheque N 65,000
9) Returned goods to Dauda worth N 85,000
10) Paid cash into Bank N 140,000 required.
Record the transaction on the necessary accounts, balance the account and extract a trial balance.
TRADING, PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET
The aim of every business is not to make profit but to maximize profit. For this reason, every business that
wants to maximize profit must try as much as possible to minimize cost. In other to ascertain whether a
business is making a profit or not, two main accounts will be prepared (the trading, profit and loss accounts).
The preparation of these accounts is just a continuation of the double entry principles. These accounts are
also known as the final accounts.
TRADING ACCOUNT: -The trading account is prepared in other to ascertain the gross profit of a business
within a given financial period. Gross profit = Net sales – cost of goods sold. Gross profit is the difference
between Net sales and cost of goods sold. The debit side of the trading account is used for recording items
like:
1. Opening stock
2. Purchases
3. Carriage inwards
4. Returns out wards
5. Closing stock
On the other hand, the credit side is used for recording sales and returns inwards if any.
PROFIT AND LOSS ACCOUNT
This account is prepared in order to ascertain the net profit/loss of the business for the period under
consideration. This account starts from where the trading account stopped. The credit side is used for
recording gross profit and any other items of income nature such as; -
1. Gross profit
2. Discount received
3. Profit on sale of asset
4. Bad debit recovered, etc.
The debit side is used for recording other expenses incurred in other to make or generate revenue such as:
1. Salaries and wages
2. Telephone expenses
3. Electrical expenses
4. Stationary
5. Motor expenses
6. Depreciation
7. Discount allowed
8. Loss on sales of asset
9. Interest on money borrowed to generate income
10. Bad debts

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11. Provision for bad debt etc
NOTE: -On no account should items like motor vans, Land, building plant and machinery, furniture, etc
be recorded i
n the profit and loss account.
THE BALANCE SHEET: -The balance sheet is not an account. It is a schedule or a statement that shows
the value of the assets and liabilities of a business at a given period. For this reason, it is divided into (2)
sides.
1. The right-hand side, which is used for recording all the assets of the business and
2. The left-hand side, which is used for recording the capital and the other liabilities of the business.
EXAMPLE
The following information are extracted from the books of C. Y. Enterprises on 31/12/2020
Trial balance for the period ended 31/12/2020
N N
Opening stock 15,000
Purchases 54,500
Sales 100,000
Returns inwards 5,000
Returns outwards 8,000
Bad debts 2,500
Salaries and wages 5,000
Telephone expenses 3,000
Office rent 3,700
Stationary 2,000
Discounts 3,000 7,500
Capital 120,000
Bank loan 72,000
Creditors 23,700
Motor van 50,000
Fixtures 7,500
Furniture 20,000
Cash in hand 125,000
Cash at bank 5,000
Debtors 30,000
331,200 331,200
ADDITIONAL INFORMATION:
1. Closing stock was valued at N20,000 at 31/12/2020
2. Depreciate motor van by 10% 0f its book value
3. Rent prepaid N200 and accrued telephone expenses N320.
You are required to prepare trading profit and loss account for the period ended 31/12/2020.