Notes for Business Accounting

1. CHAPTER 3
ACCOUNTING PROCESS
AND
BOOKS OF ACCOUNTS

2. COURSE OUTLINE
 Describe the accounting process
 Highlight the importance of the following sources
documents used in the business
 Discuss the function of each the journals by sorting the
above documents into the following prime books

3. ACCOUNTING PROCESS
Classifying
Recording
Summarizing
Analyzing
Interpreting
Accounting data and information from business
transaction and activities are arranged and categorized
according to the types of transaction and documents
The transaction are recorded into appropriate
books of account
Accounting data for a of financial statement
articular period is summarized in the form
Financial statements are
analysed and the result from
analysis is used to make
business decision

4. SOURCE DOCUMENTS IN BUSINESS
Invoice-the invoice states the amount that the buyer owes the seller.
Credit notes and debit notes
Credit notes-state the amount to be reduced from the invoice that was issued earlier.
- Overcharged in invoice
- Return of items
Debit notes- state the amount to be added to the invoice that was issued earlier
- Undercharged in invoice
- Charged interest on late payment
Payment voucher- when the buyer pays for credit purchases, the business will prepare a payment voucher when he prepared
the cash or cheque
Official receipt-to acknowledge money received
- Money includes both cash and cheque

5. Memo-commonly used for contributions and drawings by the owner
Cheque and cheque butts
Cheque- is document that orders a bank to pay a specific amount of money from a person’s account to the person in whose name
the cheque has been issued.
Cheque butts- evident that payment has been made by cheque
Quotation-sent to a customer by a company stating the fixed price that would be charged to produce or deliver goods or services if
the customer accept.
Cash bills- document use in cash purchased or cash sales
- It’s like invoice but use in cash transaction only when you buy or sales goods.
Sales order& Purchased order
Purchased order- is a document used for ordering goods.
Sales order- is a document used for confirmation of sale.
Delivery order/notes-a document sent with a shipment of goods that describes the goods and the quantities being delivered

6. FUNCTION OF THE JOURNAL
GENERAL JOURNAL
Use to record:-
• The purchased and sale of fixed assets on credit
• The correction and errors
• Writing off bad debts
• Opening entries
• Other items
SALES JOURNAL (a list recording all credit sales for each period)
This book a merely a list, showing the following:
• Date
• Name of customer
• Invoice number
• Folio column
• Final amount of invoice

7. • TRADE DISCOUNT-No entry is made for trade discounts in the double entry accounts.
- Trade discount is giving to attract customers to buy from us.
PURCHASES JOURNAL(a list of all credit purchases)
This book a merely a list, showing the following:
• Date
• Name of supplier
• The reference number of the invoice
• Folio column
• Final amount of invoice
RETURN OUTWARDS @ PURCHASES RETURN JOURNAL
- used to debit the account of each supplier concerned in the
purchases ledger.

8. RETURN INWARDS @ SALES RETURN JOURNAL (Is used to post each item to the credit of the account of the customer
concerned in the sales ledger).
The might reasons customers returning goods to us such as the following:
• Goods were of the wrong type
• They were the wrong color
• Goods were faulty
• Customer had bought more than he needed
CASH BOOK (The cash book consists of the cash account and the bank
account put together in one book).
Discount Allowed – cash discounts allowed by a firm to its customers when
they pay their accounts quickly.
• Discount Received – received by a firm from its suppliers when it pays their
accounts quickly.
• Contra – A contra for cash book items is where both the debit and credit
entries are shown in the cash book.
• Folio columns – Columns used for entering reference numbers.

9. CASH DISCOUNT
-Cash discount happened when we settle the amount of debts according the credits Term.
- We received discount when we paid the debts and we give the discount when the debtors are paying their debts.

10. SOURCE DOCUMENT, FUNCTION AND BOOKS OF ACCOUNT