Presentation on Accounting and Bookkeeping Principles and Practices

This presentation, delivered by CPA Vicent Laurian, provides a comprehensive overview of bookkeeping and accounting principles. It covers essential topics such as the nature of accounting, the difference between accounting and bookkeeping, and the different types of business organizations. The presentation delves into the five fundamental elements of accounting: assets, liabilities, owner's equity, income, and expenses, and explains the accounting equation. It further explores Generally Accepted Accounting Principles (GAAP), including the business entity, going concern, monetary unit, historical cost, accrual, matching, consistency, materiality, prudence, and substance over form principles. The presentation also covers accounting systems, including journal and ledger entries, and double-entry bookkeeping, with examples. It concludes with an overview of accounting for non-current assets like Property, Plant, and Equipment (PPE), Investment Property, and Intangible Assets, referencing relevant IAS standards. This presentation is a valuable resource for anyone looking to understand the core concepts and practices of accounting and bookkeeping. It's a great resource for students to understand the core concepts and practices of accounting and bookkeeping. Desklib provides past papers and solved assignments to help students excel.

BOOKKEPING & ACCOUNTING
(A flexible learning Program)
PRESENTATION
BY
CPA VICENT LAURIAN
LECTURER & BUSINESS CONSULTANT
Email: [e-mail]
Cell: [phone]/784 862733

Learning Outcomes:
By the end of this course you should be able to:
 Explain the nature of accounting and bookkeeping
 Apply the general acceptable principles of accounting in your daily
Accounting work
 Record transactions in the correct book of accounts
 Prepare Financial statements
 Account for Accruals and Prepayments
 Account for Non current assets (PPE, Investment property &
Intangible assets)
 Account for Trade and other receivables
 Cash and Bank balances (Bank Reconciliation)
 Explain Unrecorded liabilities
 Explain Deferred Tax implications in the financial statements

UNIT 1: NATURE OF ACCOUNTING
By the end of this unit you should be able to:
 Explain the difference between accounting and
bookkeeping
 Describe the different types of business organizations
 Describe the (5)fundamental elements of accounting
 Use the accounting equation to show the relationship
between the (5) fundamental elements of accounting

Bookkeeping and Accounting
What is Bookkeeping?
 Bookkeeping is a systematic method of maintaining
accurate and complete records of daily financial
transactions of a business.
 It is the first step of the accounting process. Bookkeeping
uses basic accounting processes. (i.e. From Journals,
Ledgers to the Trial balance)

Bookkeeping and Accounting
What is Accounting?
 Accounting is the process of analysing, classifying,
recording, summarizing, communicating and
interpreting business transactions and events expressed
in monetary terms.
 It is much wider than bookkeeping.
 An accountant sets up the accounting system that is
used by the bookkeeper to keep records and supervises
the work of the bookkeeper.

Types of Business Organisations
sole traders (sole or single proprietorship)
partnership,
company, and
co-operatives.
PRIVATE SECTOR – IFRS/IAS by IASB
PUBLIC SECTOR – IPSAS by IPSASB

The 5 Elements of Accounting
 Assets
 Liabilities
 Owners Equity
 Income
 Expenses
CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
(CONSTITUTION) BY THE IASB

ASSET:
Resource controlled by the entity as a result of past
event from which economic benefits are expected to
flow to the entity
LIABILITY:
Present obligation of the entity as a result of past
event
Obligation: a duty which the entity has no practical
ability to avoid

EQUITY:
Residual interest in the assets of a business after
deducting all its liabilities
EQUITY = ASSETS – LIABILITIES
OR
ASSETS = EQUITY + (incomes –expenses) + LIABILITIES
Equity holders = residual claimants

EXPENSES:
Decrease in economic benefits inform of cash
outflows, decrease in assets or increase in liabilities
which results into decrease in equity other than
that relating to distributions (dividends) to equity
holders.

The Accounting Equation
 The accounting equation is a simple way of showing
how the three elements of accounting (assets, liabilities
and owner’s equity) relate with each other.
ASSETS = EQUITY
The equity in the above formula can be divided into two
forms:
 Equity that the owner has borrowed from a bank
 Equity from the business owner’s sources
ASSETS = LIABILITIES + OWNER’S EQUITY
An accounting equation is displayed in what is known as a
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION).

UNIT 2: ACCOUNTING PRINCIPLES AN
CONCEPTS
These principles and standards are collectively
known as ‘Generally Accepted Accounting
Principles’ (GAAP).
By the end of this unit you should be able to
apply accounting principles and concepts in
the reporting of business transactions in your
daily accounting work

UNIT 2: ACCOUNTING PRINCIPLES AN
CONCEPTS
 1. Business Entity principle
 2. Going Concern principle
 3. Monetary unit principle
 4. Historical cost principle
 5. Accrual principle
 6. Matching principle
 7. Consistency principle
 8. Materiality principle
 9. Prudence principle (conservatism)
 10. Substance over form principle

DEAD – CLIC
Debit the following to increase: (and vice versa)
Expenses
Assets
Drawings
Credit to increase the following: (and vice versa)
Liability
Incomes
Capital

UNIT 3: ACCOUNTING SYSTEM - PART
By the end of this unit you should be able to:
Record financial transactions in the journal
and ledger
Differentiate between single and double
entry bookkeeping

Basic Books of Accounts
Books of accounts refer to all the records or
books in which financial information or
transactions of a business is recorded and
maintained.
These records include documents such as, cash
receipts, cheques, payment vouchers, invoices,
the journal and ledger.

Basic Books of Accounts
Books of accounts are divided into two main categories:
 Books of original entries: these are books in which we
first record transactions. For example, cash receipts,
checks, payment vouchers and journals. They provide
detailed information of a transaction, such as name of
the client, nature of transaction, date, client’s contact
details, etc.
 Books of secondary entries: these books use previously
recorded financial information from books of original
entries. They help to summarise and group different
transactions related to the same item or person, which is
helpful in preparing financial statements. A good
example is the ledger.
(THE JOURNAL AND LEDGER)

The Journal
 The Journal is the first book of accounts where business
transactions are recorded.
 It is sometime called the book of original entry because
all transactions are recorded in chronological order as
they occur.
 1) General Journal: this is a journal that first records
general financial transactions as well as information that
cannot be recorded in the other journals.

The Journal
2) Cash Journal (CASH BOOK)
3) Purchases Journal
4) Sales Journal
5) Purchases returns Journal
6) Sales returns Journal

The Ledger
(The home of all accounts)
What is an account?
 An account is a detailed financial record which stores
information associated with individual assets, liabilities,
equity, revenue and expenses.
 The ledger is the destination of all entries in the journal. In
other words, the financial information in ledger accounts
comes from the Journal. The process of transferring
information from the journal to the ledger accounts is
known as posting

The Ledger
(The home of all accounts)
There are four basic rules to remember about “T” accounts.
 The left-hand side of the accounting equation increases in
assets
 The right-hand side of the accounting equation decreases in
assets
 The left-hand side of the accounting equation decreases in
equity
 The right-hand side of the accounting equation increases in
equity

The Ledger
(The home of all accounts)
Double Entry Bookkeeping
Very simply, in a double entry system at least
two entries of equal amounts must be made for
each business transaction, one a debit entry
and another a credit entry.
This is a very important fact and is called the
golden rule of accounting.
Further, the Debits must always equal Credits.
Double entry bookkeeping is used in all
businesses that need to produce a balance
sheet and a profit and loss statement
(FINANCIAL STATEMENTS)

EXAMPLE – LEDGER ACCOUNTS
In January 2022, ABC Enterprises had the following
transactions:
 1/1/2015 The owner invested TZS 5,000,000 in his business.
 2/1/2015 The business made a cash purchase of a
second-hand truck for TZS 3,500,000
 3/1/2015 The business bought furniture on credit for TZS
1,000,000
 4/1/2015 The business borrowed TZS 500,000 from CRDB
Bank to add to the business capital
 4/1/2015 The business bought stationery for TZS 1,000,000
by cheque

EXTRACT A TRIAL BALANCE
To check the arithmetical accuracy
(additions/substractions) of ledger balances
To identify other clerical errors (trial balance
may still balance)
E.g. ommissions, error of principle, error of
commission, transposition error, complete reversal
of entries

EQUITY:
(I)Share capital (subscribed and paid up):
• Ordinary shares
• Irredeemable preference shares
(II)Share premium (paid up capital in excess)
(III) Retained earnings (accumulated profits)
(IV) Revaluation Reserves (other components of equity
– OCE)

ACCOUNTING FOR NON-CURRENT
ASSETS:
PROPERTY, PLANT & EQUIPMENTS AS PER IAS 16
INVESTMENT PROPERTY AS PER IAS 40
INTANGIBLE ASSETS AS PER IAS 38

IAS 16: PPE
 Tangible non-current assets held to be used by the entity
for:
 (i) admin purpose
 (ii) production of goods or delivery of services
Land & buildings, plant & machineries, vehicles, ships,
aircrafts, furnitures&fixtures, computers and other office
equipments
RECOGNITION CRITERIA
Should only be recognized when:

 Initially all assets including PPE are measured and
recognized cost
(i) Purchasing price including any non-refundable
taxes (e.g import duty, excise duty)excluding any
trade discounts/refunds from supplier
(ii) Direct attributable costs
Incurred to bring the asset into usable condition and
present location
(iii) Future obligated costs
costs to dismantle/decommission the asset, site clean
up and restoration costs
DR. PPE
CR. Provision (liability)

SUBSEQUENT (FURTHER) EXPENDITURES
Shall be classified into capital and revenue
expenditures
Revenue expenditures:
Incurred to maintain the operating capacity of an
asset . E.g. periodic (minor) repairs and
maintenance (rennovations)
Treatment:
shall be expensed straight to P/L when incurred.

SUBSEQUENT (FURTHER) EXPENDITURES
 Shall be classified into capital and revenue
expenditures
Capital expenditures:
Incurred to improve/upgrade the operating capacity
of an asset or incurred to enhance benefits/extend
useful life of an asset
E.g. major repairs/maintenance, major inspection,
replacement/renewal of significant component of an
asset (engine to a vehicle, motor to a machine)
Treatment: shall be capitalized as part of PPE

SUBSEQUENT (FURTHER) EXPENDITURES
 Shall be classified into capital and revenue
expenditures
Capital expenditures:
Incurred to improve/upgrade the operating capacity
of an asset or incurred to enhance benefits/extend
useful life of an asset
E.g. major repairs/maintenance, major inspection,
replacement/renewal of significant component of an
asset (engine to a vehicle, motor to a machine)
Treatment: shall be capitalized as part of PPE

IAS 40: INVESTMENT PROPERTY
Tangible non-current assets held by the entity for
rental income (sublet to third party) or capital
appreciation (increase in future market prices)
Example:
Piece of land held for unknown future use, building
which is vacant to be sublet to third party, building
constructed for investment purpose, building held
under finance lease (longterm rental) to be
leased out to third under operating lease (short
term rental)

Part/portion to a property
(e.g. 8 floor building)
Portion of a property sublet to third part for
rental income should be treated as investment
property IAS 40
Portion which is occupied and used by the
entity should be treated as PPE IAS 16

Parent sublet a property to a subsidiary
In parent individual books shall be treated as
investment property IAS 40
In the group accounts shall be treated as PPE
IAS 16

Servicing an investment property
Servicing costs such as utility bills (water and
electricity bills), security, cleaning, periodic
repairs (rennovations),etc
If servicing costs are significant part of rental
consideration then the property shall be treated
as PPE IAS 16

IAS 38: INTANGIBLE ASSETS (IA)
 IA: Identifiable non-monetary assets without physical substance
E.g. Goodwill, patent, copyrights, software, trademark,
brandname, logo, customer list, trade secrets (formulas, business
licence,etc.
IA are identifiable when:
(i)They are separable:
Can be sold/rented out without affecting the business (other
assets)
OR
They arise contractual/legal agreements with third (i.e. acquired
from third party)
Note: internal generated goodwill can not be recognized as IA

RECOGNITION CRITERIA FOR IA
Control
More likely benefits will flow to the entity
Cost/value can be measured reliably
Identifiable
All of the above conditions must be met for IA to
be recognized into the books

SPECIFIC IA:
(i) IA acquired separately as part of normal business
transaction
 They shall be recognized at cost (amount paid)
(ii) IA acquired as part of business combination
(parent acquires a subsidiary)
They shall be recognized at fair value (only if it can be
reliably determined)
(iii) Research and development (R&D) costs
Research costs shall be expensed straight to P/L when
incurred
Development costs shall be capitalized as IA if and
only if there is a technical and commercial feasibility

Following costs shall not be capitalized
as IA:
Advertising and promotion costs
Staff training costs
Internal generated goodwill
Start-up (business formation) costs