3. Facilitators
Mofe Binitie Oluwatomisin Amu
WEF Global shaper and
Transactions Advisory
Consultant with EY Nigeria
Consultant with EY Nigeria
and Chartered Accountant
6. Objectives of this Workshop
An understanding of the importance of financial records
An understanding of basic accounting principles
An understanding of how to record basic transactions
An introduction to accounting software packages
7. What are financial records?
Financial records are historical accounts of financial
transactions. Accounting is the recording of financial
transactions - storing, sorting, retrieving, summarizing, and
presenting the information in various reports and analyses
Introduction
Accounting is defined as:
"The process of identifying, measuring and
communicating economic information to permit informed
judgments and decisions by users of the information.” - The
American Accounting Association. -
8. Why do we need Financial records?
1. Financial health.
2. Financial planning.
3. Budgeting.
4. Calculating tax liability.
5. Financial reporting.
6. Need for financing.
10. The Elements of accounting
Assets: (Generator, Building, Cash, Patents, Licenses,
Receivables)
Liabilities: (Bank loans and overdrafts, payables)
Owners equity: Residual of 1 and 2 above)
These elements lead to sub elements:
– Income
– Expenses
12. The Accounting Definitions
Transaction: A transaction is any activity that changes the
value of a firm’s assets, liabilities, or owner’s equity
Account: summary record of an entity’s asset, liability, and
owner’s equity transaction over defined period; annually,
quarterly etc.
Double-entry accounting: means that there will be at least
two (2) accounts affected by each transaction.
13. The Accounting Definitions
Journal: diary of information of day-to-day transactions.
Ledger: individual accounts that help summarize activity and
obtain balances of accounts.
Trial Balance: a statement listing on a certain date that shows
all accounts and their balances.
Accrual concept: Recognise income when they are earned and
recognize expenses when they are incurred regardless of
whether cash has come in or gone out.
14. The Accounting Cycle
1. Analyze transactions. (What do I debit, what do I credit!)
2. Record in a journal.(Record)
3. Post from the journal to the ledger.(Summarize)
4. Prepare a trial balance.
5. Prepare Financial Statements.
15. Analyzing Transactions
Assets and Expenses: An increase is recorded as debit (left side)
while a decrease is recorded as credit (right side)
Liabilities, Equities and Revenues: An increase is recorded as
credit (right side) while a decrease is recorded as debit (left side)
17. Practical Examples
You put money from your personal savings into the business
Dr:
Cr:
Dual Printer and scanning machine is purchased on credit
Dr:
Cr:
Stationeries and printing ink is purchased outright(not credit)
Dr:
Cr:
18. Practical Examples
Payment of staff salaries
Dr:
Cr:
Sold goods to customer who promised to pay next month
Dr:
Cr:
19. Practical Examples
Sambo Makeup studios was incorporated on the 1st of April 2016 with an initial capital of
400,000 which was a start up grant received from Lagos Global shapers. During its first
month in operation, the company engaged in the following transactions:
S/N Transaction Date
1 received 400,000startup grant from Lagos Global shapers 2nd April
2 paid 100,000as Rent for business space 3rd April
3 Paid 75,000for furniture and décor 6th April
4 Bought a small generator to power the studio costing 20,000on credit 9th April
5 Bought new set of Makeup materials (brushes, concealer, foundation, lipsticks)for 20,00010th April
6 paid 6,500as utilities for the first the first month 13th April
7 paid 5,000as fuel for generator 15th April
8 Did first makeup job for Titi Ojo's red carpet event for 20,000but she promised to pay in the next month16th April
9 paid 25,000for website and hosting 19th April
10 Did makeup for a bridal train of 8ladies and was paid 100,000 23rd April
11 paid 60,000as fees for two staff 29th April
20. Recording in Journal
DR CR
Transactions N N
Received 400,000 startup grant from Lagos Global shapers
Cash 400,000
Capital 400,000
Paid 125,000 as Rent for business space
Rent 100,000
Cash 100,000
Paid 75,000 for furniture and décor
Furniture and fittings 75,000
Cash 75,000
Bought a small generator to power the studio costing 20,000 on credit
Generator set 20,000
Cash 20,000
Bought new set of Makeup materials (brushes, concealer, foundation, lipsticks)for 50,000
Makeup expenses 20,000
Cash 20,000
Paid 12,000 as utilities for the first the first month
Utilities 6,500
Cash 6,500
Paid 5,000 as fuel for generator
Fuel 5,000
Cash 5,000
Did first makeup job for Titi Ojo's red carpet event for 20,000 but she promised to pay in the next month
Receivables: Titi Ojo 20,000
Sales: Titi Ojo 20,000
Paid 25,000 for website and hosting
Website cost 25,000
Cash 25,000
Did makeup for a bridal train of 8 ladies and was paid 100,000
Cash 100,000
Sales: Funmi Oreola 100,000
Paid 60,000 as fees for two staff 60,000
Salaries and wages 60,000
Cash
21. Post from the journal to the ledger
(Summarize)
CASH LEDGER
DR CR
Grant from Lagos global shapers 400,000 Rent 100,000
Funmi Oreola 100,000 Furniture and fittings 75,000
Makeup materials 20,000
Utilities 6,500
Fuel costs 5,000
Website costs 25,000
Salaries and wages 60,000
Balance c/d
500,000 291,500
Balance b/d 208,500
SALES LEDGER
DR CR
Titi Ojo 20,000
Funmi Oreola 100,000
- 120,000
EXPENSES LEDGER
DR CR
Makeup materials 20,000
Utilities 6,500
Fuel costs 5,000
Rent costs 100,000
Website costs 25,000
Salaries and wages 60,000
216,500
RECEIVABLES LEDGER
DR CR
Titi Ojo 20,000
20,000 -
PAYABLES LEDGER
DR CR
Generator set 20,000
FIXED ASSETS LEDGER
DR CR
Furniture and fittings 75,000
Generator set 20,000
95,000
CAPITAL LEDGER
DR CR
Grant from Lagos global shapers 400,000
22. Prepare a trial balance
DR CR
Decription N N
Cash 208,500
Sales 120,000
Expenses 216,500
Capital 400,000
Fixed assets 95,000
Receivables 20,000
Payables 20,000
Total 540,000 540,000
23. Prepare Financial Statements.
BALANCESHEET
Furniture and fittings 75000 Payables (gen set) 20,000
Generatorset 20000 Capital 400,000
Receivables (Funmi) 20,000 Net loss (96,500)
Cash 208,500
Total 323500 Total 323500
ASSETS LIABILITIES ANDEQUITY
PROFIT OR LOSS STATEMENT DR CR
Sales 120,000
Less Expenses:
Makeup materials 20,000
Utilities 6,500
Fuel costs 5,000
Rent costs 100,000
Website costs 25,000
Salaries and wages 60,000
216,500
Net loss (96,500)
25. Accounting software
Accounting softwares are applications that function as accounting information systems
that record and process accounting transactions within functional modules such as
accounts payable, accounts receivable, payroll, and trial balance. They allow detailed
tracking of financial transactions and near instantaneous reporting and analysis.
Accounting software allows for the automation of the financial reporting process.
They may be:
Personal finance accounting software
Small business accounting software
Mid market accounting software
Large scale enterprise resource planning software
Major vendors include:
Intuit
Sage
SAP
Oracle
Microsoft
26. Free accounting software packages
TAS software by SAGE
GNU cash
NCH Express invoice
Xtuple postbooks
VT Cash book
Freshbooks
Zoho invoice
Billing boss
Intuit billing manager
Outright
Wave accounting