Wed 18 Apr 2018
(i) It can result in a business exhausting the budget, leading to spending more than
what is coming in.
(ii) Businesses may need to file for bankruptcy or shut their doors if they fail to keep adequate records from the
(iii) It can result in problems with suppliers, payroll, utilities, and other vital components to a running successful business.
(i) Relevance means an account information to make a difference in decision making
(ii) Comparability means an account information can be used to compare different entities
(iii) Consistency: information is consistently presented from year to year
(iv) Reliability means an account information is verifiable, factual, and neutral
(i) Accounting information is historical in nature
(ii) There is no information as to usefulness, size or quantity because accounting is expressed in monetary terms
(i) Direct material cost: It is the expenditure incurred on raw materials which can be traced to a particular production unit.
Example: Orange in fanta making.
(ii) Direct labour cost: This refers to the wages of employees who are directly to engaged in the production process.
Example: Wage of machine operator.
(iii) Factory overhead: It relate to expenditure incurred in running the factory which cannot be traced to a particular production unit.
Example: Indirect wages.
(i) Opening stock: This is the brought-forward stocks from the previous year.
(ii) Closing stock: This is the stock at the end of every trading year
(iii) Work-in-progress: This the total value of the materials and labour for unfinished projects.
Where a big business with diverse trading activities is conducted under the same roof the same is usually divided into several departments and each department deals with a particular kind of goods or service. For example, a textile merchant may trade in cotton, woolen and jute fabrics. The overall performance for this type of business depends, however, on departmental efficiency.
(i) It helps the management to make proper plan of action, policies in order to increase profit after analysing the results of operation of various departments.
(ii) Departmental accounting helps us to understand which department should be expanded further or which one should be closed down as per the results of the operation.
Cash book Adjustment
In a tabular form
Bal b/d #48,500 | Bank. charges 1000
Interest on investment #2500 | Dishonoured cheques 2000
Credit transfer #3000 | bal b/d 51,000
Total #54,000 | Total 54,000
bal bd 51,000
Bank Reconciliation statement as at 31/12/2016
Balance as per adjusted cash book #51,000
add unpresented cheques #8850
add back wrong credit #3500
12,320 + 51,000 = #63,350
Less uncredited cheques 8450
Balance as per bank statement = #54,900
STATEMENT OF AFFAIRS AS AT 1ST JANUARY
Land and buildings:15000
CREDITORS LEDGER CONTROL ACCOUNT
Payment to creditors:12000
DEBTORS LEDGER CONTROL ACCOUNT
TRADING PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31/12/2016
Less closing stock:2000
Rent and rates:4000
Gross profit b/d:17500
Obihan trading profit and loss account
SALES = 1,200,000
Less return inward =
Less cost of sales
Opening stock = 3000,000
Add purchase 1,050,000
Less return outward = 18,600
Cost of goods available. =1,331,400
Less closing stock=360,000
Cost of goods sold=971,400
LESS OPERATIVE EXPENSIVE
Rates (18,000 +1,500) = 16,500
Rates ( 18,000 + 660) = 3,660
Salaries (90,000 + 15,000) = 105,000
Bad Debits = 600
Insurance = 93,000
Depreciation: Furniture 9,000
Machineries = 18,000
Provision for bad debit = 540
NET LOSS 246,300