Summary

Summary of New Era Accounting - Grade 11

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Course
Accounting

Institution
11th Grade

Book
New Era Accounting

My Grade 11 Accounting Notes cover all of the basic concepts in the New Era Accounting textbook. These notes are designed to help you understand the underlying theory behind accounting, as well as how to apply this knowledge to practical situations. These notes cover topics such as partnerships, ...

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Summarized whole book? Yes
Uploaded on November 15, 2022
File latest updated on January 4, 2023
Number of pages 11
Written in 2022/2023
Type Summary

grade 11
accounting
new era
caps
nsc
theory
ethics
internal control
reconciliation
creditors
debtors
bank
fixed asssets
partnerships
financial statements
income statement
balance sheet
interpret
notes

Book Title:New Era Accounting

Author(s):Trevor Hall

Edition:2012
ISBN:9781920321819
Edition:Unknown

Institution
11th Grade
Course
Accounting
Schooljaar 201

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© Thomas Kabalin

Accounting
Partnerships
 Partnership: agreement between at least 2 people who carry out business with the aim of
making a profit and sharing it. Each partner contributes capital (cash or assets)
 Legal to form orally – not advisable
 Lawyer should draw up written contract – detail all important aspects that could give rise to
problems
 Sole proprietor – provide all capital, take all risks, all profit/loss belongs to them
 Limited by capital, experience & ability to make decisions
 Advantages of partnership:
o Additional capital – help to expand
o Responsibilities shared
o Expertise, experience & discussion leads to better decisions (& better management)
o Better management means more profit (even if shared)
 Disadvantages:
o Each partner can make legally binding decision without discussion – lead to financial
difficulties
o Partners are jointly & severally liable if partnership cannot pay debts
 Creditor can sue partners jointly / sue 1 partner separately
 Partner would have to pay full debt then recover other partner’s shares
 If cannot recover, partner who paid debt can do nothing
 Capital:
o Each partner has own account – fixed unless increase / withdraw contribution
o This is because:
 Partners share profit in ratio of capital
 Changes may affect liquidity (ability to pay debts)
o If partner leaves, retires, dies – must be paid back
 Drawings:
o Each partner has own account (how much they owe the firm)
 Current account:
o Shows how much business owes partner
o If debit – partner withdrawn more than entitled to – should be paid back as can
cause liquidity problems (equity of business reduced)
 Appropriations account:
o Salaries – remunerate partners who work in business
o Interest on capital – reward partners for investing (would have earned interest from
bank – useful when profit ratio not according to capital)
o Bonus – reward exceptional work
 Usually not made if no profit left after salaries/interest on capital
 Can be % of net profit
o Share remaining profits-reward for risk of entrepreneurship (secondary distribution)

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, © Thomas Kabalin

Adjustments
 Prepaid expenses - business making advanced payments for goods or services to be received
in the future (Asset – Debit then decrease expense)
 Accrued expenses - an expense that is recognized on the books before it has been paid
(Liability – Credit then increase expense)
 Income received in advance - revenue which is to be earned in a future accounting period
but is already received in the current accounting period (Liability – Credit then decrease
income)
 Accrued income - money that's been earned but has yet to be received (Asset – Debit then
increase income)
 Consumable stores on hand (Asset – Debit then decrease expense)
 Trading stock deficit/surplus (income/expense)
 Accumulated depreciation (contra asset)
 Provision for bad debts adjustment (income/expense) – not all debtors will pay but cannot
write off bad debts that haven’t happened – rather use % of debtors control to calculate a
provision for bad debts (contra asset)

Remember: accrued means shown in books before bank!

Non-Current Assets/Liabilities with Current Portions
 Happen in statement of financial position (balance sheet), not books
 Repayment of non-current loan in next financial period
o Non-current liability – not paid back within 12 months
o Show portion that will be paid back in 12 months in current liability account (short
term portion of long term long/mortgage)
 For fixed deposit maturing in next financial period
o Financial asset under non-current assets
o If part will mature in next 12 months – show in cash & cash equivalent

Interest on Loan
 Amount originally borrowed is capital amount (capitalize interest mean to add to capital
amount of loan – same with fixed deposit)
 If not capitalized – interest on loan/fixed deposit goes to accrued income/expenses rather
than loan
 Capitalizing means interest and capital amount are covered in repayments – more
convenient for bank/borrower
 In fixed deposit – means investor will receive interest on interest

Types of Activities
 Operating activities – activities in operating business (buying/selling goods, wages)
 Financing activities – activities in raising funds for business from owner / lender (capital,
loan, paid/owe interest)
 Investing activities – activities in investing the funds of the business with the intention of
earning a profit (fixed deposit, interest, land and buildings/other fixed assets – invest in
business to make a profit)

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, © Thomas Kabalin

Operating activities include cash activities related to net income. Investing activities include cash activities related to noncurrent assets.

Fixed Assets
 Tangible/fixed assets: physical, non-current assets which are used by the business to supply
goods and services or for administrative purposes
 Non-current: business intends to use the assets for a long time (more than 1 year) – it may
sell it at the end of its useful life, but the intention is to use it
 Installation/other costs of asset are added to the cost price
 Useful life is the number of years the business intends to use it before replacing it

Depreciation
 Deprecation: the decrease in book value of a tangible asset as a result of using it (imputed
expense & tax deductible)
 Asset cannot be shown at cost price if you cannot sell it for that much (prudence concept)
 Land and buildings not depreciated – they appreciate (not shown until sold)
 Same method of depreciation used each year – principle of consistency
 Ancient assets recorded at R1
 When asset account starts with balance – means it is old (had it for more than 1 year)
 New assets only deprecated for months owned

Control of Fixed Assets
Prevention of theft by the public
 Premises secured with fencing, security, alarm
 Assets insured

Prevention of theft/fraud/misuse by staff
 Purchasing assets
o Separation of duties – person who asks for (requisitions) asset should not negotiate
purchase
o Senior staff member obtains quotes from supplier to decide – prevent bribe
o If business too small – owner should be involved
 Asset Disposal
o Decision to sell made by owner or senior staff member
o Reason must be investigated to ensure asset no longer fulfils function
o Selling price considered so that business does not lose unnecessary money
o Staff may not buy asset without permission
o Asset scrapped if obsolete (can't be sold)
o Process controlled so staff can't have asset scrapped then use for personal use
 Use of assets for personal benefit
o Need permission from owner/senior staff
o Should not use asset to make money after hours

Other Control Measures
 Proof of receipt recorded in books
 Legal documents kept in fireproof safe

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, © Thomas Kabalin

GAAP
 Separate (Business) Entity Concept
o Only transactions involving that specific entity are recorded in accounting records
 Historical Cost Concept
o Asset purchased are indicated at their initial cost
 Matching and Accrual Concept
o Income earned during a particular finical period and costs incurred in generating
income are matched (matching)
o Transactions affecting financial position must be brought into account when they
occur, not when cash is received or paid (accrual)
 Prudence Concept
o Transactions are recorded in the way with the most conservative result
 Going Concern Concept
o Value of assets recorded under the assumption that the business will continue to
operate
 Materiality Concept
o All the material items should be reported properly in the financial statements
o Errors can be (temporarily) left out if they do not have a material effect on the
business
 Duality Concept
o Assets = Owner’s Equity + Liabilities
 Concept of Financial Period
o Period of 12 months over which the financial performance is determined so that the
financial position can be determined at the end of the period (income statement /
balance sheet)
 Consistency Concept
o Deal with similar transactions in the same way (e.g. FIFO, LIFO)

King Code
 Discipline
 Transparency
 Independence
 Accountability
 Responsible Management
 Fairness in Dealing with Stakeholders
 Social Issues

Bank Reconciliation
 Bank statement: a document that summarizes business activities over a specific period
(usually a month)
 Process of comparing, updating, correcting should be routine on a monthly basis
o Businesses can use electronically generated bank statement & transaction
summaries at regular intervals to make necessary entries

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, © Thomas Kabalin

o May use official bank statement sent (or emailed) by the bank as the source
document form transactions in journals
 Control of cash:
o Cash register should have float
o Documentary proof should be kept of all transactions
o Cash register must be cashed at the end of the day (CRR should tally with cash in
till/credit card vouchers)
o Bank reconciliation should be performed (B/S is effective control of cash)
 Deposit is liability for bank (credit) & payment is decrease in liability (debit)

Possible Entries
 Deposits (CRJ) may not appear on statement
 Reversal of cash not deposited
 EFTs issued after statement date
 Bank errors
 Bank charges
 Interest (on overdraft/favorable balance)
 EFTs omitted from journal
 Debit orders/stop orders
 Direct deposits
 Errors in recording EFT amounts in journal

Creditors Reconciliation
Effective Control of Creditors
 Prices charged and accuracy of invoices should be checked
 Quantities of goods received should be checked against invoices
 Discounts should be taken
 Invoices must be properly processed before payment
 Segregation of duties
 Balance in creditors control must be reconciled with creditors list
 Creditors should be paid as late as possible without interest

Other
Source Documents:
Invoice Duplicate Sales Invoice DJ
Credit Note Duplicate Credit Note DAJ
Invoice Original Credit Purchases Invoice CJ
Debit Note Duplicate Debit Note CAJ

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