Summary
Summary Financial Accounting 178 Summaries (updated for 2018 syllabus)
- Course
- Financial Accounting 178
- Institution
- Stellenbosch University (SUN)
Financial accounting 178 summaries. Including updated chapters for 2018.
[Show more]
Content preview
1 THE ACCOUNTING CYCLE1.1 Accounting cycle:
• Entity: any business that conducts operations and is involved in trading.
It can sell goods or render services, with or without the objective of
making a profit.
• Types of entities:
- Sole proprietor: a sole proprietor does not gave to comply with strict
laws and regulations stipulating how the accounting records should
be kept and financial statements prepared.
- Partnership: a partnership involves more than one owner and they
share in profits/losses in a specific ratio.
- Close corporations: CC’s are regulated by the Close Corporations’
act. The CC has members and profits are shared to members as a
profit distribution.
- Companies: financial statements must be prepared in terms of the
Companies Act. In some cases, some companies may need to be
audited by an external auditor.
• The Accounting cycle:
- Recording of transactions and processing documentation.
- Correcting of errors
- Complying with accounting principles
- Preparing financial statements
1.2 Recording transaction and processing documentation:
• Source documents:
- Must include adequate information on recording the transaction
- nature, amount, date and parties involved should be included
- pre-numbered to ensure control
- external -> creditor invoice
1
, - internal -> cheque
• Journals:
- are the first recording of documents
- Purchases journal
Purchases return journal
Cash payment journal
Cash receipts journal
General journal
Sales journal
Sales return journal
• The general ledger:
- A ledger is a collection of accounts, for example all assets, liabilities,
income, expenses.
- There must be a date, the details, amount and reference to the
journal.
- Convenience account ->a summary of certain items, for example
Debtors control account
• Accounting systems:
- Objective: all similar transactions are processed together by an
accounting system. These systems provide information for decision
making and reporting.
- Requirements:
Ø Relevant and accurate information must be available in time;
Ø There must be internal to ensure reliable information and to
safeguard assets;
Ø the system must be adaptable to accommodate adjustments
• Specific systems:
- Purchases and creditors system:
Ø Objectives
All purchases must be authorised
There must be controls to ensure ordered goods re actually
received
2
, Invoiced prices agree to authorised prices
All obligations recorded accurately
Creditors have paid on time
Ø Source documents
Requisitions
Goods received note (GRN)
Monthly creditor statements
Cheque requisitions
Order form
Invoice
Cheque counterfoil
Bank statement (BS)
Ø Journals:
Purchase journal
Purchase return journal
Cash payment journal
Ø General ledger
Creditor control
VAT control
Bank
Inventory
- Sales and debtor system
Ø Objectives
All sales are recorded timeously
Correct amount invoiced
Payments recorded
Control over collected money
Ø Source document
Delivery note
Invoice
Debtor monthly statement
Receipt
Bank deposit slip
Bank statement for direct payments
3
, Ø Journal
Sales journal
Sales return journal
Cash receipts journal
Ø General ledger
Debtor control
VAT control
Allowance for credit losses of debtors
Bank
Sales
Bad debts
Ø Debtors: a client may be granted credit after a credit review of
their financial position. He will then be granted a
postponement of payment, for 30/60 days
Ø monthly statements must be sent to the debtor indicating the
name of debtor, date and details of invoice, opening and
closing balances, payments received and an age analysis of
debt
• Bad debts:
- Steps before writing off bad debt:
Ø Send monthly statements to clients
Ø Phone client and request payment
Ø Debt collector will attempt to collect money
Ø A lawyer will be appointed to collect outstanding debt
- Two scenarios:
Bad debts recovered in current year - Bad debts written off in the previous year and
Dt Bad debts (P/L)) recovered in the current year
Cr Debtors (SFP) Dt bank (SFP)
Dt Bank (SFP) Cr bad debts recouped (P/L)
Cr Bad debts (P/L) (This is income)
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller thymerightford. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R150,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
84866 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now