Form 5 Accounting Notes
Prepared for students' reference.
1. Introduction to Accounting
Accounting is the process of recording, classifying, summarizing, and interpreting
financial transactions. It helps stakeholders make informed decisions about a
business's financial health.
2. Source Documents and Books of Original Entry
Source documents are original records that contain the details of a financial
transaction, such as receipts, invoices, and credit notes. Books of original entry
include the sales journal, purchases journal, cash book, and general journal.
3. Ledger and Double Entry System
The ledger is a book where all accounts are maintained. The double entry system
means every transaction affects at least two accounts – one debit and one credit.
4. Trial Balance
A trial balance is a list of all ledger accounts and their balances. It checks the
arithmetic accuracy of bookkeeping, ensuring that total debits equal total credits.
5. Financial Statements
These include the Income Statement (Profit and Loss Account), which shows profit
or loss for a period, and the Statement of Financial Position (Balance Sheet), which
shows assets, liabilities, and equity at a specific date.
6. Adjustments in the Final Accounts
Adjustments like accruals, prepayments, depreciation, and provision for bad debts
are made to ensure accurate profit calculation. These adjustments comply with
accounting principles such as the matching concept.
7. Bank Reconciliation Statement
This statement reconciles the difference between the cash book and the bank
statement. Common differences arise from unpresented cheques and deposits in
transit.
8. Control Accounts
Control accounts summarize the entries of subsidiary ledgers. Common types are
Sales Ledger Control Account and Purchases Ledger Control Account.
9. Accounting for Incomplete Records
This involves preparing accounts when complete records are not available. It
includes estimating missing information using accounting techniques.
10. Accounting Concepts & Principles
Important concepts include the Accrual Concept, Going Concern, Consistency,
Prudence, and the Historical Cost Principle. These provide a framework for
preparing financial statements.
