ELEMENTARY BOOKKEEPING

CDT05110
 TOPIC ONE
BOOKKEEPING CONCEPTS IN COMMUNITY DEVELOPMENT OPERATIONS

A. Define the terms bookkeeping, assets, liabilities,

capital/equity, income, expenses debtors, creditor,
profit, loss, proprietor goods, capital, services and
transactions.
B. Explain the purpose and nature of bookkeeping C.
Describe the accounting equation
D. Identify Books of original entry/prime entry
E. Explain the importance of maintaining books of
accounts and source documents
F. Categorize accounts
 BOOK-KEEPING
Bookkeeping. is the process of recording, organizing, and
maintaining financial transactions and records of a business
or individual. It involves tracking all financial activities,
including income, expenses, assets, and liabilities, to create
accurate financial statements and reports.
Book-keeping. is an art of recording financial business
transaction in a set of books in terms of money or money
worth.
Bookkeeping. is a part of accounting which is concerned
with the recording of business transactions on a day to day
basis or maintenance of books of accounts.
 Assets
Are economic resources that a business or
individual owns and can use to generate future
value.
They can be tangible, such as cash, buildings, or
inventory, or intangible, like patents, copyrights,
or intellectual property, rolling stock,
manufacturing, equipment or machinery, and
officer furniture.
 Liabilities
Represent the obligations and debts that a
business or individual owes to external parties.
This can include loans, accounts payable, accrued
expenses, and other financial obligations.
Two categorized of liabilities
1.Current (short-term)
2.Non-current(long-term) liabilities on a balance
sheet.
 Capital/equity

Referred to as equity in the context of a

business, represents the owner's or
shareholders' interest in the assets of the
business.
It's the residual value of assets after deducting
liabilities. Capital can include initial investments
by owners, retained earnings, and additional
contributions or withdrawals made by owners
over time.
 Income

Also known as revenue or earnings, is the money

generated by a business through its primary
activities, such as selling products or providing
services.
Source of funds for a business and can be
categorized into different types, such as
1. Sales revenue,
2. Interest income,
3. Rental income.
 Expenses
Are the costs incurred by a business or individual
to operate and maintain their activities.
Expenses reduce income and can include items
like salaries, rent, utilities, supplies, and other
costs necessary to run the business.
They are subtracted from revenue to calculate
profit or net income
Debtor. is a person who owes money to the
business usually is the customers who receive
service on credit from the business.

Creditor. is the person to whom money is

owing by the business. The one who supply/sell
or render service on credit to the business.
Profit. Is the excess of income over expenses/
(income – expenses). Occurred when the
income is greater/higher than expenses.

Loss. is the excess of expenses over income/

(Expenses – income), it occurs when the
expenses are higher than income
(Expenses>income).
Proprietor. is an owner of business who
provides capital to his business.

Good. Things which can see and touch whereby

a business can buy or sell.
Services. Is an activity done by the business man/
woman in order to get money. e.g Shoe shining,
teaching, treatment, transporting, clearing. Etc.

Capital. may be defined as amount of money which

a trader begins his business.
OR
Is amount of money on money worth which owner
provides to start business.
 TRANSACTION
A transaction. is an event or activity that
involves the exchange of goods, services, or
money between two or more parties.
In the context of bookkeeping and accounting, a
transaction is any financial event that affects the
financial position of an entity.
Transactions are recorded in accounting journals
and ledgers to maintain accurate financial
records.
Example: Juma paid Tsh 1000/= to Hamisi. this is transaction,
because Tsh 1000/= have been moved from Juma to Hamisi.
 Purpose of bookkeeping
The following are the major objectives of book
keeping;
1. Ascertainment of result of operation:
Bookkeeping is intended to the ascertainment of
the result of operation i.e the profit/loss of a
firm or company by recoding all the revenue
income and gains and expenses and losses of a
certain period and by comparing them.
2. Ascertainment of the financial position:
It helps to ascertain the financial position of a firm or company by
recording the appropriate values of different types of assets,
especially in its net cost, and the capital and liabilities up to the
date. It is found by preparing the balance sheet at the close of the
fiscal year.
3. Maintaining control over the assets and budget:
Bookkeeping maintains control on the assets, income and
expenses of all types by making their complete records. It helps
one to see how efficiently the assets are utilized and the budget is
disposed of. Thus, it establishes financial discipline by controlling
frauds on budget and its expenditure.
4. Prediction of the volume of cash for future:
Bookkeeping helps the future forecast of cast by verifying
the receipt and payments of an organization and the
proposed expansion programmers. Specially, it is important
to those whole financial system is based upon cash budget
5. Assessment of tax liabilities:
Book keeping keeps the complete records of all business
transactions and get them audited. Book keeping involves
the income statement and balance sheet at the last of the
fiscal year. Example sales tax, income tax etc. can be easily
assessed.
 Nature of book keeping
Bookkeeping is the process of systematically recording,
organizing, and managing financial transactions of a business or
organization. It is a fundamental aspect of accounting, which
involves the following key aspects:
1.Systematic Recording: Bookkeeping involves the methodical
and organized recording of financial transactions as they occur.
This includes entries for sales, purchases, expenses, revenues,
and other monetary activities.
2.Accuracy; is paramount in bookkeeping. Errors can lead to
financial discrepancies and potentially serious consequences for
a business. Therefore, bookkeepers must be meticulous and
precise in their work.
3.Chronological Order: Transactions are recorded in the
order in which they occur, typically following a
chronological sequence. This helps in maintaining a clear
historical record of financial activities.
4.Double Entry system; Bookkeeping often follows the
double-entry system, where each transaction affects at
least two accounts. For every debit entry, there must be a
corresponding credit entry. This system helps ensure that
the accounting equation (Assets = Liabilities + Equity)
always remains in balance.
5. Classification and Categorization:
Transactions are categorized and classified into various
accounts, such as assets, liabilities, equity, revenues, and
expenses.
This categorization is essential for the preparation of
financial statements and analysis of financial data.
6. Permanent Record:
Bookkeeping creates a permanent and organized record
of all financial transactions. These records serve as
evidence for financial audits, tax purposes, and legal
requirements
 7. Compliance:
Bookkeeping must comply with accounting
standards and regulations, such as Generally
Accepted Accounting Principles (GAAP) or
International Financial Reporting Standards
(IFRS), depending on the jurisdiction and type of
organization
 8. Financial Analysis:
The data generated through bookkeeping can be used
for financial analysis, helping businesses make informed
decisions, assess profitability, identify trends, and plan
for the future.
9. Confidentiality and Security:
Bookkeepers have a responsibility to maintain the
confidentiality and security of financial records, as
these contain sensitive information about the business
and its stakeholders.
 10. Audit Trail:
A well-maintained bookkeeping system provides an audit
trail, allowing for the tracking and verification of financial
transactions. This is crucial for both internal and external
audits.
11. Adaptability:
Bookkeeping practices can vary depending on the size,
complexity, and nature of the business. Small businesses
may use manual bookkeeping methods, while larger
organizations often rely on computerized accounting
systems.
 ACCOUNTING EQUATION

The accounting equation, also known as the

basic,
Accounting equation or the balance sheet
equation; is a fundamental concept in accounting
that represents the relationship between a
company's assets, liabilities, and equity. It is
expressed as follows:

Assets = Liabilities + Equity

Here's what each component of the equation represents:
1. Assets:
These are the economic resources owned or controlled by a
business that have a measurable value and are expected to
provide future benefits. Assets can include cash, accounts
receivable, inventory, equipment, buildings, and more. They
are typically divided into current assets (those expected to be
converted to cash or used up within one year) and non-
current assets (those expected to provide benefits for more
than one year).
 2. Liabilities:
Liabilities are the obligations or debts that a
business owes to external parties. These can
include loans, accounts payable, accrued
expenses, and other obligations. Like assets,
liabilities are also divided into current liabilities
(those due within one year) and long-term or
non-current liabilities (those due in more than
one year).
 3. Equity
Equity represents the residual interest in the
assets of a business after deducting its liabilities.
In other words, it's the owner's claim on the
assets of the business. Equity can be further
broken down into various components, including
common stock, retained earnings, and
additional paid-in capital, depending on the
structure of the business
Key points in accounting equation
The accounting equation is considered to be the foundation of
the double-entry accounting system.
1. The accounting equation shows on a company's balance
that a company's total assets are equal to the sum of the
company's liabilities and shareholders' equity.
2. Assets represent the valuable resources controlled by the
company. The liabilities represent their obligations.
3. Both liabilities and shareholders' equity represent how the
assets of a company are financed.
4. Financing through debt shows as a liability, while financing
through issuing equity shares appears in shareholders' equity.
 Types of Accounting Equation and
Formulae correlation

The entire financial accounting depends on the

accounting equation which is also known as the
‘Balance Sheet Equation’.
The following are the different types of basic
accounting equation:
1. Asset = Liability + Capital
2. Liabilities= Assets - Capital
3.Owners’ Equity (Capital) = Assets – Liabilities
4.Assets = Liabilities + Owner’s equity
 Example; Using the concept of accounting equation, compute missing
figures from the following:

s/n Assets Liabilities capital

1. 100,000 40,000/= ?
2. ? 20,000/= 30,000/=
3. 120,000/= ? 80,000/=
4. ? 50,000/= 300,000/=
5. 40,000/= 30,000/= ?
 Identifying Books of original entry/Prime
entry
Books of original entry, also known as prime
entry books or primary books,
Are the accounting records where financial
transactions are first recorded before they are
posted to the general ledger.
These books play a crucial role in the double-
entry accounting system, as they serve as the
initial point of entry for various types of
transactions.
 Advantage of book of original entry

1. Improved Accuracy
2. Categorization
3. Enhanced control
4. Quick reference
5. Historical data
6. Effective analysis
Disadvantage of book of Original Entry

1. Manual labor
2. Cost
3. Inefficiency
4. Limited accessibility
5. Potential errors
The Most common books of original entry
include
1. Cash Book
2. Sales Journal (Sales day book)
3. Purchase Journal (Purchase day Book)
4. Sales Return Journal (Returns Outwards
Book)
5. Purchase Return Journal (Returns Inwards
Book)
6. Journal Proper (General Journal)
 1. Cash Book
Is the records all cash transactions, including
both cash receipts (money received) and cash
payments (money spent).
The format of cash book as follow;
DR CASH BOOK CR
Date Particular Folio Amount Date Particular Folio Amount
 Example 1.
Cash book
Mr. Juma started business on 1st June 2008 with capital in cash 30,000/=
June 2. With capital in cash 30,000/=
3.Bought goods for cash Sh. 22,000/=
4.Sold goods for cash of Sh 27,000/=
5.Paid carriages sh 850/=
10. Cash sales sh 12,000/=
15. Bought goods for cash sh 25,000/=
18. Paid rent sh 1,200/=
20. Paid advertising sh. 1,200/=
22. Sold goods for cash sh. 15,000/=
25.Cash sales to date sh. 20,000/=
26.Paid wages goods for cash sh 500/=
27.Purchased goods for cash sh 500/=
28.Sold goods for cash sh 350/=
• Record the transactions in the appropriate ledger account
 Solution
DR CASH BOOK CR
Date Particular Folio Amount Date Particular Folio Amount
1/6/2008 capital 2 30000 2/6/2008 Furniture 3 1000
4/6/2008 Sales 5 27000 5/6/2008 Purchase 4 22000
10/6/2008 Sales 5 12000 5/5/2008 carriage 6 850
22/6/2008 Sales 5 15000 15/6/2008 Purchases 4 25000
25/6/2008 Sales 5 20000 18/6/2008 Rent 7 1200
28/6/2008 Sales 5 350 20/6/2008 Advert 8 750
26/6/2008 Wages 9 500
27/6/2008 Purchases 4 500

31/6/2008 Balance c/d 52550

104,350/= 104,350/=
1/07/2009 Balance b/d
 Example 2.
Cash book
Enter the following transaction in the cash book of Mr. Temba Traders
December 01 Cash in hand 27,500
05 cash received from Nitu 12000
08 Insurance premium paid 2000
10 Furniture purchases 6000
14 Sold Good for cash 16500
18 Purchases Goods from Naman for cash 26000
22 Cash paid to Rohini 3200
25 Sold goods to kanika for cash 18700
27 Cash Deposited into Bank 5000
28 Rent paid 4000
29 Salary paid 7000
30 Paid electricity bill in cash 1300
31 Commission paid 700
Required ;
a. Record cash book of Mr. Temba Traders
b. Post entries fro cash book to the relevant ledger Account
 Individual 5
On 1st February 2024, Imlani started a business with a Capital TZS 7,200,000 in bank account and proceeded as
follows during the moth.
February 1. Paid rent by cheque sh. 480,000/=
3. Bought a computer for use in the business by cheque sh. 1,080,000/=
4. Purchased goods by cheque sh. 6,720,000/=
6. Purchased goods on credit from Hashimu sh. 4,836,000/=
9. Sold goods on credit to Marwa sh.4,800,000/=
12. Issued a cheque to Bambo sh. 4,836,000/=
15. Sold goods and received a cheque sh.6,840,000/=
17. Received a cheque from John sh. 4,800,000/=
20. Paid wages by cheque sh. 1,500,000/=
23.Sold goods on credit to Juma sh. 1,850,000/=
25.Paid Insurance by cheque sh.300,000/=
26.Paid electricity bills by cheque sh. 625,000/=
28.Sold goods and received a cheque sh. 4,500,000/=
28.Received a cheque From Mery sh. 1,850,00
Required
a. Record cash book of Mr. Imlani business
b. Post entries fro cash book to the relevant ledger Account
 DR AND CR
Debits DR. often represented as DR Recording
incoming money

Credit CR. is recording outgoing money

 Individual 6
On 1st February 2024, Imlani started a business with a Capital TZS 7,200,000 in bank account and proceeded as
follows during the moth.
February 1. Paid rent by cheque sh. 480,000/=
3. Bought a computer for use in the business by cheque sh. 1,080,000/=
4. Purchased goods by cheque sh. 6,720,000/=
6. Purchased goods on credit from Hashimu sh. 4,836,000/=
9. Sold goods on credit to Marwa sh.4,800,000/=
12. Issued a cheque to Bambo sh. 4,836,000/=
15. Sold goods and received a cheque sh.6,840,000/=
17. Received a cheque from John sh. 4,800,000/=
20. Paid wages by cheque sh. 1,500,000/=
23.Sold goods on credit to Juma sh. 1,850,000/=
25.Paid Insurance by cheque sh.300,000/=
26.Paid electricity bills by cheque sh. 625,000/=
28.Sold goods and received a cheque sh. 4,500,000/=
28.Received a cheque From Mery sh. 1,850,00
Required
a. Record cash book of Mr. Imlani business
b. Post entries fro cash book to the relevant ledger Account
 2. Sales Journal (Sales day book)

This journal is used to record all credit sales

made by a business.

It typically includes details such as the

customer's name, date of sale, invoice number,
and the amount of the sale.
Format of sales journal sales day book
Date Particular Folio Invoice Invoice Details (TZS) Invoice Totals
Number (TZS)
 Example 1
Yona made the following sales during June 2021. You are required to record the
transaction in the sales journal for the month.
June 1. Sold to mambo LTD invoice number 04318
80 packets of rice @ TZS 2,200
60 bags of white flour each with 3kgs @ TZS 4500
12. Sold to Kirundi enterprises invoice number 04319
15 boxes of toothpastes @TZS 2600
16 Pieces of writing pads @TZS 2350
19. Sold to Rudi store invoice number 04320
11 Pair of running shoes @TZS 6000
20 shirts @TZS 1200
25. Sold good to kalumanzira worth TZS 82000 on credit and issued invoice number 04321
28. Sold to Glory invoice number 04322
15 Pair of sandals @TZS 8500
10 Bags of rice each with 3kg @ 6000
 3. Purchase Journal (Purchase Book)

Is used to record all credit purchases made by a

business.

It includes details like the supplier's name, date

of purchase, invoice number, and the amount of
the purchase.
 Purchases Journal (day book)
Format

The purchase journal has six columns, as shown

in the format below.
DATE PARTICULA FOLIO INVOICE INVOICE INVOICE
RS NUMBER DETAILS TOTAL
(TZS) (TZS)
 Example 1
Record the following transaction in the purchases day book for the moth of July 2020.
July 1. Bought from Tom LTD invoice 043516
10 bags of rice each with 5kgs @ TZS 10000
20 bags of sugar each with 5kgs@ TZS 15000
9. Bought from Aisha invoice number 03167
10 box of pen @ TZS 2000
5 Cartons of ruled paper @TZS 30000
16. Bought goods from katipo for TZS 60,800 Invoice number 06312
29. Bought from Mwanaidi invoice 09842
15 Pair of sandals @TZS 15000
14 Box kids drawing pen @ TZS 5000
4. Sales Return Journal (Returns Outwards
Book
This journal records the return of goods by
customers.
It includes information about the goods
returned, the customer's name, date, and the
reason for the return.
 FORMART
SALES RETURN DAY BOOK

DATE PARTICULAR FOLIO CREDIT CREDIT CREDIT

NOTE NOTE NOTE TOTAL
NUMBER DETAILS (TZS)
(TZSZ0
 Example
Julius sell goods on credit to various customer whom normal return goods for various
reason. The following return were received for the month of June 2024 and credit
notes were issues accordingly
June 2. MO LTD return 10 packets of rice @TZS 2200 because they were spoiled
credit note number 01280 was issued
8. Lucy returned the following goods and a credit note number 01281 was issued
3 pair of running shoes @ TZS 6000 because they were oversize
2 shirt @TZS 1200 because they were of the wrong color
17 Marta enterprises returned the following goods and credit note number
01282 was issued
3 box of toothpaste @ TZS 2600 because they were of the wrong type
2 Pieces of writing pads @TZS 2350 because they were damaged

You are required to prepare a sales returns day book

Purchase Return Journal (Returns Inwards
Book)
Similar to the sales return journal, the purchase return
journal records the return of goods to suppliers.
It includes details about the goods returned, the
supplier's name, date, and the reason for the return.
Format
.

Date PARTIC FOLIO CREDIT NOTE CREDIT NOTE DETAIL CREDIT NOTE
ULARS NUMBER (TZS) TOTAL (TZS)
 EXAMPLE
PURCHASES RETURN DAY BOOK
Julius sell goods on credit to various customer whom normal return goods for various
reason. The following return were received for the month of June 2024 and credit
notes were issues accordingly
June 2. MO LTD return 10 packets of rice @TZS 2200 because they were spoiled
credit note number 01280 was issued
8. Lucy returned the following goods and a credit note number 01281 was issued
3 pair of running shoes @ TZS 6000 because they were oversize
2 shirt @TZS 1200 because they were of the wrong color
17 Marta enterprises returned the following goods and credit note number
01282 was issued
3 box of toothpaste @ TZS 2600 because they were of the wrong type
2 Pieces of writing pads @TZS 2350 because they were damaged

You are required to prepare a Purchases return day book

 GENERAL JOURNAL &JOURNAL PROPER
This is a catch-all journal for transactions that do not fit
into the specific categories mentioned above. It is used
for one-off or non-routine transactions.
Is the book of prime entry used to record business
transaction that are not recorded in specific•: journal.
DATE DETALS FOLIO DEBIT CREDIT
 EXAMPLE
Enter the following transaction in general journal and post the
entries to the general ledger up to 30 January 2020
January 1. Diana started a business by deposit TZS 2,000,000
4. Purchased machinery worth TZS 57000
5. Paid wages TZS 30000 by cash
7. Paid Julius TZS 87000 by cheque
9.Receive rent in term of cash TZS 50000
10 Sold goods to tandahimba LTD worth TZS 60000 on
credit
Required
Preparation of the general journal or journal proper
 Importance of maintaining books of accounts and
source documents

Maintaining books of accounts and source documents is crucial for several

reasons, especially in the context of business and financial management. Here
are some of the key reasons why it is important to maintain accurate and
organized books of accounts and source documents:
1.Legal Requirement: In many countries, businesses are legally obligated
to maintain proper accounting records. Failure to do so can result in
penalties, fines, or even legal consequences. Proper record-keeping helps
ensure compliance with tax laws and financial regulations.
2.Financial Transparency: Maintaining accurate books of accounts
provides transparency into a company's financial transactions and
activities. This transparency is essential for stakeholders, including
investors, creditors, and government authorities, to assess the financial
health of the business.
3.Decision-Making: Business owners and managers rely on financial data to
make informed decisions. Accurate books of accounts provide the necessary
information to assess the company's profitability, cash flow, and overall
financial performance. This information helps in strategic planning and
resource allocation.
4.Tax Compliance: Proper record-keeping is crucial for accurate tax reporting.
It ensures that the business pays the right amount of taxes and takes
advantage of available deductions and credits, minimizing the risk of audits or
disputes with tax authorities.
5.Audits and Reviews: Businesses may undergo internal or external audits,
financial reviews, or due diligence processes. Maintaining organized books
and source documents makes these processes smoother and more efficient,
reducing the likelihood of errors or discrepancies.
6.Accountability and Trust: Accurate financial records build trust
with stakeholders, including customers, suppliers, and investors.
When others can rely on the accuracy of your financial
statements, it enhances your reputation and credibility.
7.Financial Planning: Having access to historical financial data
allows for better financial planning and budgeting. It helps
businesses set realistic financial goals, track their progress, and
adjust their strategies as needed.
8. Fraud Prevention: Proper record-keeping can help detect and
prevent fraud within an organization. Regularly reconciling
financial records can reveal discrepancies and anomalies that
may indicate fraudulent activities.
9. Historical Analysis: Maintaining records over time allows for
historical analysis and trend identification. This can provide
valuable insights into the business's performance, allowing for
continuous improvement and adaptation to market changes.
10.Succession Planning: In the event of a change in ownership or
management, well-maintained financial records provide a clear
picture of the business's assets, liabilities, and financial history.
This information is essential for a smooth transition.
11.Lender and Investor Relations: Lenders and investors often
require access to a company's financial records before providing
financing or investment. Properly maintained books of accounts
can help attract financing and build trust with financial partners.
 Categorize accounts
An account may be defined as a record of transactions
of a particular type or with a particular person usually
expressed in financial terms and maintained in ledger.
When a business grows, the numbers of accounts in
the ledgers also grows, necessitating the need to
classify them.
Accounts are classified into two main categories as
shown below
1. Personal accounts
2. Impersonal accounts
 1. PERSONAL ACCOUNTS
This account contains the name of a business, person, firms,
companies, cooperative societies, banks, financial institution are
known as personal accounts.
The personal accounts may further be classified into three
categories
a. Natural personal account
This account contain the name of individual (natural persons) such
as a/c Juma, Sophia, Halima a/c.
b. Artificial personal account
Account of firms, companies, banks, financial, institutions such as
reliance industries ltd, lions club, university of Dar-es-salaam,
NMB, CRDB, etc
C. Representative personal accounts
The accounts recording transactions relating to limited
expenses and incomes are classified as nominal accounts.
But in a certain case (due to the matching concepts of
accounting) the amount on a particular date is payable to
the individual or recoverable from individuals such accounts
are classified as representative personal accounts. Example
accrued /outstanding expenses and paid I advance/pre-paid
expenses
 2. IMPERSONAL ACCOUNTS
The account which do not contain the names of
any person business are called impersonal
account
There are also two kinds.
1.Real accounts
2.Nominal accounts
1.Real accounts these relate to tangible items.
These accounts always represent something we
can see, touch or move. Such as building, van,
plant, machinery, cash, furniture etc are
classified as tangible real accounts. Intangible
real accounts (which do not have physical shape)
are the accounts relating to intangible assets,
such as goodwill, trademarks, copyrights,
patents etc
2.Nominal accounts relating to income, expenses,
losses and gains are classified as nominal account.
Example wages salaries, purchases, sales,
advertising bad debts, profit, losses, etc fall in the
category of nominal accounts.
These accounts are further sub-divided into two
a) Revenue account
b) Expenses accounts
Diagram of Categorize accounts