Chap 1

Introduction
A business proprietor or owner normally runs a business to make money(profit). He or she needs
information to know whether the business is doing well or progressing. The owner of a business may
ask the following questions;
1-How much profit or loss has the business made
2-How much money do I owe
3-Will I have sufficient funds to meet my commitment

1.1 Definition of accounting

Accounting is the process of identifying, measuring, recording ans communicating organization
economic information to users of the information for judgment and decision making

1.2 The history of accounting

The history of accounting can be traced back to ancient times according to some beliefs. The VERY act
of writing originated in order to record accounting information during 1400s accounting grew because
the need for information to merchants in the Venice city of Italy . Scholar Luca Pacioli wrote the first
printed explanation of Double-Entry book keeping in 1494. Double entry book keeping involve
entering every transaction debited(receiving) as against a correspondent credited account(billing)

1.3 Users of accounting information

-Business owners
Managers of the business
-Financial institutions
-Government or state
-Investors
-Employers or employees of the business
-The public and NGO’s

1.4 Objectives of accounting

i)helps in keeping the accounting recordings off the business
ii) It helps the business to know the profit or loss at the end of the business period
iii) Accounting helps in communicating business information
iv) Accounting serve as a proof when there is a fraud
v) Accounting helps the business in decision making

1.5) Employment opportunities in accounting

There are good number of opportunities when you study accounting. These include
Account clad/flap check well
Book keeper
Financial controllers
Charted accountants
Auditors

1.6 Branches of accounting

1-Financial accounting
2-Cost accounting
3-Managerial accounting
Generally enterprise are classified according to the following criteria;
-Domain of activity
-Legal status(ownership)
-Size

Classification according to ownership

It answers the question to who owns the enterprise. Ownership is divided into 3;
-Private enterprise(owned by individuals)
-State owned enterprise( owned by the government)
-Para public enterprises(partly owned by the government and partly owned by individuals)

Classification according to size

The factors taken into consideration here are ;
-staffing situation(number of workers)
-Amount of capital
-Turnover(sales)
Size here is divided into 3 I.e
-Small size enterprises
These are enterprises dealing in retailing businesses

-Medium size enterprises

These are enterprises having average capital and can be wholesalers

-Large size enterprises

These are enterprises whose capital, personnel and turnover
Companies fall under this category

Classification according to activity

Enterprise can be classified according to activity in following ways
i_Commercial enterprises
 CHAP 2 Notion of the enterprise
2.1-Definition of the enterprise
An enterprise is a financial independent organization which produces goods and services for the
market.

2.2-Role or place of an enterprise in the economic environment

Business organization play a number of roles in the society. This roles can be treated under the
following headings
a)ECONOMIC ROLE
it produce goods and services in order to satisfy the consumer

b) THE SOCIAL ROLE: it provide the means of employment opportunities to the citizens in the
country. It also improve on the social status of the population by buying raw materials from them,
paying salaries to workers and providing the population with consumer and durable goods
Enterprises also improve on economic development through the construction of social infrastructures

c)FINANCIAL ROLE: through their activities, business organization act as suppliers, customers,
borrowers and lenders in the financial sector. They help in financial activities of individuals by granting
them credit facilities.

look for notes and complete here

2.5 The enterprise and economic flow

The economic flow refers to the movement of goods services and cash into(inflow and out (outflow) of
the enterprise. They are made up of ;
A-External flow
An external flow is the exchange or transfer of goods and services cash and fixed assets and other
resources from the enterprise to another enterprise. It simply links the enterprise with other enterprises.
It is made up of real flow and monetary flow.
Diagram of external data flow
 REAL FLOW: this the movement of physical items like goods, material equipment etc, either entering
or exiting the enterprise. The real flow can also be called tangible flow

MONETARY FLOW: this correspond to the various sums paid out or received. When money is paid
out it is known as money outflow and the one received is known as money inflow.

Service flow: The movement of services like security, publicity etc can also be known as intangible
flow. I
llustration1; enterprise Asong sold a computer to enterprise Besong for 700000frs by cash
required. Present a flow chart in the books of Asong and indicate the type of flow

ANSWER
Real flow(computer)
ASONG BESONG
Monetary flow(700000frs)

illustration2
enterprise Ngong paid to Abakwa fm radio for advertisement by bank check. Present the flow diagram
and indicate the types of flows

Monetary flow
NGONG Abakwa FM
Service flow
INTERNAL FLOW
this is the movement of goods and services within the enterprise. Illustration transfer of 200kg of raw
material worth 60000from the warehouse to the workshop

warehouse Internal flow

workshop

Recording of business transactions in an enterprise

1)Transaction: it is a business event or activity which can be measured in terms of money and which
must be recorded in business book or system of account. It can also be defines as an agreement
between a supplier(seller) and customer(buyer) to exchange assets for payment

2.6.1 AN ACCOUNT
DEF:An account is a table which records flows of the same nature, The account is made up of the
debit side and the credit side
DEBIT: it represents the left hand side of the account used in recording all entries into the account.
This side indicate the uses.
CREDIT SIDE: it represents the right hand side of the account where exit or out going values from the
account are recorded. It indicates sources

2-presentation of an accountants
An account can be represented in four different layouts as follow
I) Traditional or classical layout
name or account
Debit side Credit side
items Amount Items Amount

ii)Double or married column layout

name or account
Date Items Amount
Debit Credit

iii)Double or married column layout with balances

name and accountants
Date Items Amount
DV Cv balance

iv)T account layout

Dv cash Account Cv
Illustration
During the month of December the following transaction took place in JASON’S ENTERPRISE
11/12/2023 initial cash 100,000frs
3/12/2023 cash sales of goods 50,000frs
12/12/ 2023 cash purchase of goods 80,000frs
19/12/2023 deposit cash into the account 40,000frs
15/12/2023 cash withdrawal from the bank 20,000frs
30/12/2023 cash purchase of office equipment 3million
present the cash account using the four account layouts

answers (see snapshots in the phone)

APPLICATION EXERCISE
The following transactions took place in Jerry’s enterprise during the month of January 20241
-1/1/2024 Balance in the customers account 120,000frs
-5/1/2024 credit sales 40,000frs
-18/1/2024 payment made by customers in cash 100,000frs
-25/1/2024 credit sales of goods 34000frs
-29/1/2024 customer pay by bank check 15,000frs
-30/1/2024 customer return goods worth 4,000frs
Required;Present the customer’s account two layouts of account
Answer( see snapshot)
SECTION 2 THE BALANCE SHEET
2.1 general intro
To produce goods or services, an enterprise needs to combine certain factors such as material and
immaterial things which include building,raw material,vehicles,machines,tools,cash at bank and cash
in hand. To acquire all these items,one needs funds which may be personal or borrowed
-SOURCE OF FUNDS
This indicate the origin of the business capital which may be from personal service, contribution by
share holders, borrowing. It can also come from borrowing from friends, ‘njangi’ houses,etc
-APPLICATION OF FUNDS
This indicate how capital has been used e.g purchase of equipment, goods, raw material etc
illustration
on the 20/11/23 Felix started a business with his personal capital of 600,000f and borrowed 200,000f
from a credit union. This amount was used as follows,
-purchase of a building 25,000f,
-stock of goods 300,000f
-furniture 100,000f
-cash in hand 150,000f
Work required: group the following items into sources and application of funds
Answer

Sources of funds
capital 600,000
borrowed capital 200,000
Total 800,000

Application of funds
buildings=250,00
sock of goods= 300,000
furniture=100,000
cash in hand=150,000
Total=800,000

2.2 ACCOUNTING EQUATIONS

This is also known as the balance sheet equation based on the fundamental accounting equation. This
equation is normally stated as Sources of funds=Application of funds
If a firm or business is set up, it needs resources before It can be successful. These resources
will include furniture, equipment, stock of goods, cash, etc known as assets. These resources,assets
may be entirely provided by the owner or from borrowed sources if thus the owner provides all the
sources alone, the accounting equation will appear as Assets=Owner’s equity
In the case where the firm owner borrowed from outsiders to add to what he has, the accounting
equation will appear as Assets= owner’s equity+ borrowing or Asset=liabilities. These assets and
liabilities are represented on a table known as the balance sheet

2.3 balance sheet

A balance is a financial statement which shows the patrimonial situation of an enterprise at a given
date. It can also be defines by the own-es and the owes of an enterprise at a particular given date.
Presentation of a balance sheet: a balance sheet is made up of assets and liabilities
a-Assets: These are those things in value owned and control or belongs to the business. These assets are
divided into 3. Fixed assets(tangible and intangible), Current assets and Cash assets.
b)Liabilities: the liabilities of an enterprise shows the origin( sources of funds to acquire assets). In
other words, Liabilities of an enterprise corresponds to all what the enterprise owes. They are made up
of
-Long term or durable liabilities(owner’s equity+borrowing)
-Current liability
-Liquid/ cash liability

Specimen of a balance sheet

illustration: on the 1/x/23 mr simon sime open an enterprise with the following elements
-Good will 600,000f
-Land 900 000
building 2000,000
transport equipment 4000 000
stock of goods 800 000
bank over draft 50 000
customer 300 000
bank 200 000
cash 50 000
capital 4 600 000
borrowing 3 500 000
supplier 400 000
work required: present the opening balance sheet of Mr Simon

Simon Sing’s opening balance sheet as at 1/1/2023

Assets Liabilities
Items Amount Items Amount
Fixed assets Durable resources
-Good will 600 000 -capital 4 600 000
-land 900 000 -borrowings 3 500 000
buildings 2000 000
transport equipment 4000 000 current liabilities
-supplier 700 000
Current assets
-stock of goods 800 000 cash liabilities
-customer 300 000 -Bank overdraft 50 000

cash assets
-cash at bank 200 000
-cash in hand 50 000

Total 8850 000 Total 8850 000

Application Exercise
The following balances have been taken from Nana balance sheet at the end of December 2022
-land 3 600 000
-building 1000 000
-transport equipment 3 400 000
-stock of goods 3000 000
-Customer 3 850 000
-bank 1 500 000
-personal capital 11 000 000
-supplier 4 050 000
borrowing 5 300 000
cash in hand 950 000
work requires: present the opening balance sheet as at 1/1/2022
Nanna's opening balance sheet as at 1/1/2023
Assets Liabilities
Items Amount Items Amount
Fixed assets Durable resources
-land 3 600 000 -capital 11 000 000
buildings 1000 000 -borrowings 5 300 000
transport equipment 3 400 000
current liabilities
Current assets -supplier 4 000 000
-stock of goods 6 000 000
-customer 3 850 000

cash assets
-cash at bank 1 500 000
-cash in hand 950 000

Total
20 300 000 Total 20 300 000
SECTION 3: Double entry
3.1 intro
Each accounting transaction brings forth the use of at least two accounts. The same transaction is
recorded on the debit of an account and at the same time recorded on the credit of another account and
at the same time recorded on the credit of another account

The principle of double entry

This principle states that when analyzing an operation, an account or accounts should be debited while
an account or accounts should be credited. After recording, the debit and the credit account must be
equal. That is total debit=total credit.
Illustration;
Jason’s enterprise withdraw cash from the bank
work required:
-Which are the accounts concerned
-Which account is receiving and which account is giving
-What is the nature of the account
-Do the recording in the T-account
SOLUTION
-the accounts concerned are the bank account and the cash accountants
-the cash account is receiving while the bank account is giving
-All the two accounts are assets accounts (cash assets)

“T” Account
Dv cash account Cv Dv bank account Cv
250 000 250 000

Application exercise
During the day Jason’s enterprise carries out the following transactions;
1. purchase of goods by cash 700 000
2. deposit cash into the bank account 200 000
3. sales of goods by bank check 450 000
4. payment made by a customer in cash 480 000
work required; for each transaction, search the account concerned, identify the account receiving and
giving and present the ‘T’ accounts
Solution
1) cash account and purchase account
purchase is giving while cash is receiving
‘T’ accountant
Dv purchase account Cv Dv cash account Cv
700 000 700 000

2) account concerned: bank account and cash accountant

cash account is giving and bank account is receiving

Dv cash account Dv bank account Cv

200 000 200 000
3) bank account and sales account
sales account is giving and bank account is receiving

Dv sales account Dv bank account Cv

450 000 450 000

4) cash account and customer accountant

cash account is receiving and customer account is giving

Dv customer account Dv cash account Cv

480 000 480 000

3.2 The journal

a-definition: A journal is an accounting document or a table which records the daily transactions of an
enterprise in a chronological order. It is an obligatory document in an enterprise
b-The role of a journal
-A journal permits the verification of each transaction
-It can be used as proof in justice

Speciment of a journal amount(fcfa)

Acc no
Dv Cv Date Dv Cv

illustration record the following transaction in a journal that took place in peter’s enterprise during the
month of September 2023
-13/9/23 peter’ withdraw cash from the bank account 60 000
-15/9/23 bought a computer machine by bank check 600 000
-15/9/23 payment of state taxes through MTN momo account 400 000
2/1/23 BOUGHT goods on credit 700 000
3//1/23 pay supplier by bank check 600 000
4/1/23 credit sales of goods 600 000
4/1/23 receive bank check form a customer 30 000
6/1/23 bought on credit transport goods for own use on credit 2 000 000
7/1/23 cash purchase of raw material 400 000
12/1/23 transfer cash from the post office account to the bank account 350 000

Answer
Chap 3 Introduction to OHADA accounting system

1)Background information
OHADA is a french acronym meaning Organisation pour l’Harmonization En Afrique du Droit des
Affaires. In english acronym is OHBLA meaning Organisation for the Harmonization of Business Law
in Africa
It came into force in Cameroon on the 1/1/2001. OHADA treaty was singed in the island of
Comoros(port luis) on the 17 October 1993 by 17 member countries. The main objective of OHADA is
to unite business law in Africa and promote arbitration. The specific objective include;
-To harmonize accounting practice of the enterprise in the member countries
-To keep, prepare and present accounts in liable and understandable manner.
-To adopt principles and accounting methods of enterprises to the international standard
-To increase efficiency in the control of accounts

2)Codification of OHADA accounting system(accounting chart)

1-intro: The structure of OHADA accounting plan is made up of a patrimonial account which range
from class 1 to class 1 account. The profit and loss account range from class 6 to class 8 account, and
class 9 concern cost accounting.

2-The meaning of the first figure in the codification

The first figure of each class ranging from 1 to 9, indicates the classes(class 1 class 2 etc)

3-Expansion of accounting numbers

The sub account always start with the code of the main account e.g 10 , capital account(main account)
and the sub account is 101(share account), and the sub sub 1011 subscribed capital and uncalled
account.ex2 class 3 account 31, Stock of goods(main account), sub account 311 stock of goods A, sub
sub account 3111 Stock of goods A1

Chap 4