EMS

• Overview of the Accounting cycle


  1. Source documents

  2. Journal entries

  3. Posting into ledgers

  4. Trial balance

  5. Final statement
• Transactions


  A business deal with at least two interested parties: a buyer and a seller
• Cash transaction


  Payment is made immediately
• Credit transaction


  Payment takes place at a later date
• Source documents


  Evidence that a transaction has taken place
• Information contained in source documents


  • Date of the transaction
  • Source document number
  • People/businesses involved
  • Reason for the transaction
  • Amount involved
• Journals


  Also known as books of prime/original entry, used to enter transactions into the accounting records of the business for the first time
• Types of subsidiary journals


  • Cash receipts journal
  • Cash payment journal
  • Debtors journal
  • Creditors journal
• General ledger


  A summary of all the subsidiary journals, consisting of different accounts to allocate the transactions of the business
• Posting


  The process of recording amounts from subsidiary journals into the general ledger
• Trial balance


  A list of all the accounts' balances in the general ledger, used to check that the total debit balances are equal to the total credit balances
• Income statement


  A report that shows the income, expenses and profit or loss of a business for a certain period of time
• Balance sheet


  A report which shows the financial position of a business at a point in time, an overview of the owner's equity, assets and liabilities
• Financial statements


  Usually consist of an income statement, balance sheet and cash flow statement, providing information about the business performance and financial position
• Service businesses


  • Relatively easy and inexpensive to set up, generally rely on the skills and knowledge of the owner, do not require a large amount of money to be invested in equipment, machinery, or stock
• Service businesses


  • Carpenters
  • Plumbers
  • Doctors
  • Bookkeepers
  • Lawyers
• Cash journals


  Used to summarise all the cash transactions of a business
• Cash receipts journal


  Records information about cash received into the business
• Cash payments journal


  Records information about cash paid out of the business
• Posting


  The process of recording amounts from the cash journals to the general ledger
• Purpose of cash journals


  • Manage the cash transactions of a business, provide a record of the total cash receipts and payments at any point in time, underline the information posted into the general ledger, avoid numerous small amounts being posted to the general ledger, provide an effective way of comparing the business records of cash transactions with the bank statement, prepared in chronological and numerical order to notice missing receipts or cheques
• Four Factors of Production


  • Natural Resources
  • Labour
  • Capital
  • Entrepreneurship
• Accounting entries


  1. Amounts entered in the 'bank' column

  2. Analysis columns used to indicate the ledger account to which the amount should be posted
• The functions within accounting software packages are largely automated, but the principles behind them are the same, so you still need to understand the basic accounting concepts
• Cash receipts journal


  • 1 May 2016: Peter King paid R10000 capital into the business, Receipt number 001 issued
  • 5 May 2016: Cash register took R650 for services provided, banked
  • 18 May 2016: Cash register amounted to R350, Receipt number 002 issued to P Singh who paid R300 in respect of services provided, total R650
  • 26 May 2016: R5000 received from Big Bank in the form of a loan, Receipt 003 issued and amount banked
• Four Factors of Production


  • Natural Resources
  • Labour
  • Capital
  • Entrepreneurship
• Natural Resources


  Sold or manufactured and sold
• Labour


  Wages and salaries
• Natural resources refer to natural wealth and include water, arable land, mineral deposits and the environment
• Characteristics of natural resources


  • Some can be replaced while others cannot
  • Very often they have to be processed as they cannot be used in their natural state
  • Different places have different kinds of natural resources
• Examples of natural resources in South Africa


  • Fish from our large coastlines
  • Water from the sea and rivers
  • Trees from the forests or plantation that have been created
  • Minerals such as gold, diamonds, platinum, coal, and iron ore
  • Agricultural products such as grapes, sugar, corn, wheat, and many others
• Labour


  Human effort put into the production of goods and services, including both physical and mental exertion
• Types of labour


  • Unskilled
  • Semi-skilled
  • Skilled
  • Highly skilled/professional
• Unskilled labour


  Employees that have no formal education or training but require experience, perform simple duties and do mainly physical work
• Semi-skilled labour


  Have basic literacy and numeracy skills, probably a short history of training, do more routine work and do not have to make major decisions
• Skilled labour


  Have at least a Grade 9 or higher schooling qualification and may have completed some additional tertiary education, required to make decisions and carry out duties responsibly, work as artisans or technicians
• Highly skilled or professional labour


  Have several years of training with formal qualification such as a degree or postgraduate degree
• Role of workers in business


  • Perform duties appointed to do
  • Be competent to do the job
  • Work in good faith
  • Work honestly and faithfully
  • Put the interest of the business before their own during working hours
  • Not compete with the business, steal, be dishonest or disloyal
  • Follow all instructions and authority
• Fair employment practices


  • Employment is freely chosen, no forced or bonded labour
  • Freedom of association and right to collective bargaining respected
  • Working conditions are safe and hygienic
  • Child labour shall not be used
  • Living wages are paid
  • Working hours are not excessive
  • No discrimination is practised
  • Regular employment is provided
  • No harsh or inhumane treatment is allowed
• Capital


  Comprises of money and/or all manufactured resources such as machines, tools and buildings which are used in the production of goods and services