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• 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


  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
• 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
• Financial statements


  Usually consist of an income statement, balance sheet and cash flow statement
• Service businesses


  • Relatively easy and inexpensive to set up as they 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
• Purpose of cash journals


  • Allocate amounts received and paid to specific general ledger accounts
  • Provide a record of the total cash receipts and payments of the business 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 those that appear on the bank statement
  • Prepared in chronological and numerical order to notice if any cheques or receipts are missing
• Four Factors of Production


  • Natural Resources
  • Labour
  • Capital
  • Entrepreneurship
• Accounting entries in a cash receipts journal


  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


  Natural wealth including water, arable land, mineral deposits and the environment
• Characteristics of natural resources


  • Some can be replaced while others cannot
  • Often need to be processed before use
  • Different places have different kinds
• Examples of natural resources in South Africa


  • Fish from coastlines
  • Water from sea and rivers
  • Trees from forests or plantations
  • Minerals such as gold, diamonds, platinum, coal, iron ore
  • Agricultural products such as grapes, sugar, corn, wheat
• 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 with 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
• Highly skilled/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 not used
  • Living wages paid
  • Working hours not excessive
  • No discrimination practiced
  • Regular employment provided
  • No harsh or inhumane treatment allowed
• Capital


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


  Capital contributed by the owner or entrepreneur of a business, obtained by means of saving or inheritance
• Borrowed capital


  Capital that is borrowed from an outside institution like a bank, interest is paid on the borrowed amount
• Entrepreneurship


  People who are prepared to take calculated risks and who seize opportunities as they arise, combine the factors of production to produce goods and services