CS 14

PRINCIPLES OF ACCOUNTING AND TAXATION

Unit Description
This paper seeks to equip the candidate with knowledge, skills and attitudes that will enable him to
prepare and interpret financial statements and compute taxes for various entities in a non-complex
environment.
Learning Outcomes
The candidate should be able to;
 Prepare books of original entry and basic ledger accounts under the double entry system
 Prepare basic financial statements of corporations and not for profit organisations.
 Prepare non-complex tax computations for individuals and corporations
 Interpret informaltion in financial and tax statements for decision making

COURSE CONTENT
1. Introduction to Accounting.
(i) The Nature and Purpose of Accounting
(ii) Users of accounting information and their respective needs
(iii) Accounting Standards and their purposes (IFRS, IASs, IPSAS)
(iv) Regulatory frameworks (ICPAK, IASB, IAESB, IPSASB), the Companies Act
(v) Professional Ethics
(vi) Principles, Concepts and conventions underlying the preparation of accounting statements

2. Accounting Procedures and Types

(i) Accounting cycle

(ii) Double Entry book-keeping

 (iii) Books of original entry (journals, ledgers, cashbooks)
Books of original entry are the books in which we first record transactions, such as the sale and
purchase of stock. We have a separate book for each kind of transaction. Thus, the nature of the
transaction affects which book it is entered into. Sales will be entered in one book, purchases in
another book, cash in another book, and so on. We enter transactions in these books recording:
i. the date on which each transaction took place – the transactions should be shown in date
order;
ii. Details relating to the sale (as listed in the computer example above) are entered in a
‘details’ column;
iii. A folio column entry is made cross-referencing back to the original ‘source document’,
e.g. the invoice;
iv. The monetary amounts are entered in columns included in the books of original entry for
that purpose.
Types of books of original entry
They are known as either ‘journals’ or ‘day books’. However, in the case of the last book of original
entry shown below, it is always a ‘journal’ and the second last is always known as the ‘cash book’.
The term ‘day book’ is, perhaps, more commonly used, as it more clearly indicates the nature of these
books of original entry – entries are made to them every day.
The commonly used books of original entry are:
i. Sales Day Book (or Sales Journal) – for credit sales.
ii. Purchases Day Book (or Purchases Journal) – for credit purchases.
iii. Returns Inwards Day Book (or Returns Inwards Journal) – for returns inwards.
iv. Returns Outwards Day Book (or Returns Outwards Journal) – for returns outwards.
v. Cash Book – for receipts and payments of cash and cheques.
vi. General Journal (or Journal if the term ‘Day Book’ is used for the other books of original
entry) – for other items
Using more than one ledger
Entries are made in the books of original entry. The entries are then summarised and the summary
information is entered, using double entry, to accounts kept in the various ledgers of the business. One
reason why a set of ledgers is used rather than just one big ledger is that this makes it easier to
divide the work of recording all the entries between different bookkeepers.
Types of ledgers
The different types of ledgers most businesses use are:
i. Sales Ledger. This is for customers’ personal accounts.
ii. Purchases Ledger. This is for suppliers’ personal accounts.
iii. General Ledger. This contains the remaining double entry accounts, such as those relating to
expenses, fixed assets, and capital.
 A diagram of the books commonly used

Types of accounts

I like to describe accounts as either being personal accounts or impersonal accounts.

 Personal Accounts – these are for debtors and creditors (i.e. customers and suppliers).
 Impersonal Accounts – divided between ‘real’ accounts and ‘nominal’ accounts:

Real Accounts – accounts in which possessions are recorded. Examples are buildings, machinery,
fixtures and stock.

Nominal Accounts – accounts in which expenses, income and capital are recorded.
This diagram may enable you to follow this better;

Nominal and private ledgers

The ledger in which the impersonal accounts are kept is known as the Nominal (or ‘General’) Ledger.
In order to ensure privacy for the proprietor(s), the capital, drawings, and other similar accounts are
sometimes kept in a Private Ledger. This prevents office staff from seeing details of items which the
proprietors want to keep secret.
Cash books
The Cash Book consists of the cash account and the bank account put together in one book. We used
to show these two accounts on different pages of the ledger. Now it is easier to put the two sets of
account columns together. This means that we can record all money received and paid out on a
particular date on the same page. In the Cash Book, the debit column for cash is put next to the debit
column for bank. The credit column for cash is put next to the credit column for bank.
The bank column contains details of the payments made by cheque and direct transfer from the bank
account and of the money received and paid into the bank account. The bank will have a copy of the
account in its own books. Periodically, or on request from the business, the bank sends a copy of the
account in its books to the business. This document is known as the bank statement. When the
business receives the bank statement, it checks it against the bank columns in its Cash Book to ensure
that there are no errors.

Folio entries speed up the process of finding the other side of the double entry in the ledgers.
The following images portray how cash and bank accounts would appear separately, vis a vis how
they would appear as a consolidated cash book.
(iv) Balancing accounts and preparing the trial balance
(v) Depreciation of non-current assets including their disposal (by part exchange; ordinary
sale; accident)
(vi) Preparation of movement of property, plant and equipment (as per International Financial
Reporting Standards)
(vii) Trade Receivables, bad debts write-offs, and provisions for bad and doubtful debts
(viii) Accruals, Prepayments, reserves and provisions necessary adjustments in statements of
financial performance
(ix) Introduction to simple statements of Financial Performance
(x) Statements of financial position Final Accounting statements in a sole trader
(xi) Financial statements of a partnership business reflecting changes in partnerships such as
admission, retirement and dissolution

3. Introducion to simple Company Accounts

(i) Company Formation; Documents
(ii) Share Capital and Reserves
(iii) Issue of shares at par; premium; discount
(iv) Over and Under subscriptions
(v) Allotment and calls on shares, forfeiture of shares
(vi) Preparation of Statements of financial performance and appropriation account and the
statement of financial position
(vii) Published Accounts: Components of a complete set of published financial statements only

4. Accounting for Non-Profit Making Organisations

i. Features of Non-Profit Making Institutions
ii. Types of funds and their accounting treatment
iii. Income and Expenditure Account
iv. Statement of financial position
v. Public sector accounting and Financial system
vi. Features of Public sector (National and County governments /, state Corporations,
Departments and Agencies)
vii. Regulation and oversight IPSAS Board, Director of accounting services, National
Treasur, ParlamentaryCommittees, Accounting Officers at National and County levels,
current PFM Acts
viii. Objectives of public sector financial statements and Standards (IPSAS)
ix. Accounting techniques inpublic sector such as budgeting, cash accrual, committment and
fund accounting) (Preparation of financial statement excluded)

5. Introduction to Taxation
i. History of Taxation
ii. Types of Taxation
iii. Principles of an optimal tax system
iv. Single versus multiple tax systems
v. Classification of Tax systems
vi. Tax shifting
vii. Factors determining tax shifting
 viii. Tax Evasion and Tax Avoidance
ix. Taxable Capacity
x. Fiscal Policies
xi. The Revenue Authority; History, structure and mandate
6. Investment Allowances
I. Rationale for investment allowances
II. Investment Allownace
III. Industrial Building Deductions
IV. Wear and Tear Deductions
V. Farm work deductions
VI. Shipping Investment Deductions
VII. Other Deductionsn
7. Custom Taxes and Excise Taxes
i. Customs Procedure
ii. Import and export Duties
iii. Prohibitions and restriction measures
iv. Transit goods and bond securities
v. Purposes of customs and excise duties
vi. Goods subject to customs control
vii. Import declaration form, pre-shipment inspection, clean report of findings
viii. Excisable gppds and services
ix. Application for excise duty (licensing)
x. Use of excise stamps
xi. Offences and penalties
xii. Excisable goods management system
SAMPLE READING AND REFERRENCE MATERIAL
1. Wood, F .,& Robinson, S. (2018). Frank Wood’s Book Keeping and Accounts (9th Edition).
Harlow: Pearson Education Limited.
2. Wang’ombe, D. (2008). Fundamentals of Accounting. Nairobi: Focus Publishers.
3. Whittenburg, G. EG., & Gill, S. (2021). Income Tax Fundamentals 2021 (39th Edition).
Australia: Cengage.
4. Kasneb e-learning resources (link on the Kasneb Web site).
5. Kasneb approved study packs.
6. Sample text books on taxation from local authors.
Saturday, 8th January, 2022
NOTES
1. INTRODUCTION TO ACCOUNTING.
Definition; Accounting can be defined as ‘the process of identifying, measuring, and
communicating economic information to permit informed judgements and decisions by users of
the information’. Simply put, it is the orderly and systematic recording of the monetary values of
financial transactions of the business for purposes of facilitating successive decision making.
THE HISTORY OF ACCOUNTING
Accounting was and still is as a product of necessity owing to the need for people engaging in
commercial activities to:
 Record business transactions
  Determine if they were being financially successful. (profitability )
 Determine how much they owned and how much they owed. (assets and liabilities)
It is believed to have been utilised in Mesopotamia in one form or another since at least 3,500 BC.
There also exists significant evidence of the practise of accounting in ancient Egypt, China, Greece, as
well as Rome. The ‘Pipe Roll’ in England, is considered to be the oldest surviving accounting record
in the English language. It contains an annual description of rents, fines and taxes due to the King of
England, from 1130 to 1830.
However, it was only when Paciloi wrote about it in 1494 or, to be more precise, wrote about a branch
of accounting called, ‘bookkeeping’ that accounting began to be standardised and recognised as a
process or procedure. At the time, no standard system for maintaining accounting records had been
developed because the circumstances of the day did not make it practicable for anyone to do so. For
instance, why would anyone devise a formal system of accounting if the people who would be
required to ‘do’ accounting did not know how to read or write.
One accounting scholar (A. C. Littleton) suggested that seven key ingredients which were required
before a formal system could be developed existed when Pacioli wrote his treatise:
I. Private property. The power to change ownership exists and there is a need to record the
transaction.
II. Capital. Wealth is productively employed such that transactions are sufficiently important to
make their recording worthwhile and cost-effective.
III. Commerce. The exchange of goods on a widespread level. The volume of transactions needs
to be sufficiently high to motivate someone to devise a formal organised system that could be
applied universally to record transactions.
IV. Credit. The present use of future goods. Cash transactions, where money is exchanged for
goods, do not require that any details be recorded of who the customer or supplier was. The
existence of a system of buying and selling on credit led to the need for a formal organised
system that could be applied universally to record credit transactions.
V. Writing. A mechanism for making a permanent record in a common language. Writing had
clearly been around for a long time prior to Pacioli but it was, nevertheless, an essential
element required before accounting could be formalised.
VI. Money. There needs to be a common denominator for exchanges. So long as barter was used
rather than payment with currency, there was no need for a bookkeeping system based upon
transactions undertaken using a uniform set of monetary values.
VII. Arithmetic. As with writing, this has clearly been in existence far longer than accounting.
Nevertheless, it is clearly the case that without an ability to perform simple arithmetic, there
was no possibility that a formal organised system of accounting could be devised.

When accounting information was being recorded in the Middle Ages it sometimes simply took the
form of a collection of invoices and receipts which were given to an accountant to calculate the profit
or loss of the business up to some point in time. This practice persists to this day in many small
businesses. The accountant of the Middle Ages would be someone who had learnt how to convert the
financial transaction data into accounting information. Quite often, it would be the owner of the
business who performed all the accounting tasks. Otherwise, an employee would be given the job of
maintaining the accounting records. As businesses grew in size, so it became less common for the
owner to personally maintain the accounting records and more usual for someone to be employed as
an accounts clerk. Then, as companies began to dominate the business environment, managers
became separated from owners . The owners of companies (shareholders) often have no involvement
in the day-to-day running of the business. This led to a need for some monitoring of the managers.
Auditing of the financial records by accountants became the norm and this, effectively, established the
accounting profession. The first national body of accountants, The Institute of Chartered
Accountants of Scotland, was formed in Scotland in 1854 and other national bodies began to emerge
gradually throughout the world, with the English Institute of Chartered Accountants being formed in
1880 and the first US national accounting body being formed in 1887.

Sunday, 9th January, 2022

(I) THE NATURE AND PURPOSE OF ACCOUNTING
The accounting process is concerned with: recording data; classifying and summarising data; as well
as communicating what has been learned from the data. The objectives of this Accounting process
include letting people and organisations know:
 if they are making a profit or a loss;
 what their business is worth;
 what a transaction was worth to them;
 how much cash they have;
 how wealthy they are;
 how much they are owed;
 how much they owe to someone else;
 enough information so that they can keep a financial check on the things they do.
However, the primary objective of accounting is to provide information for decision making. The
information is usually financial, but can also be given in volumes, for example the number of cars
sold in a month by a car dealership or the number of cows in a farmer’s herd. For example, if a
business recorded what it sold, to whom, the date it was sold, the price at which it was sold, and the
date it received payment from the customer, along with similar data concerning the purchases it made,
certain information could be produced summarising what had taken place.
The profitability of the business and the financial status of the business could also be identified, at
any particular point in time. It is the primary objective of accounting to take such information and
convert it into a form that is useful for decision making.
People and businesses
Accounting is something that affects people in their personal lives just as much as it affects very large
businesses. We all use accounting ideas when we plan what we are going to do with our money. We
have to plan how much of it we will spend and how much we will save. We may write down a plan,
known as a budget, or we may simply keep it in our minds.
Recording accounting data
However, when people talk about accounting, they are normally referring to accounting as used by
businesses and other organisations. The owners cannot remember all the details so they have to
keep records of it. Organisations not only record cash received and paid out. They will also record
goods bought and sold, items bought to use rather than to sell, and so on. This part of accounting is
usually called the recording of data.
Classifying and summarising
When the data is being recorded it has to be organised so as to be most useful to the business. This is
known as classifying and summarising data. Following such classifications and summaries it will be
possible to work out how much profit or loss has been made by the business during a particular
period. It will also be possible to show what resources are owned by the business, and what is
owed by it, on the closing date of the period.
Communicating information
From the data, people skilled in accounting should be able to tell whether or not the business is
performing well financially. They should be able to ascertain the strengths and weaknesses of the
business. Finally, they should be able to tell or communicate their results to the owners of the
business, or to others allowed to receive this information.

(II) USERS OF ACCOUNTING INFORMATION AND THEIR RESPECTIVE NEEDS

Possible users of accounting information include:
 Managers.
These are the day-to-day decision-makers. They need to know how well things are progressing
financially and about the financial status of the business.They use accounting information to evaluate
the effectiveness of plans employed.
 Owner(s) of the business.
They want to be able to see whether or not the business is profitable. In addition, they want to know
what the financial resources of the business are.
 A prospective buyer.
When the owner wants to sell a business the buyer will want to see such information.
 The bank.
If the owner wants to borrow money for use in the business, then the bank will need such information.
 Tax inspectors and the government.
They need it to be able to calculate the taxes payable.
The government uses accounting information to assess the tax to be collected incase there is any
profit.
 A prospective partner.
If the owner wants to share ownership with someone else, then the would-be partner will want such
information.
 Investors /lenders
Whether existing ones or potential ones. They want to know whether or not to invest their money in
the business. They use accounting information to determine whether or not the firm shall be able to
pay the principle amount as well as interest when the payment is due.
  Customers
They rely on accounting information to determine whether the firm is able or will be able to cater for
and sustain their needs in future.
 Employees
They use accounting information to get assurance on their job security/ security of tenure.
 Suppliers
They use accounting information to determine whether the firm shall be able to pay for the goods and
services rendered as and when payments fall due.
 General Public
They use accounting information to determine how socially responsible the firm is in terms of
empowering the vulnerable groups in the society, creation of social amenitie, supporting education for
the needy, provision of clean water to the informal settlements.
 Others
There are many other users of accounting information; suppliers and employees. One obvious fact is
that without properly recorded accounting data, a business would have many difficulties providing the
information these various users require. However, the information produced by accounting needs to
be a compromise – so many different groups of stakeholders make it impossible to produce
accounting information at a reasonable cost in a form that suits them all. As a result, accounting
focuses on producing information for owners. The other stakeholder groups often find the accounting
information provided fails to tell them what they really want to know. However, if organisations made
the effort to satisfy the information needs of all stakeholders, accounting would be a very costly
exercise indeed!
Monday, 10th January,2022
(III) ACCOUNTING STANDARDS AND THEIR PURPOSES (IFRS, IAS S, IPSAS)
(IV) REGULATORY FRAMEWORKS (ICPAK, IASB, IAESB, IPSASB), THE COMPANIES
ACT
The IASB
The International Accounting Standards Board (IASB) is an independent, private-sector body
that develops and approves International Financial Reporting Standards (IFRSs). The IASB
operates under the oversight of the IFRS Foundation. The IASB was formed in 2001 to replace the
International Accounting Standards Committee (IASC).

(V) PROFESSIONAL ETHICS

 (VI) PRINCIPLES , CONCEPTS AND CONVENTIONS UNDERLYING THE PREPARATION OF
ACCOUNTING STATEMENTS

Accounting Principles
These are broad basic assumptions that must be adhered to in the execution of the accounting process.
They are also known as the concepts of accounting. They include;
i. The historical cost concept. It means that assets are normally shown at cost price, and that
this is the basis for valuation of the asset.
ii. The money measurement concept. Accounting information has traditionally been concerned
only with those facts covered by (a) and (b) which follow:
a) it can be measured in monetary units, and
b) most people will agree to the monetary value of the transaction.
This limitation is referred to as the money measurement concept, and it means that accounting can
never tell you everything about a business. For example, accounting does not show the following:

c) whether the business has good or bad managers,

d) whether there are serious problems with the workforce,
e) whether a rival product is about to take away many of the best customers,
f) whether the government is about to pass a law which will cost the business a lot of extra
expense in future.
The reason that (c) to (f ) or similar items are not recorded is that it would be impossible to work out a
monetary value for them which most people would agree to.
iii. The business entity concept.
The business entity concept implies that the affairs of a business are to be treated as being quite
separate from the non-business activities of its owner(s). The items recorded in the books of the
business are, therefore, restricted to the transactions of the business. No matter what activities the
proprietor(s) get up to outside the business, they are completely disregarded in the books kept by the
business. The only time that the personal resources of the proprietor(s) affect the accounting
records of a business is when they introduce new capital into the business, or take drawings out
of it.
iv. The dual aspect concept
This states that there are two aspects of accounting, one represented by the assets of the business
and the other by the claims against them. The concept states that these two aspects are always
equal to each other. In other words, this is the alternate form of the accounting equation:
Assets = Capital + Liabilities
As you know, double entry is the name given to the method of recording transactions under the dual
aspect concept.
 v. The time interval concept
One of the underlying principles of accounting, the time interval concept, is that financial statements
are prepared at regular intervals of one year. For internal management purposes they may be prepared
far more frequently, possibly on a monthly basis or even more frequently.

Accounting standards
This refers to a framework that guides the accounting practice. They are of various types including;
(i) IFRS- International Financial Reporting Standard
(ii) JGAAP- Japan General Accepted Accounting Principle
(iii) USGAAP- United States Generally Acdepted Accounting Principle
(iv) AGAAP- Australian Generallly Accepted Accounting Principle

I. ENTITY PRINCIPLE
It states that; the accountant should treat a firm as a separate entity distinct from its owners and
managers. For example, where a business owner salaried himself.
II. GOING CONCERN PRINCIPLE
It states that the accountant shall treat the firm as to be existing well into the foreseable future and that
there should be no intention whatsoever to scale down the firms operation or even to put the firm into
liquidation.
III. ACCRUAL PRINCIPLE
It states that revenue and expenses should be recognised when earned and incurred respectively,
regardles of when cash is received or paid. (Revenues - Expenses= Net Profit)
IV. PRUDENCE PRINCIPLE
It states that where alternative procedures, methods and estimates exist, then the accountant should
prefer the one that gives the most cautious presentation of the firm, i.e; the one that provides the worst
case scenario.
V. SUBSTANCE OVER FORM
It states that accountatnts should prefer the econmic reality of assets as oppo sed to their legal form.
VI. HISTORICAL COST PRINCIPLE
It states that in recognizing fixed assets, the accountants should consider the amount incurred in
acquiring the fixed assets and in bringing them into full operation.
VII. CONSISTENCY PRINCIPLE
It states that similar transactions should be accorded similar treatment which should be effected from
period to period and accross firms. For example; it is used on depreciated goods.
Monday, 28th February, 2022
2. ACCOUNTING PROCEDURES AND TYPES
 ELEMENTS OF ACCOUNTING
These are pillars of accounting in whose absence reporting would be difficult. They include; assets,
liability and capital, which support the preparation of the balance sheet (statement of finacial
position). In addittion we have incomes and expenses that support the preparation of income statement
(statement of financial performance).
Definitions
Assets
This is a resource controlled by an entity and results from past transactions and in which future
economic benefits are expected to flow into the firm.They are broadly classified into two;
I. Intangible Assets
These are assets that that do not command a physical existence, i.e that cannot be touched or seen.
They include; computer softwares, goodwill, trademarks, copyrights, patents, e.t.c
II. Intangible Assets
These are assets that command a physical existence, i.e they can be seen or touched/ felt. They are
broadly classified into two categories;
I. Fixed Assets
These are assets whose future economic benefits are expected to flow into the firm for a period of
time exceeding a year. These include; machinery, vehicles, buildings, furniture, partitions
(boundaries), fixtures, equipment, computers (hardware), e.t.c.
II. Current Assets
Theses are assets whose future economic benefits are expected to flow in the firm within a period of
one year. These include; cash (both in hand and at bank), stock/inventory, debtors/ accounts
receivable, bank , prepayments, e.t.c.
CAPITAL
This is residual interest in the assets of the firm after deducting all of the liabilities. The formula for
capital is expressed as; C = A – L. (A= C+L)
INCOME
Refers to an increase in economic benefits in the form of cash flows, an enhancement of assets and a
decrease in liabilities that leads to an increase in capital other than those from equity contributors/
owners. Examples of income include; commission received, revenue/sales, discount received, rent
received, royalties received, appreciation of fixed assets (land), profit on sale of fixed assets
(disposal), bad debts recovered, a decrease in provision for doubtful debts, e.t.c.
Doubtful debt
These are debts whose chances of repaymen are uncertain. It is what can be refferred to as a 50/50
situatuion/chance.
Bad debt
Debts whose chances of non-repayment are almost certain are reffered to as Bad debts.
 EXPENSES
They refer to a decrease in economic benefits in the form of cash outflows, depletion of assets, an
increase in liabilities that lead to decrease in capital other than those attributed to contributors. These
include; salaries, school fees, insurance, interest on loan, bills, bad debts, rent money, doubtful debts,
purchases on edibles, damaged goods, buying of electronics, commissions allowed, fuelling cars,
water bills, purchases on budget, transport bills, e.t.c.
(I) ACCOUNTING CYCLE

(ii) Double Entry book-keeping

This concept implies that all the assets in the firm must be represented by liabilities and capital. For
example, if the owners of a firm inject additional capital into the business, then this will have a double
effect in that assets will always be equal to a summation of liabilities and capital. This is represented
in the form of an equation i.e; A= L+C. For double entry to hold, every debit entry must have a
corresponding credit and vice versa.
We debit when; an asset increases or when either capital or a liability decreases. Also we credit when;
a liability or a capital inreases and when an asset decreases

THE ASSET OF STOCK

Trading stock is bought at a cost price and sold at a selling price. Profit is earned out of the
trading activity. Temporay accounts are opened to record the monvement in stock because of
the different prices i.e cost price and sellings price. Temporary Accounts are:
Purchases Account
Records purchase of trading stock at cost price. The meaning of term "Purchases" is now limited to
buying trading stock.
Purchases Returns Account (Returns Outwards A/c)
Record of the cost of all goods returned to suppliers
Sales Account
Record of all sales in the busniess. The meaning of the term "Sales" is limited to sale of trading stock
Sales Returns Account(Returns Inwards Account)
Record of all goods returned by customers to the business at selling price.
NOTE:
1.) Purchase,sale and return of Non currrent Assets is recorded in the asset’s account.
2). At the end of the accounting period ,there is a physical stock taking to determine the cost of
closing stock. The stock is disclosed in the books at the lower of ;
(i) Original Cost
(ii)Net Realizable value
DOUBLE ENTRY - FOR TRADING STOCK
1. Bought goods costing shs. 65,000 on credit from Azure Traders
Stock A/c INCREASE RECIEVING DEBIT Purchases A/c
Azure Traders A/c INCREASE GIVING CREDT Azure Traders A/c
2 Bought goods costing shs.78,000 and paid by cheque
Stock A/c INCREASE RECIEVING DEBIT Purchases A/c
Bank A/c DECREASE GIVING CREDIT Bank A/c
3 We returned goods costing shs,7,000 to Azure Traders
Azure Traders A/c DECREASE RECIEVING DEBIT Azure Traders
Stock A/c DECREASE GIVING CREDIT Purcases Returns a/c
4 sold goods for shs.89,000 on credit to Omega Ltd
Omega Ltd INCREASE RECIEVING DEBIT Omega Limited
Stock A/c DECREASE GIVING CREDIT Sales A/c

5 Sold goods on credit to Avviela valued at shs. 100,000

Aviela A/c INCREASE RECIEVING DEBIT Aviela A/c
Stock A/c DECREASE GIVING CREDIT Sales A/c
6 A customer returned goods valued at shs.7,000 back to the business
Stock A/c INCREASE RECIEVING DEBIT Sales Returns A/c
Debtor's A/c DECREASE GIVING CREDIT Debtor's A/c
7 Bought Machinery costing shs.600,000 on credit
Machinery A/c INCREASE RECIEVING DEBIT
Credtor's A/c INCREASE GIVING CREDIT

EXPENDITURE
This refers to a cost incurred in the normal subsistence of the business.
Capital Expenditure is a cost incurred to; Acquire Non current Assets, OR to enhance the earning
capacity of a Non Current Asset (E.g; am engine Overhaul, New Motor, Refurbish rooms).
It is recorded in the respective Asset’s Account. The busniess will enjoy economic benefits from the
Expenditure for more than one accounting period.It is not incured every year.
Revenue Expenditure
Refers to the cost incurred to finance the day to day business activities. The cost is recurrent and it is
treated as a trading expense charged to Income statement. Temporary Accounts are opened to
record the Expenditure.For example; Salaries and wages Account, Rates Account, Rent Expense
Account, Lighting and Heating Account, Insurance Account and Motor Vehicle expenses Account.
Double entry for revenue expenditure
Debit: Expenses A/c
Credit: Bank

(iii) Books of original entry (journals, ledgers, cashbooks)

(iv) Balancing accounts and preparing the trial balance

(v) Deprecistion of non-current assets including their disposal (by part exchange;
ordinary sale; accident)
(vi) Preparation of movement of property, plant and equipment (as per International
Financial Reporting Standards)
(vii) Trade Receivables, bad debts write-offs, and provisions for bad and doubtful debts
(viii) Accruals, Prepayments, reserves and provisions necessary adjustments in statements
of financial performance
(ix) Introduction to simple statements of Financial Performance
(x) Statements of financial position Final Accounting statements in a sole trader
(xi) Financial statements of a partnership business reflecting changes in partnerships such
as admission, retirement and dissolution
Introducion to simple Company Accounts
(viii) Company Formation; Documents
(ix) Share Capital and Reserves
(x) Issue of shares at par; premium; discount
(xi) Over and Under subscriptions
(xii) Allotment and calls on shares, forfeiture of shares
(xiii) Preparation of Statements of financial performance and appropriation account and the
statement of financial position
(xiv) Published Accounts: Components of a complete set of published financial statements only
Accounting for Non-Profit Making Organisations
x. Features of Non-Profit Making Institutions
xi. Types of funds and their accounting treatment
xii. Income and Expenditure Account
xiii. Statement of financial position
xiv. Public sector accounting and Financial system
xv. Features of Public sector (National and County governments /, state Corporations,
Departments and Agencies)
xvi. Regulation and oversight IPSAS Board, Director of accounting services, National
Treasur, ParlamentaryCommittees, Accounting Officers at National and County levels,
current PFM Acts
xvii. Objectives of public sector financial statements and Standards (IPSAS)
 xviii. Accounting techniques inpublic sector such as budgeting, cash accrual, committment and
fund accounting) (Preparation of financial statement excluded)

Introduction to Taxation
xii. History of Taxation
xiii. Types of Taxation
xiv. Principles of an optimal tax system
xv. Single versus multiple tax systems
xvi. Classification of Tax systems
xvii. Tax shifting
xviii. Factors determining tax shifting
xix. Tax Evasion and Tax Avoidance
xx. Taxable Capacity
xxi. Fiscal Policies
xxii. The Revenue Authority; History, structure and mandate

Investment Allowances
VIII. Rationale for investment allowances
IX. Investment Allownace
X. Industrial Building Deductions
XI. Wear and Tear Deductions
XII. Farm work deductions
XIII. Shipping Investment Deductions
XIV. Other Deductionsn
Custom Taxes and Excise Taxes
xiii. Customs Procedure
xiv. Import and export Duties
xv. Prohibitions and restriction measures
xvi. Transit goods and bond securities
xvii. Purposes of customs and excise duties
xviii. Goods subject to customs control
xix. Import declaration form, pre-shipment inspection, clean report of findings
xx. Excisable gppds and services
xxi. Application for excise duty (licensing)
xxii. Use of excise stamps
xxiii. Offences and penalties
xxiv. Excisable goods management system