SCOPE OF TRAINING

1. INTRODUCTION TO ACCOUNTING

2. OBJECTIVES AND AIM OF ACCOUNTING

3. RESPONSIBILITIES OF ACCOUNTANT

4. CLASSES OF ACCOUNT

5. IMPORTANCE OF JOURNAL

6. COMPONENT OF A FINANCIAL STATEMENT

7. DOCUMENTATION OF FINANCIAL RECORDS

8. TAX ASPECTS OF ACCOUNTING

INTRODUCTION TO ACCOUNTING

Accounting is the language of business. It is the system of recording, summarizing, and analyzing an economic entity's
financial transactions. Effectively communicating this information is key to the success of every business. Those who
rely on financial information include internal users, such as a company's managers and employees, and external users,
such as banks, investors, governmental agencies, financial analysts, and labor unions. These users depend upon data
supplied by accountants to answer Financial questions like : is the company profitable, how's there debt ratio, how
well do they generate dividends etc.
 COMPONENTS OF BASIC
ACCOUNTING
• RECORDING : THE PRIMARY FUNCTION OF ACCOUNTING IS TO MAKE RECORDS OF ALL TRANSACTIONS THAT
THE FIRM ENTERS INTO. FOR THE PURPOSE OF RECORDING, THE ACCOUNTANT MAINTAINS A SET OF BOOKS.
THEIR PROCEDURES ARE VERY SYSTEMATIC.

• SUMMARIZING : RECORDING OF TRANSACTIONS CREATES RAW DATA. FOR THIS REASON, THE ACCOUNTANT
CLASSIFIES DATA INTO CATEGORIES.

• REPORTING : MANAGEMENT IS ANSWERABLE TO THE INVESTORS ABOUT THE COMPANY’S STATE OF AFFAIRS.
THE OPERATIONS THAT ARE BEING FINANCED WITH THE MONEY OF OWNERS, IT NEEDS TO BE PERIODICALLY
UPDATED TO THEM.
OBJECTIVES OF ACCOUNTING

The main objectives of financial accounting are :

• Accuracy

• Recording financial data

• Providing information

• Aiding decision making

The functions of accounting facilitate the objectives of accounting. There are many objectives of accounting. For
instance,

• Accounting facilitates the systematic management of the records of the transaction and other financial data.

• It gives an idea about the chances of profitability or failure or losses.

• The process assists the management by helping them to make the best decisions. Besides that, accounting
ascertains the financial position of an organization.

• It also helps in the evaluation of the employee and their working efficiency, in addition, communicating and
spreading the accounting information to the user.

• Accounting contributes the biggest to any organization by preventing fraud and prevents profit risks.
RESPONSIBILITIES OF AN ACCOUNTANT

• Keeping/documenting financial records

• Preparing financial statements

• Reconciliation of accounts

• Analyzing of financial statements

• Preparation of payroll

• Complying with financial policies

 CLASSES OF ACCOUNT

The ability to read financial statements requires an understanding of the items they include and the standard
categories used to classify these items. The accounting equation identifies the relationship between the elements of
accounting.

ACCOUNTING FORMULA : ASSETS = LIABILITIES + OWNER’S EQUITY

 ASSETS
An asset is something of value the company owns. Assets can be tangible or intangible. Tangible assets are generally
divided into three major categories:

• Current assets (including cash and cash equivalent, marketable securities, accounts receivable, inventory, and
prepaid expenses);

• Property, plant, and equipment; and long‐term investments.

• Intangible assets lack physical substance, but they may, nevertheless, provide substantial value to the company
that owns them. Examples of intangible assets include patents, copyrights, trademarks, and franchise licenses.
 LIABILITIES

Liabilities are the company's existing debts and obligations owed to third parties. Examples include amounts owed to
suppliers for goods or services received (accounts payable), to employees for work performed (wages payable), and to
banks for principal and interest on loans (notes payable and interest payable).

Liabilities are generally classified as short‐term (current) if they are due in one year or less. Long‐term liabilities are
not due for at least one year.
 COMPONENT OF A FINANCIAL
STATEMENT
There are basically 5 components of a financial statements ;

• Statement of profit or loss

• Statement of financial position

• Statement of equity

• Cash flow

• Notes to account
QUESTIONS !!!
 DOCUMENTATION OF FINANCIAL
RECORDS

One of the most critical components of bookkeeping is documenting financial transactions. This process involves
recording all financial transactions, including purchases, sales, receipts, and payments, in a systematic and organized
manner. Proper documentation of financial transactions is essential for any business to maintain accurate records of
its financial activities and make informed decisions based on this information. In this section, we will discuss the
importance of documenting financial transactions and the best practices to follow.
• Importance of documenting financial transactions : documenting financial transactions is crucial for several reasons. First, it
helps to keep track of all financial activities and transactions that occur in a business. This information is critical for monitoring
cash flow, preparing financial statements, and filing tax returns. Second, proper documentation of financial transactions ensures
that all financial records are accurate, complete, and up-to-date, which is essential for making informed business decisions.
Finally, well-documented financial records provide transparency and accountability, which is critical for building trust with
stakeholders, including investors, lenders, and customers.
• Documenting financial transactions : financial transactions serve as the lifeblood of any organization, whether it's a
startup seeking venture capital or a nonprofit relying on grants. Properly documenting these transactions is not only a legal
requirement but also a strategic necessity. Let's examine this multifaceted process from different angles:

The importance of documentation Includes:

• Legal compliance,

• Transparency,

• Audits and due diligence,

• Internal control
 AREAS THAT NEED PROPER
DOCUMENTATION
In accounting all areas are very important when it comes to documentation, but we will look at few areas;

• Revenue

• Expenses and Direct cost

• Fixed assets

• Current assets ( Trade Receivables, inventory, Cash and cash equivalents)

• Current liabilities ( Trade Payables)

• Loans

• Important documents relating to the company for the year (board of directors minutes, shares increase etc.)
 REVENUE
WHAT IS REVENUE?

Revenue is the money generated from normal business operations, calculated as the average sales price times the number of units
sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Revenue is also known as
sales on the income statement.

• There are different ways to calculate revenue, depending on the accounting method employed. Accrual accounting will include
sales made on credit as revenue for goods or services delivered to the customer. Under certain rules, revenue is recognized even if
payment has not yet been received.

• Cash accounting, on the other hand, will only count sales as revenue when payment is received. Cash paid to a company is
known as a "receipt." It is possible to have receipts without revenue. For example, if the customer paid in advance for a
service not yet rendered or undelivered goods, this activity leads to a receipt but not revenue.
What is accrued and deferred revenue?

• Accrued revenue is the revenue earned by a company for the delivery of goods or services that have yet to be paid by the
customer. In accrual accounting, revenue is reported at the time a sales transaction takes place and may not necessarily
represent cash in hand.

• Deferred or unearned revenue can be thought of as the opposite of accrued revenue, in that unearned revenue accounts for
money prepaid by a customer for goods or services that have yet to be delivered. If a company has received prepayment for its
goods, it would recognize the revenue as unearned but would not recognize the revenue on its income statement until the period
for which the goods or services were delivered.
 IMPORTANCE OF DOCUMENTING
REVENUE
• ENSURING COMPLIANCE WITH ACCOUNTING STANDARDS : Revenue recognition is governed by various
accounting standards, such as the generally accepted accounting principles (GAAP) in the united states and the
international financial reporting standards (IFRS) internationally. Adhering to these standards is crucial for
businesses to maintain transparency, facilitate accurate financial reporting, and avoid legal and regulatory issues.

• ENHANCING FINANCIAL REPORTING ACCURACY : Accurate revenue recognition is essential for producing
reliable financial statements that reflect the true financial position of a business. It affects key performance
indicators, such as net income, retained earnings, and cash flow, which are crucial for making informed business
decisions.
• STREAMLINING COMPLEX TRANSACTIONS : As businesses grow, they may engage in more complex transactions, such as long-
term contracts, subscriptions, or bundled products and services. These transactions can complicate revenue recognition, as they
may require recognizing revenue over multiple reporting periods or allocating revenue between different components.

• IMPROVING VISIBILITY AND CONTROL : Revenue recognition capabilities provides businesses with real-time visibility into
their financial performance. This enables better decision-making, as management can track revenue trends, identify potential
issues, and take corrective action if needed.

Revenue recognition is a fundamental aspect of accounting that has a significant impact on financial reporting and overall business
performance.
 DIRECT COST AND EXPENSES

Direct costs are costs that are directly involved in the development, manufacture or releasing of products to market. Any cost
that is essential to these aspects of production is classed as a direct cost. While expenses are cost incurred to aid the running of
the business/company daily activities.

Both are important, as they are part of your bottom line, and provide an insight into your company’s profitability. Direct and
indirect costs can have different tax implications, although some instances of both are tax-deductible. They can also have
different implications if you are applying for grant assistance from the government. Your accountant will be able to advise you
further.
 IMPORTANCE OF DOCUMENTING
COSTS
Documenting expenses and direct costs is crucial for several reasons:
Financial management: keeping track of expenses helps businesses understand their financial health, enabling better budgeting
and forecasting.
Cost control: by monitoring direct costs, organizations can identify areas where they can reduce expenses, enhancing profitability.
Tax compliance: proper documentation ensures that all deductible expenses are accounted for, simplifying tax preparation and
minimizing the risk of audits.
Performance evaluation: analyzing documented expenses allows businesses to assess project profitability and make informed
decisions about resource allocation.
Transparency and accountability: detailed records foster transparency, which is essential for stakeholders, investors, and
regulatory compliance.
Historical reference: documenting expenses creates a historical record that can inform future budgeting and strategic planning.
 TRADE RECEIVABLES
In general terms, a debtor is a customer that has purchased a good or service and in return owes their supplier a payment.
This indicates that on a fundamental level, almost all companies and entities will be debtors at one time or another, since
everyone makes purchases as a customer in some way or another. In accounting, this customer/supplier relationship is
referred to as debtor/creditor.

Documenting trade receivables is crucial for several reasons:

Financial accuracy: accurate documentation ensures that financial statements reflect the true financial position of the
company, which is vital for decision-making and reporting.

Cash flow management: by keeping detailed records, businesses can better manage cash flow, forecast incoming cash, and
identify potential cash shortages.
•Credit risk assessment: documentation helps assess the creditworthiness of customers, allowing companies to make
informed decisions about extending credit.

•Dispute resolution: well-documented receivables provide clear evidence in case of disputes with customers over payment
terms, amounts owed, or delivery issues.

•Legal protection: in the event of non-payment, proper documentation can serve as crucial evidence in legal proceedings,
helping to enforce collections.

•Performance monitoring: tracking trade receivables allows businesses to monitor customer payment patterns and
overall sales performance, aiding in strategic planning.
 TRADE PAYABLES

A creditor is an individual or institution that extends credit to another party to borrow money usually by a loan
agreement or contract. Creditors are commonly classified as personal or real.

Creditors can include friends or family that you borrow money from and have to pay back. Unsecured creditors are
those that lend money without any collateral. Secured creditors are those that lend money with collateral so that if
you default on your loan, they may repossess the asset pledged as collateral to cover the money they have lost.
•Cash flow management: trade payables allow companies to manage their cash flow more effectively. By delaying
payments to suppliers, businesses can use their cash for other operational needs or investments, improving liquidity.

•Supplier relationships: maintaining healthy trade payables can foster strong relationships with suppliers. Timely
payments can lead to better terms, discounts, and more favorable credit arrangements, enhancing overall supply chain
efficiency

•Operational flexibility: trade payables give businesses the flexibility to respond to changes in demand without
immediately impacting their cash reserves. This is especially important for companies in volatile markets.

•Creditworthiness: managing trade payables responsibly can positively affect a company's credit rating. Consistent, timely
payments demonstrate reliability and can help secure better financing options

•Financial metrics: trade payables are an essential part of financial metrics such as the current ratio and quick ratio. These
metrics help assess a company's short-term financial health and operational efficiency.

•Budgeting and planning: understanding trade payables can aid in budgeting and financial planning, helping businesses
anticipate cash outflows and align them with expected revenues.
 JOURNAL

A Journal is a detailed record of all transactions done by a business. The information recorded in a journal is used to
reconcile accounts. Entries are usually recorded using a double-entry method. The double-entry method records a
transaction in two (or more) entries.
HOW TO RECORD A JOURNAL ENTRY
• When manually creating a journal entry, you (or your accountant or bookkeeper) will follow these common steps:
• Step 1: identify the transaction
• First, you need to determine which transaction you’ll be recording.
• Step 2: identify the accounts
• Next, determine which accounts are affected by the transaction.
• Step 3: determine debits and credits
• For each account affected by the transaction, identify the exact amounts for which the account was increased or
decreased. (We’ll outline more about the difference between debits and credits in journal entry accounting later in
this post).
• Step 4: record the journal entry

• Once you have all the details, you can record the transaction as a journal entry. As described previously, this
includes the transaction date, account names, amount debited, amount credited, a brief description of the
transaction, and any other pertinent details.

• Step 5: review and check

• It’s important to review the journal entry to ensure that it is:

• Accurate (i.e., Are the accounts and amounts correct?)

• Balanced (i.e., Are the debits and credits equal, so that the accounting equation “assets = liabilities + shareholders’
equity” is balanced?)
 TAX ASPECTS OF ACCOUNTING
For proper context there are different laws that guides a country in regards to tax payments. In Nigeria we have
various taxes that relates to an entity operational in Nigeria.

The following will be discussed on

• Value added tax

• Withholding tax

• Payee

• ITF and NSITF

QUESTIONS ON RELATABLE SCENARIOS
THANK YOU