Vous êtes sur la page 1sur 20

LCCI First Level Revision Notes

Page 1 of 1

LCCI First Level Revision Notes


1. Double Entry, Ledger, P/L Account and B/S Ch 1 Ch 2 Ch 3 Ch 4 Ch 5 Ch 6 Ch 7 Ch 8 2. The Accounting Equation Transaction through Double Entry Purchases and Sales Expenses : Profit or Loss Balancing Accounts : the Trial Balance Trading and Profit and Loss Accounts The Balance Sheet Final accounts : more features

Cash Book and Day Book Ch 9 Ch 10 Ch 11 Ch 12 Ch 13 Ch 14 Ch 19 The Division of the Ledger Bank Facilities Cash Book : two columns Cash Book : three columns cash discount Day Books : Sales Day Book Returns Day Books Petty Cash Book : Imprest System

3.

Adjustments Before Final Accounts Ch 15 Ch 16 Ch 17 Ch 18 Ch 20 Ch 21 Ch 22 Ch 23 Accruals and Prepayments Depreciation of Fixed Assets Bad Debts and Provision for Doubtful Debts Bank Reconciliation Statements Capital and Revenue Expenditure The Journal Errors in the Accounts Final Accounts and Adjustments further considered

4.

Miscellaneous Ch 24 Club and Society Accounts

LCCI First Level Revision Notes

Page 2 of 2

LCCI First Level Revision Notes


Ch. 1 The Accounting Equation A = L + OE Balance Sheet => at a moment in time Format of B/S Purchase Cash B/S at 20X3 200 700 Capital Loan Creditor 500 200 200 900

900 Ch. 2 Transaction Through Double Entry Dr A(+) L(-) OE(-) Cr A(-) L(+) OE(+) Bank May 1 Capital 5000

Ledger should include date, description and amount Ch. 3 Purchases and Sales Purchase : goods bought with the intention of selling them Purchase on credit A(+) Purchase John 100 Purchase on cash Purchase Cash 100 Sales for cash A(-) Sales Cash 420 Sales on credit Sales Tom 420 Purchase return (return outward) - Good returns to supplier Returns outward John 420 Tom (Debtor) Sales 420 Sales 420

John (Creditor) Purchase 100 Cash Purchase 100

Cash

John (Creditor) Return outward 420

LCCI First Level Revision Notes

Page 3 of 3

Sales return (return inward) Returns inward Tom 100 Ch. 4 Expenses : profit or loss Expense Cash Wage 100 Drawings - not reduce directly in capital account - drawing is different from expense Cash Drawing 100 Beg. Capital + Profit / Loss = End Capital Ch. 5 Balancing accounts : the Trial Balance Balance off the account Sales Cash 100

Tom (Debtor) Return inward 420

Wage

Drawing Cash 100

Bal b/d

L. Smith 300 Bank Bal. C/d 300 200

100 200 300

Nil balance => 2 sides equal, not enter in TB Trial balance => Total Dr = Total Cr Dr Balance Cash Asset Debtor Purchase Return inward Expense Drawing Cr Balance Capital Loan Creditor Sales Return outward Trial Balance of ABC at 31 May 20X3 Dr Cr Cash 1670 Capital 1670

Ch. 6 Trading and profit and loss accounts Net Profit = Sales COGS Expense Gross Profit COGS = Opening Stock + Purchase Closing Stock Trading and P/L account => part of double entry system, B/S is not

LCCI First Level Revision Notes *** Stock shown in T/B is beginning stock, NOT closing stock Balance off Trading and P/L Account Given : Purchase Sundries 3420 Rent Payable Sundries 500 Office Expense Sundries 240 Advertising Sundries 410 Step 1) Trading Account W Trent Trading and P/L Account for the year ended 31 Dec 20X7 Purchase 3420 Sales 4860 Gross Profit c/d 2640 Stock 1200 6060 6060 Gross Profit b/d 2640 Purchase Sundries 3420 P/L 3420 Stock P/L 1200 Step 2) P/L Account Rent Office Expense Lighting Advertising Net Profit Step 3) Capital Account Drawing Sundries 600 Capital 600 P/L Account 500 Gross Profit b/d 240 Rent Receivable 370 410 1420 2940 2640 300 P/L 4860 Sales Sundries 4860

Page 4 of 4

Sales Sundries 4860 Rent Receivable Sundries 300 Lighting Sundries 370

2940

Capital Drawing 600 Bal b/d Bal c/d 3820 Net Profit 4420 Bal b/d

3000 1420 4420 3820

Ch. 7 The balance sheet A, L, OE are closed off (not part of double entry system) => simply listed in B/S

LCCI First Level Revision Notes Fixed Asset - relatively long life in business e.g. 2 3 yr, primary purpose is not to resell - e.g. land, building, fixture, office equipment, machine, motor Current Asset - trading activity - e.g. stock, debtor, cash, bank Presentation sequence Fixed Asset Land and buildings Fixture and fitting Machinery Motor vehicle Long Term Liability - Payable > 1 yr Current Liability - e.g. Creditor, bank overdraft, short term bank loan Ch. 8 Final accounts : more features (*** IMPORTANT ***) Carriage => expense incurred in the delivery of good Carriage inward - purchase delivery - normally supplier make no separate charge, but has => paid more Net Purchase = Purchase + Carriage Inward Purchase Return Carriage outward - deliver to customer - charge as expense in P/L account Net Sales = Sales Return Inward Stock COGS = Opening Stock + Purchase + Carriage Inward Purchase Return Closing Stock *** Stock appeared in TB => opening stock Year End Procedure - Sales, purchase, expense, drawing => close - Capital, stock, cash, debtor, creditor, asset => b/d

Page 5 of 5

Current Asset Stock Debtor Bank Cash

LCCI First Level Revision Notes *** P/L Account and Balance Sheet

Page 6 of 6

W Trent Trading and P/L Account for the year ended 31 Dec 20X7 Beg. Stock 1200 Sales 9620 Purchase 6430 Less : return inward 310 Carriage inward 230 9310 6060 Less : return outward 180 6480 7680 Net purchase Less : closing stock 2300 COGS 5380 C/d Gross profit 3930 9310 9310 Rent payable 500 Gross profit b/d 3930 Office Expense 390 Rent receivable 300 Lighting 580 Advertisement 610 Carriage outward 270 Net profit 1880 4230 4230 W Trent B/S at 31 Dec 20X7 Capital 600 Bal b/d 3000 1300 Add : Net profit 1420 1900 Less : drawing 600 820 3820 1200 630 930 Liability 30 2790 Creditor 870 4690 4690

Fixed asset Furniture Motor Current asset Stock Debtor Bank Cash

LCCI First Level Revision Notes Ch. 9 The division of the ledger Division of Ledger Sales Ledger Purchase Ledger Cash Book General Ledger (Nominal Ledger) e.g. Return In / Out, Expense Type of account Debtors and creditors Account other than people

Page 7 of 7

Debtor Account Creditor Account Cash / Cheque Other Account

Personal Account Impersonal Account

Sub division of Impersonal Account Real Account Asset (motor, stock), Liability and Capital Nominal Account Income, expense *** Notes : Sales Ledger NOT equal Sales Account (Income Receivable) e.g. Purchase good by cheque Purchase good on credit Sales of good for cash Sales on credit Purchase of motor by cheque Payment by cheque to creditor Ch. 10 Bank facilities Current account by cheque Deposit account money paid Credit transfer enable a person to pay money into someone elses bank account Standing order regular payment Direct debit credit transfer in reverse Ch. 11 Cash book : two columns Cash book combine cash and bank account Dr Date Account Cash CASH BOOK Bank Date Cr Account Cash Bank Dr Purchase (G/L) Purchase (G/L) Cash (Cash book) Cust. (Sales ledger) Motor (G/L) Supplier (Pur. Ledger) Cr Bank (Cash book) Supplier (Pur ledger) Sales (G/L) Sales (G/L) Bank (Cash book) Bank (Cash book)

Cash Bank Contra : double entry is completed within the cash book e.g. Jul 1 Bal b/d Cash 145, Bank 860 Jul 3 Paid by cheque 134 Jun 17 Banked cash 140

LCCI First Level Revision Notes Dr Date Jul 1 Jul 17 C - Contra Bank overdraft - A credit balance on bank account - In B/S => current liability Ch. 12 Cash book : three columns cash discount Discount allowed - discount for debtor for prompt payment - expense (G/L) => OE(-) Cash Tom 95 Discount received - An income (G/L) => OE(+) Cash Tom 95 Tom Cash 95 Dist Rec 5 Tom Cash 95 Dist All. 5 Dist All. Tom 5 Account Bal b/d Cash C Cash 145 CASH BOOK Bank Date 860 Jul 3 140 Jul 17 Cr Account Insurance Bank C Cash 140

Page 8 of 8

Bank 134

Dist Recv. Tom 5

- To go through G/L is inconvenient, collect discount allowed, received in cash book and transfer periodically total to discount account - Discount column is a temp storage, not part of double entry system - immediate post from cash book to personal account, monthly posting from discount account to G/L - Discount account => as sundries Dr Account A Smith Dist All 5 Cash 95 CASH BOOK Bank Account L Turn Cr Dist recv Cash 10

Bank 190

- Discount column => not bal., total transfer to G/L as sundries Ch. 13 Day books : sales day book Cash sales Dr Cash / Bank (in cash book) Cr Sales (in G/L) Credit sales record in sales day book Invoice => source document

LCCI First Level Revision Notes Sales invoice (src doc.)

Page 9 of 9

Sales Day Book (Book of prime entry) Promptly Sales Ledger (Dr Debtors) SALES DAY BOOK May 3 E Lyon 656 May 4 John 418 1074 SALES LEDGER E Lyon Sales 656 John Sales 418 Cash purchase Dr Purchase (in G/L) Cr Cash / Bank (in cash book) Credit purchase Purchase day book Purchase invoice (src doc.) Monthly transfer G/L (Cr Sales Account) G/L Sales Sundries 1074

Purchase Day Book (Book of prime entry) Monthly transfer G/L (Dr Purchase) PURCHASE DAY BOOK May 3 E Lyon 656 May 4 John 418 1074 PURCHASE LEDGER E Lyon Purchase 656 John Purchase 418 Promptly Purchase Ledger (Cr Creditors) G/L Purchase Sundries 1074

LCCI First Level Revision Notes Ch. 14 Returns day books Return inward day book - return inward journal / sales returns book - issue credit note to debtor Credit note issued

Page 10 of 10

Return inwards Day Book Monthly transfer G/L (Dr Return inwards) RETURN INWARDS DAY BOOK May 3 E Lyon 656 May 4 John 418 1074 SALES LEDGER E Lyon Return in 656 John Return in 418 Return outwards day book - return outward journal / purchase return book - credit notes received from creditors Credit note received Promptly Sales Ledger (Cr Debtors) G/L Return inwards Sundries 1074

Return outwards Day Book Promptly Purchase Ledger (Dr Creditor) RETURN OUTWARDS DAY BOOK May 3 E Lyon 656 May 4 John 418 1074 PURCASE LEDGER E Lyon Return out 656 Monthly transfer G/L (Cr Return outwards) G/L Return outwards Sundries 1074

LCCI First Level Revision Notes John Return out 418 Ch. 15 Accruals and prepayment Accrual expense - unpaid expense - e.g. Given that rent = 1000 per quarter, payment is made as follows: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 1000 1000 Total rent = 4 x 1000 = 4000 Year 4 1000 1000

Page 11 of 11

Rent Bank 1000 P/L 4000 Bank 1000 Bank 1000 Bal c/d 1000 4000 4000 Bal b/d 1000

Liability

Prepaid expense - payment in advance - e.g. Given insurance fee = 440, 120 paid in advance Year 4 Insurance Bank 560 P/L 440 Bal c/d 120 560 560 Bal b/d 120

Current Asset

Accrual and prepayment in P/L and B/S - Given lighting accrued 70, advertisement prepaid 110 P/L : Lighting + 70, Advertisement 110 B/S : Under current asset : prepayment : 110 Under current liability : accrual : 70 Stock, Debtor, Prepaid, Cash Creditor, Accrued Other forms of prepayment - Stock purchased for use in business, e.g. office supplies - diff from normal stock Office Supplies Sundries 3700 P/L 2900 Bal c/d 800 3700 3700 Bal b/d 800 Bal. fig.

Purchase

Closing stock

LCCI First Level Revision Notes Income accrual - rent receivable, commission receivable - income not receive should be charged at P/L - current asset (debtor) in B/S - e.g. Given 300 per quarter, 300 not received Rent Receivable P/L 1200 Bank Bank Bank Bal c/d 1200 Bal b/d 300 Income prepayment - income received in advance - current liability in B/S - e.g. 4 x 100 for Year 3, 100 prepaid for Year 4 Rent Receivable P/L 400 Bank Bal. C/d 100 Bank Bank Bank Bank 500 Bal b/d Ch. 16 Depreciation of fixed assets The need for depreciation - Fixed asset : long life in business => value will fall each year - If no account for fall in value, value in fixed asset and profit will be overstated 100 100 100 100 100 500 100 300 300 300 300 1200

Page 12 of 12

Depreciation : the estimate of the fall in value of fixed asset over a period of time

Straight line method (fixed instalment method) Annual depreciation charge = (Orig. cost disposal value) / Number of year = depreciation % x (Orig. cost disposal value) Net Book Value (NBV) = Cost Accumulated Depreciation (A.D.)

e.g. 4 year = 25% annually Reducing balance method (diminishing balance method) - much bigger amounts are provided in earlier years e.g. Given orig. cost = 20000, dep. 40% annually

LCCI First Level Revision Notes Cost Year 1 dep. (40%) Year 2 dep. (40% of 12000) Year 3 dep. (40% of 7200) Year 4 dep. (40% of 4320) 20000 8000 12000 4800 7200 2880 4320 1728 2592

Page 13 of 13

Book keeping entries for depreciation - fixed asset at cost price, w/o any adjustment and a separate provision for depreciation account, which accumulate year by year amount of depreciation - e.g. straight line, 9375 p.a.., the fixed asset account will b/d each year Year 1 Bal c/d Year 2 Bal c/d Provision for depreciation (straight line) Year 1 9375 31 Dec P/L 9375 Year 2 18750 Bal b/d 31 Dec P/L 18750 Year 3 28125 Bal b/d 31 Dec P/L 28125 Year 4 Bal b/d 31 Dec P/L

9375 9375 9375 9375 18750 18750 9375 28125 28125 9375

Year 3 Bal c/d

Year 4

Provision for depreciation (Reducing bal) Year 1 Year 1 Bal c/d 8000 31 Dec P/L 8000 8000 8000 Year 2 Year 2 Bal c/d 12800 Bal b/d 8000 31 Dec P/L 4800 12800 12800 Year 3 Year 3 Bal c/d 15680 Bal b/d 12800 31 Dec P/L 2880 15680 15680 Year 4 Year 4 Bal b/d 15680 31 Dec P/L 1728

LCCI First Level Revision Notes Depreciation and final accounts - P/L => depreciation charge as expense - B/S => shown NBV Fixed asset: Motor car: Cost 12000 Provision for dep. 2400 NBV 9600 Sale of fixed assets Step 1) Orig. cost of asset Dr Disposal account Cr Fixed asset Step 2) Depreciation Dr Provision for depreciation Cr Disposal account Step 3) Sales proceed Dr Bank / Cash Cr Disposal account Step 4) Loss on sales Profit on sales Dr P/L account Dr Disposal account Cr Disposal account Cr P/L account e.g. Vehicle sales on Year 3 Vehicle Bal b/d 40000 Disposal 40000

Page 14 of 14

Provision for dep. Disposal 28125 Bal b/d 18750 P/L 9375 28125 28125

Disposal Vehicle 40000 Pro. For dep. 28125 P/L profit 1625 Bank 13500 41625 41625 Ch. 17 Bad debts and provision for doubtful debts Bad debts - debtor not pay their account => write off - Step 1) Dr Bad debt Cr Debtor Step 2) Dr P/L account Cr Bad debt Provision for doubtful debts Gross debtor Less bad debt write off Less pro. for doubtful debt at 4% Net debtor

18620 620 18000 720 17280

P/L account Year 6 Pro. for bad Debt 720 Provision for doubtful debt P/L 720

LCCI First Level Revision Notes Given : At Year 7, 20000 x 4% = 800 to be charged Increase in provision = 800 720 = 80 P/L account Year 7 Pro. for bad Debt 80

Page 15 of 15

Provision for doubtful debt Bal c/d 800 Bal b/d 720 P/L 80 800 800 Bal b/d 800

Given : At Year 8, 19000 x 3% = 570 to be charged Decrease in provision = 800 570 = 230 P/L account Year 8 Reduce in Prov Provision for doubtful debt P/L 230 Bal b/d 800 Bal c/d 570 800 800 Bal b/d 570

230

- specific provision : specific debtor general provision : estimated % of debtor - B/S representation, bad debt written off is not shown Debtor 18000 Less pro. for bad debt 912 17088 Bad debts recovered Case 1) Recovered within the same financial year as debt was written off Dr Debtor Cr Bad Debt Dr Cash / Bank Cr Debtor Case 2) Recovered after the year of write off Dr Debtor Cr Bad Debt Recovered Dr Cash / Bank Cr Debtor Transfer to P/L : Dr Bad Debt Recovered Cr P/L Account Ch. 18 Bank reconciliation statements Bad debts - debtor not pay their account => write off

Ch. 19 Petty cash book : imprest system - Cash book may be crowded => petty cash book deal with small payment - At certain period, post to cash book, expense acct. in G/L The imprest system

LCCI First Level Revision Notes - Initially set up the float say 100, spend 83, and then reimburse 83 back to float. - Set up the float: Dr petty cash book 100 Cr cash book 100 - Reimburse: Dr petty cash book 83 Cr cash book 83 PETTY CASH BOOK Detail V. No Total Bank 1 Postage 2 5.6 John 3 10 15.6 Bal c/d 84.4 100 Bal b/d Bank

Page 16 of 16

Receipt 100

Date May 1 May 3 May 5 May 31

Postage 5.6 5.6

Ledger

10 10

100 84.4 15.6

Jun 1 Jun 1

Dr Total is posted to cash book, G/L Ch. 20 Capital and revenue expenditure Capital expenditure Expected to provide benefit over a period longer than acct. period 1. Purchase of fixed asset that add value to existing fixed asset 2. Extending factory premises 3. Adding fitment to machine that it becomes more productive Increase fixed asset in B/S => NOT in P/L

Cr

Defn. e.g.

Final Account

Revenue expenditure Short lived, benefit is within the acct. year 1. Buy good to sell 2. Buy raw material 3. Office expense 4. Maintaining fixed asset (not add value) Charge to P/L

Ch. 21 The journal Journal (General journal) - a diary in which the detail of transactions was kept - all day books were part of the journal - any transaction not included in the cash, sales, purchase and return day book is noted in journal - Journal is not part of the double entry, it just supporting the double entry system Main use of journal - purchase and sale of fixed asset on credit - correction of error - opening entry - other transfer (e.g. bad debt write off, depreciation)

LCCI First Level Revision Notes

Page 17 of 17

Layout of journal John : Journal Year 4 Dr Mar 15 Motor 8600 Tom Purchase of motor

Cr 8600

Other transfer - transfer to P/L - accrual and prepayment - provision for depreciation - bad debt write off - create / adjust provision for doubtful debt - adjusting for owners drawings Ch. 22 Errors in the accounts 1. Error not discovered in trial balance Error of omission Cause Transaction completely omitted e.g. A purchase of furniture is not record Adjusting Furniture 215 journal XYZ 215 Error of commission Cause Transaction entered in a wrong account e.g. Sales on credit to T Fred entered as D Fred Adjusting T Fred 215 journal D Fred 215 Reversal of entries Cause Record on wrong side of Dr, Cr e.g. Purchase of 360 is entered as Dr Cash, Cr Purchase Adjusting Purchase 720 journal Cash 720 Error of principle Cause Transaction is entered in the wrong class of account e.g. Payment for 315 to repair the motor is entered as motor account (Should be revenue expenditure) Adjusting Motor repair 315 journal Motor 315 Error of original entry Cause Wrong amount e.g. Sales of good of 87 is incorrectly entered as 78

LCCI First Level Revision Notes Adjusting F Sharp 9 journal Sales 9 Compensating error Cause Error cancel out each other e.g. Telephone and sales is overstated by 10 Adjusting Sales 10 journal Telephone 10 Error of duplication Cause Transaction is entered in the book twice 2. Error affecting trial balance - incorrect posting on one side - error in addition - wrong b/d journalize the adjustment 3. Effects of error on profit and B/S Purchase undercast => Gross profit overstated => Capital overstated Closing stock overvalued => Gross profit overstated => Capital overstated Expense overstated => Net profit understated => Capital understated

Page 18 of 18

Ch. 23 Final accounts and adjustments further considered (*** IMPORTANT ***) 1. Drawings Owners drawing Dr drawing Cr cash/bank Drawing in terms of goods Dr drawing Cr purchase Rent for private use Dr drawing Cr rent 2. Final adjustment - Change in P/L should have corresponding change in B/S Accrual and Prepayment e.g. Wage accrued 1320 and rate prepaid 160 P/L Wage + 1320, rate 160 B/S Current liability 1320, current asset 160

LCCI First Level Revision Notes Depreciation e.g. Given in T/B, provision for depreciation of motor is 3000, and is increased by 1500 P/L Charge 1500 as depreciation expense B/S Accumulated depreciation becomes 3000 + 1500 = 4000 Provision for doubtful debt e.g. Given in T/B, provision for doubtful debt is 200, and is increased by 40 P/L Charge 40 as expense (provision for doubtful debt) B/S Current asset less : provision for doubtful debt 240 Drawing e.g. Drawing in terms of goods P/L Deduct purchase B/S Increase drawing => decrease capital Capital and revenue expenditure e.g. 2500 purchase and 3800 of wage is in fact capital expenditure P/L Purchase 2500 and wage 3800 B/S Fixed asset + 6300 3. Closing stock valuation Stock is valued at the lower of : cost price or net realization value (NRV) NRV = selling price - cost of getting the good into a saleable condition e.g. Item 1 cost 210 and is damaged, repair cost = 55, selling price = 220 Cost = 210 NRV = 220 55 = 165 value as 165 4. Sample P/L and B/S

Page 19 of 19

Ch. 24 Club and society accounts Receipts and payment account Receipts Payment Bal at bank, Purchase of sport 1 Jan Yr 6 430 Stationery Subscription rec. 6 Dec 2860 7 Dec 320 Bal at bank, 3180 31 Dec Yr 6 3610 Asset = accumulated fund + liabilities Business organization Trading account Non profit making organization Refreshment account

1500 1520 9375

590 3610

LCCI First Level Revision Notes P/L account Profit Loss Capital Income and expenditure account Surplus of income over expenditure Deficit / excess of expenditure over income Accumulated fund

Page 20 of 20

Social Club Income and expenditure account for the year ended 31 Dec Yr 5 Expenditure Income Rent payable 3400 Subscriptions 6320 Insurance 380 Less rec in advance 320 Telephone 370 6000 General expense 280 add accrued due 240 Depreciation: 6240 Equipment 800 Rent receivable 540 Motor 1200 2000 Surplus of income Over expenditure 350 6780 6780 B/S at 31 Dec Yr 5 Fixed asset Book Agg Net Income value Subscriptions Rent payable 3400 Less rec in advance Insurance 380 Telephone 370 add accrued due General expense 280 Depreciation: Rent receivable Equipment 800 Motor 1200 2000 Surplus of income Over expenditure 350 6780

6320 320 6000 240 6240 540

6780