1. Expenditure

It refers to the total amount of money that a government or a person spends.

It refers to payment of cash or cash-equivalent for goods or services or a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher or other such document.

  1. Revenue

Is the amount of money that a company actually receives during a specific period including discounts and deductions for returned merchandise.

  1. Provision for depreciation and adjustment

Depreciation is usually recorded at the end of the accounting period.

Adjusting entries assure both the balance sheet and the income statement are up-to- date accrual basis of accounting.

 

Importance of estimates and budgets as tools in financial management Control of funds

  • Government accounting system

Is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about government in aggregate and detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities.

  • Business accounting system

Is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about a business in aggregate and detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities.

  • NGO’s accounting system

It is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about an NGO in aggregate and detail reflecting transactions and other economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities.

Books of accounts

It refers to records or books in which all financial information (transactions) of a business or an entity is recorded and maintained

  • Savings account

Are accounts maintained by retail financial institutions that pay interest but cannot be used directly as money in the narrow sense of a medium exchange

  • Current account

It is a type of deposit account that caters to professionals and businessmen alike.

  • Fixed account

It is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account until the given maturity date

  • Cash account

It is an account in which all transactions are in money.

  • Petty account

It is the money kept available within business to make change for customers or pay for customer or pay for small purchases that need to be paid with cash.

Double entry book-keeping

It is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to different account.

For instance recording earning of Ksh 10,000 would require making two entries: a debit entry of Ksh 10,000 to an account called “cash” and a credit entry to an account called “Revenue”.

The rule to remember is “debit the receiver and credit the giver”. For every transaction the value of debit must = the value of credits.

The extended accounting equation must balance:

‘ A + E = L + OE + R’

A- Asset

E- Expenses

L- Liabilities

OE- owner’s equity

R- Revenue

  • Expenses are always on the debits
  • Revenues are always on credits
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