In-Depth Notes on Principles of
Accounts Syllabus
SECTION 1 – INTRODUCTION TO PRINCIPLES OF ACCOUNTS
Definition and Purpose: Accounting is the systematic process of identifying, measuring,
recording, classifying, summarizing, and interpreting financial transactions. Its goal is to
provide useful financial information to stakeholders for economic decision-making.
Functions of Accounting: Recording transactions, classifying data, summarizing into
financial statements, and interpreting results.
Branches: Financial Accounting, Cost Accounting, Management Accounting, Tax Accounting.
Accounting Cycle: Transaction → Journal → Ledger → Trial Balance → Adjustments →
Financial Statements → Closing entries.
Users: Internal (managers, owners), External (creditors, investors, government).
Principles: Accrual, Going Concern, Consistency, Materiality, Prudence, Business Entity.
SECTION 2 – THE CLASSIFIED BALANCE SHEET
Purpose: Shows financial condition at a specific date.
Format: Vertical or Horizontal.
Classifications: Assets (Current and Non-current), Liabilities (Current and Non-current),
Capital/Equity.
Accounting Equation: Assets = Liabilities + Owner’s Equity.
SECTION 3 – BOOKS OF ORIGINAL ENTRY
Purpose: First record of business transactions.
Types: Sales Journal, Purchases Journal, Returns Inwards, Returns Outwards, Cash Book,
Petty Cash Book, General Journal.
Petty Cash: Uses imprest system.
SECTION 4 – LEDGERS AND THE TRIAL BALANCE
Ledgers: Sales, Purchases, General.
Double Entry: Every transaction affects two accounts.
Trial Balance: Ensures arithmetical accuracy.
Limitations: Cannot detect all types of errors.
SECTION 5 – FINANCIAL STATEMENTS OF THE SOLE TRADER
Trading Account: Calculates Gross Profit.
Profit and Loss: Calculates Net Profit.
Balance Sheet: Shows assets, liabilities, capital.
Analysis: Profitability, Liquidity Ratios, ROCE.
SECTION 6 – END OF PERIOD ADJUSTMENTS
Types: Accrued/Prepaid Expenses, Accrued/Unearned Income, Depreciation, Doubtful
Debts, Inventory Adjustments.
SECTION 7 – CONTROL SYSTEMS
Purpose: Detect errors and fraud.
Control Accounts: Sales and Purchases Ledger Control.
Bank Reconciliation: Resolves discrepancies.
Petty Cash: Operates under imprest system.
SECTION 8 – INCOMPLETE RECORDS
Causes: Missing or partial records.
Techniques: Statement of Affairs, Mark-up/Margin, Capital Comparison.
SECTION 9 – ACCOUNTING FOR PARTNERSHIPS
Features: Shared ownership, unlimited liability.
Accounts: Capital, Current, Appropriation.
Changes: Admission, retirement, goodwill adjustments.
SECTION 10 – ACCOUNTING FOR CORPORATIONS
Features: Legal entity, limited liability.
Key Concepts: Share capital, dividends, reserves, corporation tax.
Statements: Income, retained earnings, balance sheet.
SECTION 11 – ACCOUNTING FOR CO-OPERATIVE SOCIETIES
Features: Democratic control, profit distribution based on use.
Accounts: Sales, surplus distribution, member shares.
SECTION 12 – NON-PROFIT ORGANIZATIONS
Examples: Clubs, charities.
Accounts: Receipts/Payments, Income/Expenditure, Balance Sheet.
Special Items: Subscriptions, donations, special funds.
SECTION 13 – MANUFACTURING ACCOUNTS
Purpose: Calculate cost of goods manufactured.
Components: Raw materials, Prime Cost, Overheads, COGM.
SECTION 14 – PAYROLL ACCOUNTING
Components: Gross Pay, Deductions, Net Pay.
Employer Duties: Accurate records, tax remittance.
Payroll Entries: Record wages, deductions, contributions.
