SOME OF BASIC TERMINOLOGIES IN BOOK KEEPING

BOOK-KEEPING TERMS IMPORTANT DEFINITION 6/20/2014 user SAELOUM HILAAL

IMPORTANT BOOK-KEEPING NOTES.

1.   CREDITORS: Are the people or institutions that extend credit in another persons or business organization.

2.   BUSINESS ENTITY CONCEPT: It states that the business is a separate entity from the owner of that business.

3.   TRADING ACCOUNT: It is an account opened for the purpose of calculating/computing either gross profit or gross loss of the business organization at the end of accounting period.

4.   DEPRECIATION: Is the gradual decrease in the value of an asset from any cause over a time of its use. Depreciation can be caused by tear and wear, obsolescence, and exhaustion.

5.   ACCRUAL CONCEPT: This refers to cost incurred or revenue earned but not yet paid or received at the end of accounting period/year.

6.   NUGATORY EXPENDITURE: This refers to payments out of public funds but for which no benefits had been received by the government.

7.   VIREMENT: This refers to a n authority granted by one minister to another on access of funds when the former is replaced by the latter.

8.   COLLECTOR OF REVENUE: This is an officer who has been appointed by the receiver of the revenue to perform collecting and accounting function on behalf of his respective appointing authority.

9.   CIVIL CONTIGENCY FUND: It is the fund especially established for the purpose of meeting government expenditure on which the accounting officer was unable to foresee before in his annual estimated expenditure.

1     PAYMASTER GENERAL: It is the fund especially established for the purpose of meeting government expenditure on which the accounting officer was unable to foresee before in his annual estimated expenditure.

11.                FIVE ERRORS WHICH DO NOT AFFECT TRIAL BALANCE ARE AS SHOWN BELOW:

·         Errors of commission

·         Errors of principle

·         Errors of omission

·         Errors of compensation

·         Errors of complete reversal

12.                AUDITING OF OBJECTIVES:

·         Defection of errors

·         Prevention of errors

·         To examine the financial statements of the business so as to form an opinion as to whether or not they show a true and fair view of financial position of the business.

·         Reporting on the strengthen or/and the weaknesses of the internal control system of the firm

·         Prevention of frauds.

NB: (FRAUD)

     This is intentional misrepresentation or alteration of accounting records regarding sales, revenues, expenses and other factors for profit motive such as inflating company, stock, values obtaining more favorable financing or avoiding debt obligation.

13.                PREPAID INCOME: This refers to the income which has been received but not yet earned by the end of accounting period. Income like this is shown as liabilities in the balance sheet.

14.                ACCOUNT SALES: It is the statement prepared by the consignee and forwarded to the consignor that shows the value of sales expenses incurred by him, his commission and the net proceeds due to the consignor.

15.                ERROR OF COMPLETE REVERSAL OF ENTRY: This is a kind of error in which a transaction is recorded to the wrong side of the account.

16.                CAPITAL EXPENDITURE: Is an expenditure on buying fixed assets or adding value to them. It is also referred as an expenditure which do not arise out of normal running activities of the business.

17.                AUDITING: This is the process of independently examining financial statements, books of accounts and records of enterprise by an auditor in order to check whether or not financial statements are prepared according to the General Accepted Accounting Principles (G.A.A.P) and that they show a fair and true and true view of states of affairs of the business. Audit has got many types but among of them are as explained below:

·         PROCEDURAL AUDIT: It is the examination and review of the internal procedures used to process and record transactions of an organization.

·         MANAGEMENT AUDIT: It is kind of audit conducted to investigate the management aspect of a business.

·         STANDARD AUDIT: It is a type of audit conducted to ascertain whether the clients accounting systems complies with the requirement of standards set by the professional bodies.

·         BALANCE SHEET AUDIT: It refers to an auditors verification of the value of assets, liabilities, the balance of reserves and provisions and the amount of profit earned or loss incurred by a firm during a financial year.

·         VOUCHING AUDIT: It refers to the kind of audit whereby the auditor checks each and every transaction right from the origin in the books of price entry till they are posted.

·         FINAL COMPLETED AUDIT: It is the kind of audit carried out at the end of the financial period after all the books of accounts have been balanced and a financial statement has been prepared.

18.                BUDGETING: Generally refers to listing of all planned expenses and revenues. It is a process of planning for saving and spending.

19.                BILL OF EXCHANGE: It is unconditional order in writing, signed and addressed by one person (Drawer) to another (Drawee), requiring the Drawee to pay on demand, or at determinable or fixed future date, a specified sum of money to the third person (Payee).

20.                PUBLIC DEBT: This is a debt owed by any level of government either central, municipal or local government as a result of the government borrowing from either internal or external sources.

21.                THE IMPREST SYSTEM: It is an arrangement whereby at the beginning of the accounting period, a petty cashier is supplied with a fixed amount of money known as cash float which he uses to meet the petty expenditure for a given period –such as week or month.

22.                INTERNAL CONTROL: This is the whole system of controls, financially and otherwise, established by the government in order to carry on a business of an enterprise in an orderly and efficient manner.

23.                AUDIT PROGRAMME: It is a detailed plan of the auditing work to be performed, specifying the procedures to be followed in verification of each item in the financial statement and giving the estimated time required

24.                AUDITOR’S OPINION: It is an auditor’s view on whether or not financial statements and books of accounts audited show true financial position of an organization.

25.                AN AMBIT TO VOTE: Is the total amount of expenditure vote approved for the year to which accounting officers’ annual expenditure must be limited.

26.                C & AG: This stands for “Controller and Auditor General”. This is an officer in the public services who is appointed by the president of the United Republic and charged with the duties and power of controlling payments from the consolidated fund on behalf of national assembly. Controller and

Auditor General has the following functions:

·         Examination into the accounts of all accounting officers and receivers of revenue.

·         Examiner of other people entrusted with the revenue collection, receipts, custody, issue or payments of public money.

·         Controller of payments from consolidated funds on behalf of the national assembly.

PREPARED BY:

                             KIM SAELOUMS SIRLIIM.