CARA'S TIPSMeaning, history, functions and users of book-keeping; assets, liabilities, transactions; accounting concepts
WAECNECO
What the syllabus asks
WAEC: (1) meaning, history, nature, importance and functions; career opportunities and beneficiaries; (2) assets and liabilities: definition, differences, classification and examples; (3) business transactions: meaning, types and parties (buyers, sellers, consumers); (4) debtors and creditors: definition, identification and differences. Also topic 9, Concepts and Conventions: meaning and types.…
NECO: (1) meaning, history, nature, importance and functions; career opportunities and beneficiaries; (2) assets and liabilities: definition, differences, classification and examples; (3) business transactions: meaning, types and parties (buyers, sellers, consumers); (4) debtors and creditors: definition, identification and differences. Also topic 9, Concepts and Conventions: meaning and types.…
What you will learn
- Define book-keeping and distinguish it from accounting.
- Outline the history of book-keeping, including Pacioli and Nigerian developments.
- Explain the nature, functions and importance of book-keeping.
- Identify careers and users of book-keeping records.
- Define, classify and give examples of assets and liabilities.
- Explain types of business transactions and the parties involved.
- Distinguish debtors from creditors.
- Explain accounting concepts and conventions with book-keeping examples.
Key points
- Book-keeping records and classifies; accounting summarises, interprets and reports.
- Double entry spread from Venice after Pacioli’s Summa of 1494.
- Functions: record, classify, summarise, preserve, safeguard.
- Users: owners, managers, banks, creditors, government, employees, buyers, customers.
- Fixed assets are held for use; current assets turn into cash within a year.
- Liabilities are long-term or current; capital is the owner’s claim.
- Assets = Capital + Liabilities after every transaction.
- Debtors owe the business; creditors are owed by it.
- Concepts: entity, money measurement, going concern, duality, periodicity, accruals, realisation, historical cost.
- Conventions: prudence, consistency, materiality, disclosure.
Start here: Meaning of book-keeping and how it differs from accounting
Every evening, Mrs Halima Garba closes her provisions shop in Sabon Gari Market, Kano, and writes in a long exercise book: what she sold for cash, which customers took goods and promised to pay on Friday, what she paid the motor-boy who brought cartons from the depot, and how much she carried home. Without knowing the word, Mrs Garba is doing book-keeping.
Book-keeping is the systematic recording of the financial transactions of a business in a set of books (or a computer system), in such a way that the records are complete, accurate, classified and easy to check. Three words in that definition earn marks:
- Systematic: entries follow fixed rules and a fixed order (date, details, amount) so that anyone trained can read them.
- Financial transactions: only events that can be measured in money are recorded. A quarrel with a neighbour is not recorded; the ₦12,000 paid to repair the shop door after the quarrel is.
- Classified: like items are grouped. All rent payments go to a Rent account; all amounts owed by Alhaji Danjuma go to Danjuma’s account.
Book-keeping and accounting are not the same
WAEC often asks candidates to “distinguish” the two. Accounting starts where book-keeping stops: it summarises the records into financial statements, analyses and interprets them, and communicates the results to people who make decisions. A useful rule: the book-keeper records what happened; the accountant explains what it means.
| Point of difference | Book-keeping | Accounting |
|---|---|---|
| Scope | Recording and classifying transactions | Recording plus summarising, analysing, interpreting and reporting |
| Nature of work | Routine and clerical | Analytical; needs judgement |
| End product | Balanced accounts and a trial balance | Final accounts, reports, advice |
| Who does it | Book-keeper, accounts clerk, cashier | Accountant, auditor, tax consultant |
| Stage | Comes first | Depends on book-keeping |
| Training | Secondary or certificate level | Professional (e.g. ICAN, ANAN) or degree |
Book-keeping is therefore the foundation: an accountant who receives careless records will produce misleading statements. That is why WAEC treats Book-keeping as a separate subject from Financial Accounting: it trains the recording skills on which all later accounting rests.
State which of these events Mrs Garba should record: (a) sold 3 cartons of tinned tomato for ₦27,000 cash; (b) a customer praised her prices; (c) bought a padlock for ₦4,500; (d) heard that sugar prices will rise next month.
Solution. Record (a) and (c): both are financial transactions that have happened and can be measured in money. (b) cannot be measured in money; (d) has not yet happened.
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Practice questions
- the systematic recording of business transactions in books of account
- the auditing of company accounts
- the preparation of tax laws
- the management of staff
Show answer
A: the systematic recording of business transactions in books of account
Recording is the core of book-keeping.
- Adam Smith
- Isaac Newton
- Herbert Macaulay
- Luca Pacioli
Show answer
D: Luca Pacioli
Pacioli described double entry in 1494.
- 1394
- 1965
- 1494
- 1594
Show answer
C: 1494
Printed in Venice, 1494.
- 1494
- 1965
- 1960
- 1993
Show answer
B: 1965
Act No. 15 of 1965.
- ₦1,150,000
- ₦2,250,000
- ₦550,000
- ₦1,700,000
Show answer
A: ₦1,150,000
Capital = assets − liabilities.
Key words
- Book-keeping
- Systematic recording of financial transactions.
- Accounting
- Recording plus summarising, interpreting and reporting.
- Asset
- Resource owned or controlled, giving future benefit.
- Fixed asset
- Asset held for use for more than a year.
- Current asset
- Cash or item turning into cash within a year.
- Liability
- Amount owed by the business to outsiders.
- Capital
- Owner’s investment plus retained profit less drawings.
- Debtor
- Person who owes the business money.
- Creditor
- Person to whom the business owes money.
- Transaction
- Money-measurable event changing the financial position.
- Consumer
- Final user who buys for personal use.
- Drawings
- Value taken from the business by the owner for private use.
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