Bookkeeping and Financial Records
The double-entry foundation
Every transaction affects at least two accounts, and the accounting equation - assets = liabilities + capital - must always balance. Learn the debit and credit rules by account type: assets and expenses increase with debits; liabilities, capital, and income increase with credits. A candidate should be able to post simple transactions, balance a cash book, and explain the purpose of the trial balance (to check arithmetic equality, not to prove accuracy).
Books and controls
Know the books of original entry (sales day book, purchases day book, cash book, petty cash book, general journal) and the ledgers to which they are posted. Understand petty cash on the imprest system: a fixed float is restored periodically by the amount spent, supported by vouchers. Understand bank reconciliation: differences arise from unpresented cheques, deposits not yet credited, bank charges, and errors - not from the balance being "wrong".
Traps to watch
- Thinking a balanced trial balance proves there are no errors - compensating errors, errors of principle, and complete omissions still balance.
- Confusing debtors (customers who owe you) with creditors (suppliers you owe).
- Posting a cash sale to the sales day book on credit terms.
- Forgetting that drawings reduce capital.
- Recording a bank loan repayment entirely as an expense rather than splitting capital and interest.
Worked example
Petty cash float is 100. Vouchers total 63. Cash counted is 35. The custodian is 2 short. Restore the float by drawing 65 (63 vouchers plus 2 shortage), recording the shortage as a separate expense rather than hiding it in the vouchers.
Rule of thumb
Before posting, ask: which two accounts, which direction, and what evidence supports it?