Accountancy: From Trial Balance to Interpretation
Accountancy in CS13 tests whether you can move fluently between records, statements and interpretation. Master the accounting equation and double entry first, then the adjusting entries that examiners love: accruals, prepayments, depreciation, allowances for receivables, and closing inventory. Know the structure of the statement of profit or loss and the statement of financial position, and be able to correct errors through suspense accounts and journal entries.
A recurring trap is confusing capital and revenue expenditure, or treating a prepayment as an expense. Another is the treatment of drawings, which reduce capital rather than being an expense. Questions on partnership admission, retirement and dissolution test goodwill and revaluation; company questions test share issues, dividends and reserves. Ratio analysis questions expect you to compute and then interpret, not merely calculate.
Worked example: prepayment adjustment
A firm pays Ksh 96,000 for 12 months' rent on 1 October, and the year ends 31 December. Only three months relate to the current year: 96,000 x 3/12 = Ksh 24,000 is an expense; Ksh 72,000 is a prepayment shown as a current asset. Rule of thumb: decide the period covered by the payment, then allocate by time.
Always show workings, state assumptions, and check that debits equal credits before finalising any answer.