Record To Report

1. Golden Rules of Accounting

The golden rules of accounting are the foundational principles used to record financial transactions.

They are categorized into three types of accounts:

1. Personal Accounts: Debit the receiver, credit the giver.

2. Real Accounts: Debit what comes in, credit what goes out.
3. Nominal Accounts: Debit all expenses and losses, credit all incomes and gains.

2. Accounting Equation

The accounting equation is the foundation of double-entry bookkeeping.

It represents the relationship between a company's assets, liabilities, and equity:

Assets = Liabilities + Equity

3. Accruals

Accruals are expenses and revenues that have been incurred or earned but not yet recorded in the accounts.

Journal Entries for Accruals:

 Accrued Expense:
o Debit: Expense Account
o Credit: Accrued Expenses Liability
 Accrued Income:
o Debit: Accrued Income Asset
o Credit: Income Account

4. Accrued Expenses

Accrued expenses are expenses that have been incurred but not yet paid.

Journal Entries for Accrued Expenses:

 Debit: Expense Account

 Credit: Accrued Expenses Liability
5. Accrued Income

Accrued income is income that has been earned but not yet received.

Journal Entries for Accrued Income:

 Debit: Accrued Income Asset

 Credit: Income Account

6. Prepaid Expenses

Prepaid expenses are payments made in advance for expenses that will be incurred in future periods.

Journal Entries for Prepaid Expenses:

 At the time of payment:

o Debit: Prepaid Expense Account
o Credit: Cash/Bank Account
 When the expense is incurred:
o Debit: Expense Account
o Credit: Prepaid Expense Account

7. Outstanding Expenses

Outstanding expenses are expenses that have been incurred but not yet paid by the end of the accounting period.

Journal Entries for Outstanding Expenses:

 Debit: Expense Account

 Credit: Outstanding Expenses Liability

8. Amortization

Amortization is the process of gradually writing off the cost of an intangible asset over its useful life.

Journal Entries for Amortization:

 Debit: Amortization Expense Account

 Credit: Accumulated Amortization Account
9. Depreciation

Depreciation is the process of allocating the cost of a tangible asset over its useful life.

Journal Entries for Depreciation:

 Debit: Depreciation Expense Account

 Credit: Accumulated Depreciation Account

10. Provision

A provision is an amount set aside from profits to cover a future liability or loss that is uncertain in amount but can be
estimated.

Journal Entries for Provision:

 When the provision is made:

o Debit: Expense Account
o Credit: Provision Account
 When the provision is utilized:
o Debit: Provision Account
o Credit: Relevant Expense/Liability Account

11. Reserve

A reserve is a portion of profits set aside to strengthen the financial position of a business and to cover future contingencies
or expansions.

Journal Entries for Reserve:

 When the reserve is created:

o Debit: Profit and Loss Appropriation Account
o Credit: Reserve Account

12. Bad Debts

Bad debts are amounts owed to a business that are not expected to be received and are considered uncollectible.

Journal Entries for Bad Debts:

 Debit: Bad Debts Expense Account

 Credit: Accounts Receivable Account
13. Provision for Bad Debts

Provision for bad debts is an estimation of the number of receivables that may become uncollectible in the future.

Journal Entries for Provision for Bad Debts:

 When the provision is created:

o Debit: Bad Debts Expense Account
o Credit: Provision for Bad Debts Account
 When specific debts are written off against the provision:
o Debit: Provision for Bad Debts Account
o Credit: Accounts Receivable Account

14. Expenditure

Expenditure refers to the outflow of funds to acquire assets, goods, or services.

It can be categorized into capital expenditure and revenue expenditure.

15. Revenue Expenditure

Revenue expenditure is the spending on the day-to-day operations of a business, which is charged to the income statement
in the period in which it is incurred.

Examples:

 Salaries and wages

 Rent
 Utility bills

16. Capital Expenditure

Capital expenditure is spending on acquiring or improving long-term assets such as property, plant, and equipment.

These expenditures are capitalized and depreciated over the useful life of the asset.

Examples:

 Purchase of machinery
 Building a new factory
17. Direct Expenditure

Direct expenditure is the cost that can be directly attributed to a specific cost object, such as a product, department, or project.

Examples:

 Raw materials
 Direct labour

18. Indirect Expenditure

Indirect expenditure is the cost that cannot be directly attributed to a specific cost object and is instead allocated across
multiple cost objects.

Examples:

 Overhead costs
 Administrative expenses

19. Revenue

Revenue is the total income generated from the sale of goods and services before any expenses are deducted.

It is also known as sales or turnover.

20. Direct Revenue

Direct revenue is income that can be directly attributed to the primary activities of the business, such as the sale of goods or
services.

Examples:

 Sales revenue from products

 Service fees
21. Indirect Revenue

Indirect revenue is income earned from activities that are not the primary operations of the business.

Examples:

 Interest income
 Rental income

22. Working Capital

Working capital is the difference between a company's current assets and current liabilities.

It measures the company's ability to cover short-term obligations with its short-term assets.

Working Capital = Current Assets − Current Liabilities

23. Fictitious Assets

Fictitious assets are not real assets but represent deferred expenses or losses that are written off over time.

Examples:

 Preliminary expenses
 Discount on the issue of shares

24. EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating
performance.

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

25. Intercompany

Intercompany transactions are financial activities that occur between different legal entities within the same parent company.

These transactions must be eliminated in consolidated financial statements to avoid double counting.

Intercompany Process Overview:

1. Initiation: Recording the transaction in both the initiating and receiving entity's books.
2. Reconciliation: Matching intercompany balances between entities.
3. Settlement: Settling intercompany balances through payments or journal entries.
4. Elimination: Eliminating intercompany transactions during consolidation.

26. Fixed Asset

Fixed assets are long-term tangible assets used in the operations of a business.

They include property, plant, and equipment.

Fixed Asset Process Overview:

1. Acquisition: Recording the purchase of the fixed asset.

2. Depreciation: Allocating the cost of the asset over its useful life.
3. Maintenance: Recording any repairs or improvements.
4. Disposal: Recording the sale or disposal of the asset.

27. Accounts Receivables

Accounts receivables are amounts owed to a business by customers for goods or services provided on credit.

Accounts Receivables Process Overview:

1. Invoice Issuance: Recording the sale and issuing an invoice.

2. Payment Collection: Collecting payments from customers.
3. Reconciliation: Matching payments with invoices.
4. Bad Debt Management: Identifying and writing off uncollectible receivables.

28. Accounts Payables

Accounts payables are amounting a business owes to suppliers for goods or services received on credit.

Accounts Payables Process Overview:

1. Invoice Receipt: Recording the receipt of an invoice from a supplier.

2. Payment Processing: Scheduling and making payments to suppliers.
3. Reconciliation: Matching payments with invoices.
4. Vendor Management: Managing relationships with suppliers.
29. Inventory

Inventory refers to the goods and materials a business holds for sale or production.

Inventory Process Overview:

1. Procurement: Acquiring inventory from suppliers.

2. Storage: Storing inventory in warehouses.
3. Management: Tracking inventory levels and movements.
4. Valuation: Valuing inventory using methods like FIFO, LIFO, or weighted average.
5. Reconciliation: Matching physical inventory with accounting records.

30. Cash Management

Cash management involves managing a company's cash inflows and outflows to ensure liquidity and financial stability.

Cash Management Process Overview:

1. Cash Flow Forecasting: Predicting future cash flows.

2. Cash Collection: Collecting cash from customers.
3. Disbursement: Making payments to suppliers and employees.
4. Liquidity Management: Ensuring sufficient cash balances.
5. Investment: Investing surplus cash for short-term returns.

31. Payroll

Payroll involves calculating and distributing wages to employees.

Payroll Process Overview:

1. Data Collection: Gathering employee work hours and salary information.

2. Calculation: Calculating gross pay, deductions, and net pay.
3. Distribution: Distributing pay checks or direct deposits.
4. Reporting: Generating payroll reports and tax filings.

32. Bank Reconciliation Statement

A bank reconciliation statement matches the balance in a company's bank account with its accounting records.

It identifies any discrepancies due to outstanding checks, deposits in transit, or errors.

Journal Entries for Bank Reconciliation:

 To adjust for a bank fee:

o Debit: Bank Fees Expense
o Credit: Bank Account
 To adjust for a returned check:
o Debit: Accounts Receivable
o Credit: Bank Account
33. Journal Entries

Journal entries record financial transactions in the accounting system.

Each entry must include at least one debit and one credit, ensuring that the accounting equation remains balanced.

Example Journal Entry:

 For a cash sale:

o Debit: Cash Account
o Credit: Sales Revenue Account

34. Journal Voucher

A journal voucher is a document used to record journal entries.

The process involves preparing, reviewing, approving, and posting the entries into the accounting system.

35. Azure Accruals JV

Azure Accruals JV refers to journal entries made in an accounting system to record accrued expenses or revenues in the Azure
platform, ensuring that expenses and revenues are recognized in the period they are incurred.

36. ZFI Reclass JV

ZFI Reclass JV involves reclassifying transactions within the SAP FI (Financial Accounting) module. This process ensures that
transactions are correctly categorized and reported.

37. FX Revaluation JV

FX Revaluation JV refers to journal entries made to adjust the value of foreign currency-denominated assets and liabilities to
reflect current exchange rates.

38. Payroll JV

Payroll JV involves journal entries made to record payroll expenses, including salaries, wages, and associated taxes and
benefits.

39. Recharge JV

Recharge JV refers to journal entries made to allocate costs incurred by one part of the organization to another part, ensuring
that expenses are correctly attributed.

40. Cress Charge JV

Cress Charge JV involves journal entries related to cross-entity charges within an organization, ensuring that costs are
appropriately shared among different entities.

41. Ad hoc JV

Ad hoc JV refers to journal entries made for non-recurring, one-time transactions that do not fit into standard categories.
42. Balance Sheet Accounts Reconciliation

Balance sheet accounts reconciliation involves verifying and ensuring that the balances in the accounts are accurate and match
supporting documentation.

Types of Balance Sheet Accounts Reconciliation:

 Bank Reconciliation: Matching bank statements with accounting records.

 Accounts Receivable Reconciliation: Matching customer balances with the accounts receivable ledger.
 Accounts Payable Reconciliation: Matching supplier balances with the accounts payable ledger.

43. Chart of Accounts

A chart of accounts is a list of all accounts used by a company in its accounting system, organized by account type (assets,
liabilities, equity, revenues, and expenses).

44. Trial Balance

A trial balance is a report that lists the balances of all ledger accounts at a specific point in time, ensuring that total debits
equal total credits.

45. Income Statement

An income statement, also known as a profit and loss statement, reports a company's financial performance over a specific
period, showing revenues, expenses, and net income.

46. Balance Sheet

A balance sheet is a financial statement that presents a company's financial position at a specific point in time, showing assets,
liabilities, and equity.

47. Cash Flows

Cash flows refer to the movement of cash in and out of a business.

The statement of cash flows categorizes cash flows into operating, investing, and financing activities.

48. Books Closure

Books closure refers to the process of closing the accounting books at the end of a period to prepare financial statements.
Activities include recording adjusting entries, reconciling accounts, and generating financial reports.
49. Month End Close

Month end close is the process of finalizing accounting records for a month to ensure accurate financial reporting. It includes
reconciling accounts, posting adjusting entries, and generating financial statements.

1. Preparation Phase:

 Review Prior Period Issues: Address any unresolved issues from previous periods.
 Check Compliance: Ensure adherence to accounting policies and regulations.
 Prepare Schedule: Create a detailed schedule of activities and deadlines.

2. Accruals and Adjustments:

 Accruals: Record accrual entries for expenses and revenues that have been incurred but not yet recorded.
 Adjusting Entries: Post adjusting journal entries for prepaid expenses, depreciation, amortization, and provisions.

3. Bank Reconciliation:

 Bank Statements: Reconcile bank statements with accounting records to ensure accuracy of cash balances.
 Adjustments: Record any necessary adjustments for bank charges, interest, or discrepancies.

4. Fixed Assets:

 Depreciation and Amortization: Calculate and record depreciation and amortization expenses for fixed assets.
 Asset Review: Review additions, disposals, and transfers of fixed assets during the period.

5. Inventory Management:

 Physical Count: Conduct physical inventory counts and reconcile with book balances.
 Valuation Adjustments: Make adjustments for obsolete, damaged, or slow-moving inventory.

6. Accounts Payable:

 Invoice Processing: Review and process invoices for goods and services received but not yet paid.
 Accruals: Record accruals for expenses related to accounts payable, such as utilities or rent.

7. Accounts Receivable:

 Invoice Issuance: Verify and issue invoices for goods or services provided but not yet billed.
 Bad Debt Provision: Estimate and record provision for bad debts based on aging analysis.

8. Revenue Recognition:

 Review Contracts: Evaluate contracts and agreements to ensure proper revenue recognition.
 Deferred Revenue: Recognize revenue for services performed or goods delivered but not yet billed.

9. Financial Reporting:

 Prepare Financial Statements: Generate balance sheet, income statement, and cash flow statement.
 Management Reports: Compile financial reports for management review and decision-making.
10. Close Process Review:

 Process Improvement: Identify opportunities to streamline the month-end close process.

 Documentation: Update process documentation and procedures for future reference.

11. Audit Preparation:

 Audit Trails: Compile supporting documentation and schedules for external auditors.
 Internal Controls: Ensure compliance with internal control procedures and audit requirements.

12. Review and Approval:

 Review Entries: Review journal entries and financial reports for accuracy and completeness.
 Approvals: Obtain necessary approvals from management for financial statements and disclosures.

13. Post-Close Activities:

 Variance Analysis: Analyse variances in financial results compared to budget or prior periods.
 Financial Review: Conduct post-close financial reviews to identify trends and insights.

14. Documentation and Archiving:

 File Management: Organize and archive financial documents and reports for future reference.
 Retention Policies: Adhere to document retention policies and regulatory requirements.
50. Important Journal Entries of Record to Report

 Revenue Recognition:
o Debit: Accounts Receivable
o Credit: Revenue
 Expense Accruals:
o Debit: Expense
o Credit: Accrued Liabilities
 Depreciation:
o Debit: Depreciation Expense
o Credit: Accumulated Depreciation
 Amortization:
o Debit: Amortization Expense
o Credit: Accumulated Amortization
 Provision for Bad Debts:
o Debit: Bad Debts Expense
o Credit: Provision for Bad Debts